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 June 30, 1997
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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.)
2355 Waukegan Road
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
June 30, 1997 and December 31, 1996
(UNAUDITED)
ASSETS
1997 1996
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Cash and cash equivalents $ 2,058,545 $ 2,110,693
Accounts and accrued interest receivable 225,880 329,346
Escrow deposits 786,741 786,741
Prepaid expenses 67,421 37,666
Deferred expenses, net of accumulated
amortization of $249,375 in 1997 and
$207,813 in 1996 166,250 207,812
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3,304,837 3,472,258
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Investment in real estate:
Land 2,551,183 2,871,183
Buildings and improvements 25,885,202 27,565,202
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28,436,385 30,436,385
Less accumulated depreciation 12,520,468 11,868,945
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Investment in real estate, net of
accumulated depreciation 15,915,917 18,567,440
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$ 19,220,754 $ 22,039,698
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 122,710 $ 133,424
Due to affiliates 40,452 34,615
Accrued liabilities - principally
real estate taxes 562,487 567,357
Security deposits 44,086 47,323
Mortgage note payable 12,357,145 12,431,154
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Total liabilities 13,126,880 13,213,873
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Commitments and contingencies
Limited Partners' capital (30,000
Interests issued and outstanding) 7,280,433 9,988,382
General Partner's deficit (1,186,559) (1,162,557)
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Total partners' capital 6,093,874 8,825,825
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$ 19,220,754 $ 22,039,698
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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 six months ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
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Income:
Rental $ 1,539,844 $ 1,590,786
Service 1,124,790 910,899
Interest on short-term investments 57,958 57,992
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Total income 2,722,592 2,559,677
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Expenses:
Interest on mortgage note payable 628,711 635,819
Depreciation 651,523 660,337
Amortization 41,562 41,562
Property operating 1,306,904 1,039,897
Real estate taxes 285,035 281,975
Property management fees 115,242 115,555
Administrative 93,766 88,903
Provision for investment property
writedown 2,000,000
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Total expenses 5,122,743 2,864,048
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Net loss $ (2,400,151) $ (304,371)
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Net loss allocated to General Partner $ (24,002) $ (3,044)
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Net loss allocated to Limited Partners $ (2,376,149) $ (301,327)
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Net loss per Limited Partnership Interest
(30,000 issued and outstanding) $ (79.20) $ (10.04)
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Distributions to Limited Partners $ 331,800 $ 331,620
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Distributions per Limited Partnership
Interest $ 11.060 $ 11.054
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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 June 30, 1997 and 1996
(UNAUDITED)
1997 1996
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Income:
Rental $ 730,228 $ 749,073
Service 517,420 387,566
Interest on short-term investments 28,566 28,737
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Total income 1,276,214 1,165,376
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Expenses:
Interest on mortgage note payable 313,888 317,487
Depreciation 312,469 330,169
Amortization 20,781 20,781
Property operating 635,450 367,080
Real estate taxes 142,970 140,988
Property management fees 56,610 51,193
Administrative 52,067 51,553
Provision for investment property
writedown 2,000,000
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Total expenses 3,534,235 1,279,251
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Net loss $ (2,258,021) $ (113,875)
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Net loss allocated to General Partner $ (22,581) $ (1,139)
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Net loss allocated to Limited Partners $ (2,235,440) $ (112,736)
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Net loss per Limited Partnership
Interest (30,000 issued and outstanding) $ (74.51) $ (3.75)
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Distribution to Limited Partners $ 165,900 $ 165,810
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Distribution per Limited Partnership
Interest $ 5.530 $ 5.527
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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 six months ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
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Operating activities:
Net loss $ (2,400,151) $ (304,371)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property 651,523 660,337
Amortization of deferred expenses 41,562 41,562
Provision for investment property
writedown 2,000,000
Net change in:
Accounts and accrued interest
receivable 103,466 (109,023)
Prepaid expenses (29,755) (50,452)
Accounts payable (10,714) (13,031)
Due to affiliates 5,837 7,470
Accrued liabilities (4,870) (61,014)
Security deposits (3,237) (700)
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Net cash provided by operating activities 353,661 170,778
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Financing activities:
Distributions to Limited Partners (331,800) (331,620)
Principal payments on mortgage note payable (74,009) (66,901)
Release of capital improvement escrow 191,600
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Net cash used in financing activities (405,809) (206,921)
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Net change in cash and cash equivalents (52,148) (36,143)
Cash and cash equivalents at beginning of year 2,110,693 2,406,064
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Cash and cash equivalents at end of period $ 2,058,545 $ 2,369,921
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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 six months and quarter
ended June 30, 1997, and all such adjustments are of a normal and recurring
nature.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership is currently marketing the Factory Outlet Centre
(the "Centre") for sale. If the property is sold, the timing of the termination
of the Partnership and final distribution of cash will depend upon the nature
and extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees stemming from litigation
involving the Partnership including, but not limited to, the lawsuit discussed
in Note 6 of Notes to the Financial Statements. In the absence of any
contingency, the reserves will be paid within twelve months of the property
being sold. In the event of a contingency, reserves may be held by the
Partnership for a longer period of time.
3. Interest Expense:
During the six months ended June 30, 1997 and 1996, the Partnership incurred
and paid interest expense on the mortgage note payable of $628,711 and
$635,819, respectively.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1997 are:
Paid
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Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $25,193 $16,303 $40,452
5. Investment Property Writedown:
During the quarter ended June 30, 1997, the Partnership determined that an
impairment had occurred to the asset value of the Centre due to continued
competition in the market which has resulted in a decline in the value of the
property. Consequently, the property was written down to its current estimated
fair value and a $2,000,000 provision for investment property writedown was
recognized.
<PAGE>
6. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to, the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the financial position,
operations and liquidity of the Partnership. The Partnership believes it has
meritorious defenses to contest the claims.
7. Subsequent Event:
In July 1997, the Partnership paid $165,900 to Limited Partners representing
the regular quarterly distribution of available Net Cash Receipts of $5.53 per
Interest for the second quarter of 1997.
<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 1996 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The recognition of a provision for investment property writedown resulted in a
larger net loss during the six months and quarter ended June 30, 1997 as
compared to the same periods in 1996. Further discussion of the operations of
the Partnership is summarized below.
1997 Compared to 1996
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Discussions of fluctuations between 1997 and 1996 refer to the six months and
quarters ended June 30, 1997 and 1996.
The Partnership bills tenants on a monthly basis for common area maintenance
and real estate taxes based on estimates. Adjustments are periodically made to
these billings once the Partnership has determined the actual amounts due.
Service income increased during 1997 when compared to 1996 due to higher
billings related to common area maintenance in 1997.
Higher tenant related expenditures were incurred in 1997 resulting from
increased leasing activity. This resulted in an increase in property operating
expense during 1997 when compared with 1996.
A provision is charged to income when the General Partner believes an
impairment has occurred to the value of its property. Determinations of fair
value are made periodically based on the current estimated sales price less
closing costs and market conditions. During the quarter ended June 30, 1997,
the Partnership recognized a provision for investment property writedown of
$2,000,000 to provide for a change in the estimate of fair value of the Centre
due to continued competition in the market which has resulted in a decline in
the value of the property.
<PAGE>
Liquidity and Capital Resources
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The cash position of the Partnership remained relatively unchanged as of June
30, 1997 when compared to December 31, 1996. The Partnership generated cash
flow of approximately $354,000 from its operating activities. The operating
activities reflect the operations of the Centre, interest income earned on
short-term investments, and offset by the payment of administrative expenses.
The Partnership used cash to fund its financing activities of approximately
$406,000 which consisted of the payment of distributions totaling approximately
$332,000 to Limited Partners and the payment of principal on the mortgage note
payable of approximately $74,000.
As of June 30, 1997, the occupancy rate at the Centre was 86%. During the six
months ended June 30, 1997 and 1996, 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. The Partnership
is currently marketing the Centre for sale. If the property is sold, the timing
of the termination of the Partnership and final distribution of cash will
depend upon the nature and extent of liabilities and contingencies which exist
or may arise. Such contingencies may include legal and other fees stemming from
litigation involving the Partnership including, but not limited to, the lawsuit
discussed in Note 6 of Notes to Financial Statements. In the absence of any
contingency, the reserves will be paid within twelve months of the property
being sold. In the event of a contingency, reserves may be held by the
Partnership for a longer period of time. In light of results to date and
current market conditions, the General Partner does not anticipate that
investors will recover all of their original investment.
In July 1997, the Partnership paid a distribution of Net Cash Receipts of
$165,900 ($5.53 per Interest) to the holders of Limited Partnership Interests
for the second quarter of 1997. This distribution is consistent with the amount
paid for the first quarter of 1997. Including the July 1997 distribution,
Limited Partners have received distributions of Net Cash Receipts of $310.54
and Net Cash Proceeds of $263.08, totaling $573.62 per $1,000 Interest. The
Partnership expects to continue making quarterly distributions from cash flow
from property operations. 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 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 six month period ending
June 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended June 30, 1997.
<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
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Partners-XXII, the General Partner
Date: August 14, 1997
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<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2059
<SECURITIES> 0
<RECEIVABLES> 226
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3139
<PP&E> 28436
<DEPRECIATION> 12520
<TOTAL-ASSETS> 19221
<CURRENT-LIABILITIES> 770
<BONDS> 12357
0
0
<COMMON> 0
<OTHER-SE> 6094
<TOTAL-LIABILITY-AND-EQUITY> 19221
<SALES> 0
<TOTAL-REVENUES> 2723
<CGS> 0
<TOTAL-COSTS> 1707
<OTHER-EXPENSES> 787
<LOSS-PROVISION> 2000
<INTEREST-EXPENSE> 629
<INCOME-PRETAX> (2400)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2400)
<EPS-PRIMARY> (79.20)
<EPS-DILUTED> (79.20)
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