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
- -----
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1998
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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
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3498737
- ------------------------------- -------------------
(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
March 31, 1998 and December 31, 1997
(UNAUDITED)
ASSETS
1998 1997
--------------- -------------
Cash and cash equivalents $ 1,581,495 $ 2,235,787
Accounts and accrued interest receivable 92,755 43,259
Escrow deposits 815,045
Prepaid expenses 1,876
Deferred expenses, net of accumulated
amortization of $290,938 in 1997 124,687
--------------- -------------
1,676,126 3,218,778
--------------- -------------
Investment in real estate:
Land 2,303,478
Buildings and improvements 24,584,750
-------------
26,888,228
Less accumulated depreciation 13,171,992
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Investment in real estate, net of
accumulated depreciation 13,716,236
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$ 1,676,126 $ 16,935,014
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 217,881 $ 356,100
Due to affiliates 31,083 23,918
Accrued liabilities - principally
real estate taxes 403,763
Security deposits 41,810
Escrow liability - earnest money deposit 251,449
Mortgage note payable 12,279,304
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Total liabilities 248,964 13,356,344
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Contingencies and Commitments
Limited Partners' capital (30,000
Interests issued and outstanding) 1,604,868 3,756,376
General Partner's deficit (177,706) (177,706)
--------------- -------------
Total partners' capital 1,427,162 3,578,670
--------------- -------------
$ 1,676,126 $ 16,935,014
=============== =============
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 March 31, 1998 and 1997
(UNAUDITED)
1998 1997
--------------- -------------
Income:
Rental $ 78,237 $ 809,616
Service 84,896 607,370
Interest on short-term investments 61,114 29,392
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Total income 224,247 1,446,378
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Expenses:
Interest on mortgage note payable 103,760 314,823
Depreciation 28,191 339,054
Amortization 1,822 20,781
Property operating 7,465 671,454
Real estate taxes 13,301 142,065
Property management fees 4,245 58,632
Administrative 65,413 41,699
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Total expenses 224,197 1,588,508
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Loss before extraordinary item 50 (142,130)
Extraordinary item:
Debt extinguishment expense (245,658) None
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Net loss $ (245,608) $ (142,130)
=============== =============
Loss before extraordinary
item allocated to General Partner None $ (1,421)
=============== =============
Income (loss) before extraordinary
item allocated to Limited Partners $ 50 $ (140,709)
=============== =============
Income (loss) before extraordinary
item per Limited Partnership Interest
(30,000 issued and outstanding)
- Basic and Diluted $ 0.002 $ (4.69)
=============== =============
Extraordinary item allocated to
General Partner None None
=============== =============
Extraordinary item allocated to
Limited Partners $ (245,658) None
=============== =============
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 March 31, 1998 and 1997
(UNAUDITED)
(Continued)
1998 1997
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Extraordinary item per Limited
Partnership Interest (30,000
issued and outstanding)
- Basic and Diluted $ (8.19) None
=============== =============
Net loss allocated to
General Partner None $ (1,421)
=============== =============
Net loss allocated to
Limited Partners $ (245,608) $ (140,709)
=============== =============
Net loss per Limited
Partnership Interest (30,000 issued and
outstanding) - Basic and Diluted $ (8.19) $ (4.69)
=============== =============
Distribution to Limited Partners $ 1,905,900 $ 165,900
=============== =============
Distribution per Limited Partnership
Interest (30,000 issued and outstanding) $ 63.53 $ 5.53
=============== =============
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 quarters ended March 31, 1998 and 1997
(UNAUDITED)
1998 1997
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Operating activities:
Net loss $ (245,608) $ (142,130)
Adjustments to reconcile net loss to net
cash (used in) or provided by operating
activities:
Extraordinary item:
Debt extinguishment expense 122,865
Depreciation of property 28,191 339,054
Amortization of deferred expenses 1,822 20,781
Net change in:
Accounts and accrued interest
receivable (49,496) (49,789)
Escrow deposits 28,070
Prepaid expenses (1,876) 26,530
Accounts payable (138,219) (7,042)
Due to affiliates 7,165 (203)
Accrued liabilities (403,763) (147,840)
Security deposits (41,810) (747)
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Net cash (used in) or provided by
operating activities (692,659) 38,614
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Investing activities:
Proceeds from sale of property 14,065,000
Payment of selling costs (376,955)
Earnest money deposit credited to
purchaser (251,449)
---------------
Net cash provided by investing activities 13,436,596
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Financing activities:
Distribution to Limited Partners (1,905,900) (165,900)
Repayment of mortgage note payable (12,279,304)
Principal payments on mortgage note
payable (36,537)
Release of capital improvement escrow 786,975
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Net cash used in financing activities (13,398,229) (202,437)
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Net change in cash and cash equivalents (654,292) (163,823)
Cash and cash equivalents at beginning
of year 2,235,787 2,110,693
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Cash and cash equivalents at end of period $ 1,581,495 $ 1,946,870
=============== =============
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 Policies:
(a) For financial statement purposes, the capital accounts of the General
Partner and the Limited Partners have been adjusted to appropriately reflect
their remaining economic interests as provided for in the Partnership
Agreement.
(b) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the quarter
ended March 31, 1998, and all such adjustments are of a normal and recurring
nature.
2. Partnership Termination:
Pursuant to the Partnership Agreement, when all interests in real estate are
sold or otherwise disposed of and the General Partner is not aware of any
remaining contingencies, the Partnership will be dissolved. The Centre was sold
in January 1998. The Partnership has been dismissed as a defendant in a
proposed class action lawsuit. However, there continues to be certain
litigation with a former tenant at the property. If this litigation can be
resolved and no new contingencies arise, the General Partner expects to
terminate the Partnership during 1998.
3. Interest Expense:
During the three months ended March 31, 1998 and 1997, the Partnership incurred
and paid interest expense on the mortgage note payable of $103,760 and
$314,823, respectively.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1998 are:
Paid Payable
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Reimbursement of expenses to
the General Partner, at cost $ 16,677 $ 31,083
5. Property Sale:
In January 1998, the Partnership sold the Centre in an all cash sale for
$15,000,000, less a credit of $935,000 related to tenant improvements and
renovations for a net sale price of $14,065,000. From the proceeds of the sale,
the Partnership paid $12,279,304 to the third party mortgage holder in full
satisfaction of the first mortgage loan, paid $376,955 in selling costs and
paid a prepayment penalty of $122,793. The basis of the property at the date of
<PAGE>
sale was $13,688,045, net of accumulated depreciation of $13,200,183. For
financial statement purposes, the Partnership recorded a $3,548,157 provision
for investment property writedown during 1997 and accordingly no gain or loss
was recognized from the sale of the Centre during 1998.
6. Extraordinary Item:
In January 1998, the Partnership sold the Centre. In connection with the sale,
the Partnership wrote off the remaining unamortized deferred financing fees in
the amount of $122,865 and paid a prepayment penalty in the amount of $122,793.
These amounts were recognized as an extraordinary item and classified as debt
extinguishment expense.
7. Contingency:
In the normal course of business, the Partnership is involved in legal actions
arising from the operation of its property. The Partnership is currently
involved in certain litigation with a former tenant at the property. In
management's opinion, the liabilities, if any, that may ultimately result from
such legal actions are not expected to have a materially adverse effect on the
financial position, operations or liquidity of the Partnership.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Outlet Centre Partners (the "Partnership") was formed in 1987 to own and
operate 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. During January
1998, the Partnership sold 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 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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During January 1998, the Partnership sold the Centre and incurred debt
extinguishment expense. During 1997, the Centre operated at a loss. As a result
the partnership recognized a net loss for the quarter ended March 31, 1998 and
1997. Further discussion of the operations of the Partnership is summarized
below.
1997 Compared to 1996
- ---------------------
Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.
As a result of the sale of the Centre in January 1998, rental and service
income, interest expense on mortgage notes payable, depreciation expense,
amortization expense, property operating, real estate tax expense and property
management fees expense decreased during 1998 as compared to 1997.
Higher average cash balances were available for investment during 1998 due to
the proceeds received in connection with the sale of the Centre prior to
distribution to Limited Partners in March 1998. In addition, the mortgage note
secured by the property was not paid off at the closing date, January 8, 1998.
The proceeds were held by the escrow agent and invested until February 1, 1998
when the mortgage note was paid off. As a result, interest income on short-term
investments increased during 1998 as compared to 1997.
As a result of higher accounting and legal fees incurred by the Partnership in
connection with the property sale, administrative expenses increased during
1998 when compared to 1997.
In January 1998, the Partnership sold the Centre. In connection with the sale,
the Partnership wrote off the remaining unamortized deferred financing fees in
<PAGE>
the amount of $122,865 and paid a prepayment penalty in the amount of $122,793.
These amounts were recognized as an extraordinary item and classified as debt
extinguishment expense.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased approximately $654,000 as of
March 31, 1998 when compared to December 31, 1997 primarily due to the payment
of accrued real estate taxes. The Partnership used cash flow of approximately
$693,000 to fund its operating activities. The operating activities reflect the
payment of accrued real estate taxes, the operations of the Centre and the
payment of administrative expenses, offset by interest income earned on
short-term investments. The Partnership's investing activities of approximately
$13,437,000 consisted of the receipt of approximately $13,688,000 of sales
proceeds net of selling costs from the sale of the Centre which was partially
offset by approximately $251,000 of earnest money credited to the purchaser.
The Partnership used net cash of approximately $13,389,000 to fund its
financing activities which consisted of the repayment of the mortgage note
payable of approximately $12,279,000, the payment of distributions totaling
approximately $1,906,000 to Limited Partners and the receipt of the capital
improvement escrow of approximately $787,000.
In January 1998, the Partnership sold the Centre in an all cash sale for
$15,000,000, less a credit of $935,000 related to tenant improvements and
renovations for a net sale price of $14,065,000. From the proceeds of the sale,
the Partnership paid $12,279,304 to the third party mortgage holder in full
satisfaction of the first mortgage loan. Mortgage escrows of $815,045 were
released to the Partnership in February 1998 upon the repayment of the first
mortgage loan. The Partnership paid $376,955 in selling costs and a prepayment
penalty of $122,793. Of the sale proceeds, $400,000 will be retained by the
Partnership until July 1998. This amount is reserved to provide for the maximum
potential liability of the Partnership pursuant to the sale contract. The
remaining available proceeds from the sale were distributed to Limited Partners
in March 1998. See Note 5 of Notes to Financial Statements for additional
information.
Pursuant to the Partnership Agreement, when all interests in real estate are
sold or otherwise disposed of and the General Partner is not aware of any
remaining contingencies, the Partnership will be dissolved. The Centre was
sold in January 1998. The Partnership has been dismissed as a defendant in a
proposed class action lawsuit. However, there continues to be certain
litigation with a former tenant at the property. If this litigation can be
resolved and no new contingencies arise, the General Partner expects to
terminate the Partnership during 1998.
To date the Limited Partners have received distributions of Net Cash Receipts
of $321.60 and Net Cash Proceeds of $321.08, totaling $642.68 per $1,000
Interest. No further distributions are anticipated to be made prior to the
termination of the Partnership. However, after paying final partnership
expenses, any remaining cash reserves will be distributed. In light of results
to date, Limited Partners will not recover a substantial portion of their
original investment.
<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.
(10) Material Contracts:
(a) Agreement of Sale relating to the sale of the Factory Outlet Centre,
Bristol, Wisconsin, previously filed as Exhibit (2)(i) to the Registrant's
Current Report on Form 8-K dated August 29, 1997 is incorporated herein by
reference.
(b) Letter Agreement dated August 25, 1997 relating to the sale of the Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (2)(ii) to the
Registrant's Current Report on Form 8-K dated August 29, 1997 is incorporated
herein by reference.
(c) Letter Agreement dated September 8, 1997 relating to the sale of the
Factory Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (10)(c)
to the Registrant's Report on Form 10-Q dated September 30, 1997 is
incorporated herein by reference.
(d) Letter Agreement dated October 7, 1997 relating to the sale of the Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (10)(d) to the
Registrant's Report on Form 10-Q dated September 30, 1997 is incorporated
herein by reference.
(e) Letter Agreement relating to the sale of the Factory Outlet Centre,
Bristol, Wisconsin, previously filed as Exhibit (10)(e) to the Registrant's
Report on Form 10-Q dated September 30, 1997 is incorporated herein by
reference.
(f) Letter Agreement dated November 4, 1997 relating to the sale of the Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (10)(f) to the
Registrant's Report on Form 10-Q dated September 30, 1997 is incorporated
herein by reference.
(g) Letter Agreement dated November 7, 1997 relating to the sale of the Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (10)(g) to the
Registrant's Report on Form 10-Q dated September 30, 1997 is incorporated
herein by reference.
<PAGE>
(h) Letter Agreement dated November 19, 1997 relating to the sale of Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit 99 (i) to the
Registrant's Current Report on Form 8-K dated January 8, 1998, is incorporated
herein by reference.
(i) Letter Agreement dated December 2, 1997 relating to the sale of Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (99)(ii) to the
Registrant's Current Report on Form 8-K dated January 8, 1998, is incorporated
herein by reference.
(j) Letter Agreement dated December 10, 1997 relating to the sale of Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (99)(iii) to the
Registrant's Current Report on Form 8-K dated January 8, 1998, is incorporated
herein by reference.
(k) Letter Agreement dated December 23, 1997 relating to the sale of Factory
Outlet Centre, Bristol, Wisconsin, previously filed as Exhibit (99)(iv) to the
Registrant's Current Report on Form 8-K dated January 8, 1998, is incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the three month period
ending March 31, 1998 is attached hereto.
(b) Reports on Form 8-K:
(i) A Current Report on Form 8-K dated January 8, 1998 was filed reporting the
closing of the sale of the Factory Outlet Centre, Bristol, Wisconsin.
(ii) A Current Report on Form 8-K dated January 15, 1998 was filed reporting
the status of proposed class action litigation to which the Registrant was a
party.
<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
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XXII, the General Partner
By:/s/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal Accounting
Officer) of Balcor Partners-XXII, the
General Partner
Date: May 13, 1998
---------------------------
<PAGE>
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1581
<SECURITIES> 0
<RECEIVABLES> 93
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1676
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1676
<CURRENT-LIABILITIES> 249
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1427
<TOTAL-LIABILITY-AND-EQUITY> 1676
<SALES> 0
<TOTAL-REVENUES> 224
<CGS> 0
<TOTAL-COSTS> 25
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> (246)
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<NET-INCOME> (246)
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<EPS-DILUTED> (8.19)
</TABLE>
