SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-16717
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OUTLET CENTRE PARTNERS
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(Exact name of registrant as specified in its charter)
Illinois 36-3498737
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Balcor Partners XXII
2355 Waukegan Rd., Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
(UNAUDITED)
ASSETS
1996 1995
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Cash and cash equivalents $ 2,220,137 $ 2,406,064
Accounts and accrued interest receivable 183,366 40,445
Escrow deposits 769,650 961,250
Prepaid expenses 62,526 33,798
Deferred expenses, net of accumulated
amortization of $187,032 in 1996 and
$124,688 in 1995 228,593 290,937
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3,464,272 3,732,494
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Investment in real estate:
Land 2,871,183 2,871,183
Buildings and improvements 27,565,202 27,565,202
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30,436,385 30,436,385
Less accumulated depreciation 11,538,777 10,548,272
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Investment in real estate, net of
accumulated depreciation 18,897,608 19,888,113
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$ 22,361,880 $ 23,620,607
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 128,168 $ 137,181
Due to affiliates 26,242 13,933
Accrued liabilities - principally
real estate taxes 422,962 618,892
Security deposits 43,969 48,119
Mortgage note payable 12,466,781 12,568,420
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Total liabilities 13,088,122 13,386,545
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Limited Partners' capital (30,000
Interests issued and outstanding) 10,433,494 11,389,169
General Partner's deficit (1,159,736) (1,155,107)
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Total partners' capital 9,273,758 10,234,062
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$ 22,361,880 $ 23,620,607
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The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Rental $ 2,353,674 $ 2,249,667
Service 1,379,209 1,705,356
Interest on short-term investments 88,820 76,938
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Total income 3,821,703 4,031,961
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Expenses:
Interest on mortgage note payable 952,441 962,203
Depreciation 990,505 922,619
Amortization 62,344 62,344
Property operating 1,549,932 1,643,803
Real estate taxes 422,962 408,811
Property management fees 171,680 187,681
Administrative 134,713 164,338
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Total expenses 4,284,577 4,351,799
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Net loss $ (462,874) $ (319,838)
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Net loss allocated to General Partner $ (4,629) $ (3,198)
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Net loss allocated to Limited Partners $ (458,245) $ (316,640)
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Net loss per Limited Partnership Interest
(30,000 issued and outstanding) $ (15.27) $ (10.55)
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Distributions to Limited Partners $ 497,430 None
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Distributions per Limited Partnership
Interest $ 16.581 None
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The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Income:
Rental $ 762,888 $ 759,742
Service 468,310 550,726
Interest on short-term investments 30,828 21,831
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Total income 1,262,026 1,332,299
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Expenses:
Interest on mortgage note payable 316,622 319,958
Depreciation 330,168 307,539
Amortization 20,782 20,782
Property operating 510,035 534,831
Real estate taxes 140,987 129,639
Property management fees 56,125 56,153
Administrative 45,810 49,657
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Total expenses 1,420,529 1,418,559
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Net loss $ (158,503) $ (86,260)
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Net loss allocated to General Partner $ (1,585) $ (862)
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Net loss allocated to Limited Partners $ (156,918) $ (85,398)
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Net loss per Limited Partnership
Interest (30,000 issued and outstanding) $ (5.23) $ (2.84)
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Distribution to Limited Partners $ 165,810 None
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Distribution per Limited Partnership
Interest $ 5.527 None
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The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1996 and 1995
(UNAUDITED)
1996 1995
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Operating activities:
Net loss $ (462,874) $ (319,838)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property 990,505 922,619
Amortization of deferred expenses 62,344 62,344
Net change in:
Accounts and accrued interest
receivable (142,921) (135,213)
Escrow deposits (31,576)
Prepaid expenses (28,728) (56,760)
Accounts payable (9,013) (35,979)
Due to affiliates 12,309 (32,430)
Accrued liabilities (195,930) (137,029)
Security deposits (4,150) (800)
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Net cash provided by operating activities 221,542 235,338
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Financing activities:
Distributions to Limited Partners (497,430)
Principal payments on mortgage note payable (101,639) (91,877)
Release of capital improvement escrow 191,600
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Net cash used in financing activities (407,469) (91,877)
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Net change in cash and cash equivalents (185,927) 143,461
Cash and cash equivalents at beginning
of year 2,406,064 1,819,294
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Cash and cash equivalents at end of period $ 2,220,137 $ 1,962,755
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The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1996, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1996 and 1995, the Partnership
incurred and paid interest expense on the mortgage note payable of $952,441 and
$962,203, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1996 are:
Paid
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Nine Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $31,514 $ 4,948 $ 26,242
4. Subsequent Event:
In October 1996, the Partnership paid $165,810 ($5.527 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Net Cash Receipts for the third quarter of 1996.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Outlet Centre Partners (the "Partnership") was formed in 1987 and owns and
operates the Factory Outlet Centre (the "Centre") in Bristol, Wisconsin. The
Partnership raised $30,000,000 through the sale of Limited Partnership
Interests and utilized these proceeds to acquire the Centre.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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Decreased real estate tax reimbursements from tenants at the Centre was the
primary reason the Partnership's net loss increased during the nine months and
quarter ended September 30, 1996 when compared to the same periods in 1995.
Further discussion of the Partnership's operations is summarized below.
1996 Compared to 1995
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Unless otherwise noted, discussions of fluctuations between 1996 and 1995 refer
to both the nine months and quarters ended September 30, 1996 and 1995.
The Partnership bills tenants on a monthly basis for common area maintenance,
real estate taxes and other operating expenses of the Centre based on
estimates. Adjustments are periodically made to these billings once the
Partnership has determined the actual amounts due. The periodic adjustment of
billings for real estate taxes resulted in decreased reimbursements from
tenants due to a prior year reduction in the assessed value of the Centre
levied by the local taxing authority and was the primary reason service income
and, consequently, property management fees decreased during 1996 when compared
to 1995.
As a result of higher average cash balances, interest income on short-term
investments increased during 1996 when compared to 1995.
As a result of lower accounting and legal fees incurred by the Partnership,
administrative expenses decreased during 1996 when compared to 1995.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $186,000 as of
September 30, 1996 when compared to December 31, 1995. The Partnership
generated cash flow of approximately $222,000 from its operating activities.
The operating activities reflect the operations of the Centre, interest income
earned on short-term investments, and the payment of administrative expenses of
the Partnership. The Partnership used cash to fund its financing activities of
approximately $407,000 which consisted of the payment of distributions totaling
approximately $497,000 to Limited Partners and the payment of principal on the
mortgage note payable of approximately $102,000, net of the release of
approximately $192,000 from the Partnership's capital improvement escrow.
As of September 30, 1996, the occupancy rate at the Centre was 85%, and during
each of 1996 and 1995, the Centre generated positive cash flow, which is
defined as an amount equal to the property's revenue receipts less property
related expenses, which include debt service payments. Although the General
Partner has no current plans to sell the property, the receipt of an attractive
unsolicited offer or changing market conditions could change this strategy.
In October 1996, the Partnership paid $165,810 ($5.527 per Interest) to the
holders of Limited Partnership Interests representing a regular quarterly
distribution of available Net Cash Receipts for the third quarter of 1996. The
level of the regular quarterly distribution is consistent with the amount
distributed for the second quarter of 1996. Including the October 1996
distribution, Limited Partners have received distributions of Net Cash Receipts
of $293.95 and Net Cash Proceeds of $263.08, totaling $557.03 per $1,000
Interest.
The Partnership expects that cash flow from property operations will allow the
Partnership to continue making quarterly distributions. However, the level of
future distributions will be dependent on the cash flow generated by the
Centre. The General Partner believes it has retained, on behalf of the
Partnership, an appropriate amount of working capital to meet cash or liquidity
requirements which may occur.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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Proposed class action
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On August 30, 1996, a proposed class action complaint was filed, Lenore Klein
vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey, Law Division,
Union County, Docket No. Unn-L-5162-96). The Partnership, additional limited
partnerships which were sponsored by The Balcor Company (together with the
Partnership, the "Affiliated Partnerships"), American Express Company, Lehman
Brothers, Inc., additional limited partnerships sponsored by the predecessor of
Lehman Brothers, Inc. (together with the Partnership and the Affiliated
Partnerships, the "Defendant Partnerships") and Smith Barney Holdings, Inc. are
the named defendants in the action. The complaint was amended on October 18,
1996 to add additional plaintiffs. The amended complaint alleges, among other
things, common law fraud and deceit, negligent misrepresentation, breach of
contract, breach of fiduciary duty and violation of certain New Jersey statutes
relating to the disclosure of information in the offering of limited
partnership interests in the Defendant Partnerships. The amended complaint
seeks judgment for compensatory damages equal to the amount invested in the
Defendant Partnerships by the proposed class plus interest accrued thereon;
general damages for injuries arising from the defendants' actions; equitable
relief, including rescission, on certain counts; punitive damages; treble
damages on certain counts; recovery from the defendants of all profits received
by them as a result of their actions relating to the Defendant Partnerships;
attorneys' fees and other costs.
The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at this
time whether or not an unfavorable decision in this action would have a
material adverse impact on the Partnership.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit No. 4.1 to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
April 2, 1987 (Registration No. 33-13097) and Form of Confirmation regarding
Interests in the Partnership set forth as Exhibit 4.2 to the Registrant's
Report on Form 10-Q for the quarter ended September 30, 1992 (Commission File
No. 0-16717) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
September 30, 1996 is attached hereto.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OUTLET CENTRE PARTNERS
By: /s/Thomas E. Meador
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Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XXII, the General Partner
By: /s/Jayne A. Kosik
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Jayne A. Kosik
Vice President, and Chief Financial Officer
(Principal Accounting Officer) of Balcor
Partners-XXII, the General Partner
Date: November 14, 1996
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<PAGE>
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