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 September 30, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -----
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
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
--------------
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
----- -----
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(UNAUDITED)
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 1,542,511 $ 2,235,787
Accounts and accrued interest receivable 6,344 43,259
Escrow deposits 815,045
Deferred expenses, net of accumulated
amortization of $290,938 in 1997 124,687
-------------- --------------
1,548,855 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
-------------- --------------
Investment in real estate, net of
accumulated depreciation 13,716,236
-------------- --------------
$ 1,548,855 $ 16,935,014
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,693 $ 356,100
Due to affiliates 39,138 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
-------------- --------------
Total liabilities 46,831 13,356,344
-------------- --------------
Commitments and contingencies
Limited Partners' capital (30,000
Interests issued and outstanding) 1,679,730 3,756,376
General Partner's deficit (177,706) (177,706)
-------------- --------------
Total partners' capital 1,502,024 3,578,670
-------------- --------------
$ 1,548,855 $ 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 nine months ended September 30, 1998 and 1997
(UNAUDITED)
1998 1997
-------------- --------------
Income:
Rental $ 78,237 $ 2,287,781
Service 84,896 1,593,099
Settlement income 85,000
Interest on short-term investments 99,433 80,497
Other income 7,452
-------------- --------------
Total income 355,018 3,961,377
-------------- --------------
Expenses:
Interest on mortgage note payable 103,760 941,642
Depreciation 28,191 977,285
Amortization 1,822 62,344
Property operating 7,823 1,924,155
Real estate taxes 13,301 426,422
Property management fees 4,245 168,869
Administrative 120,964 140,460
Provision for investment property
writedown 3,000,000
-------------- --------------
Total expenses 280,106 7,641,177
-------------- --------------
Income (loss) before extraordinary item 74,912 (3,679,800)
Extraordinary item:
Debt extinguishment expense (245,658) None
-------------- --------------
Net loss $ (170,746) $ (3,679,800)
============== ==============
Loss before extraordinary
item allocated to General Partner None $ (36,798)
============== ==============
Income (loss) before extraordinary
item allocated to Limited Partners $ 74,912 $ (3,643,002)
============== ==============
Income (loss) before extraordinary
item per Limited Partnership Interest
(30,000 issued and outstanding)
- Basic and Diluted $ 2.50 $ (121.43)
============== ==============
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, 1998 and 1997
(UNAUDITED)
(Continued)
1998 1997
-------------- --------------
Extraordinary item allocated to
General Partner None None
============== ==============
Extraordinary item allocated to
Limited Partners $ (245,658) None
============== ==============
Extraordinary item per Limited
Partnership Interest (30,000
issued and outstanding)
- Basic and Diluted $ (8.19) None
============== ==============
Net loss allocated to
General Partner None $ (36,798)
============== ==============
Net loss allocated to
Limited Partners $ (170,746) $ (3,643,002)
============== ==============
Net loss per Limited Partnership
Interest (30,000 issued and
outstanding) - Basic and Diluted $ (5.69) $ (121.43)
============== ==============
Distributions to Limited Partners $ 1,905,900 $ 497,700
============== ==============
Distributions per Limited Partnership
Interest $ 63.53 $ 16.59
============== ==============
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, 1998 and 1997
(UNAUDITED)
1998 1997
-------------- --------------
Income:
Rental $ 747,937
Service 468,309
Interest on short-term investments $ 19,258 22,539
Other income 7,452
-------------- --------------
Total income 26,710 1,238,785
-------------- --------------
Expenses:
Interest on mortgage note payable 312,931
Depreciation 325,762
Amortization 20,782
Property operating 617,251
Real estate taxes 141,387
Property management fees 53,627
Administrative 30,112 46,694
Provision for investment property
writedown 1,000,000
-------------- --------------
Total expenses 30,112 2,518,434
-------------- --------------
Net loss $ (3,402) $ (1,279,649)
============== ==============
Net loss allocated to
General Partner None $ (12,796)
============== ==============
Net loss allocated to
Limited Partners $ (3,402) $ (1,266,853)
============== ==============
Net loss per Limited Partnership
Interest (30,000 issued and outstanding)
- Basic and Diluted $ (0.11) $ (42.23)
============== ==============
Distribution to Limited Partners None $ 165,900
============== ==============
Distribution per Limited Partnership
Interest None $ 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 nine months ended September 30, 1998 and 1997
(UNAUDITED)
1998 1997
-------------- --------------
Operating activities:
Net loss $ (170,746) $ (3,679,800)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Extraordinary item:
Debt extinguishment expense 122,865
Depreciation of property 28,191 977,285
Amortization of deferred expenses 1,822 62,344
Provision for investment property
writedown 3,000,000
Net change in:
Accounts and accrued interest
receivable 36,915 204,769
Escrow deposits 28,070
Prepaid expenses (9,529)
Accounts payable (348,407) (8,341)
Due to affiliates 15,220 3,576
Accrued liabilities (403,763) (141,839)
Security deposits (41,810) (2,287)
-------------- --------------
Net cash (used in) provided by
operating activities (731,643) 406,178
-------------- --------------
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
--------------
Financing activities:
Distributions to Limited Partners (1,905,900) (497,700)
Repayment of mortgage note payable (12,279,304)
Principal payments on
mortgage note payable (112,438)
Release of capital improvement escrow 786,975
-------------- --------------
Net cash used in financing activities (13,398,229) (610,138)
-------------- --------------
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, 1998 and 1997
(UNAUDITED)
(Continued)
1998 1997
-------------- --------------
Net change in cash and cash equivalents (693,276) (203,960)
Cash and cash equivalents at beginning
of year 2,235,787 2,110,693
-------------- --------------
Cash and cash equivalents at end of period $ 1,542,511 $ 1,906,733
============== ==============
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 nine months
and quarter ended September 30, 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 litigation with a
former tenant at the property. A trial is currently scheduled for January 1999.
If this litigation can be resolved and no new contingencies arise, the General
Partner would anticipate promptly terminating the Partnership.
3. Other Income:
The Partnership recognized other income during 1998 primarily due to refunds
received from vendors.
4. Settlement Income:
In July 1998, the Partnership received $85,000 from a settlement with a former
tenant of the Centre. The settlement relates to rental income owed to the
Partnership pursuant to the tenant's lease. This amount was recognized as
settlement income for financial statement purposes.
5. Interest Expense:
During the nine months ended September 30, 1998 and 1997, the Partnership
incurred and paid interest expense on the mortgage note payable of $103,760 and
$941,642, respectively.
6. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1998 are:
<PAGE>
Paid
-------------------------
Nine Months Quarter Payable
------------ --------- ----------
Reimbursement of expenses to
the General Partner, at cost $ 27,623 $ 5,892 $ 39,138
7. 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
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.
8. 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 extraordinary items and classified as debt
extinguishment expense.
9. Contingency:
In the normal course of business, the Partnership is involved in legal actions
which arise from the operation of its property. The Partnership is currently
involved in litigation with a former tenant at the property. In management's
opinion, the liabilities, if any, that may ultimately result from such legal
action are not expected to have a materially adverse effect on the financial
position 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
- ----------
Summary of Operations
- ---------------------
During January 1998, the Partnership sold the Centre and incurred debt
extinguishment expense. During the quarter ended September 30, 1998,
administrative expenses were higher than interest income earned on short-term
investments and other income. The Partnership recognized provisions for
investment property writedown during the second and third quarters of 1997. As
a result, the Partnership recognized a significant net loss for the nine months
and quarter ended September 30, 1997 compared to a smaller loss during the nine
months and quarter ended September 30, 1998. Further discussion of the
operations of the Partnership is summarized below.
1998 Compared to 1997
- ---------------------
Unless otherwise noted, discussions of fluctuations between 1998 and 1997 refer
to both the nine months and quarters ended September 30, 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 expense, real estate tax expense and
property management fees expense decreased during the nine months ended
September 30, 1998 and ceased during the quarter ended September 30, 1998 as
compared to the same periods in 1997.
In July 1998, the Partnership received $85,000 from a settlement with a former
tenant of the Centre. The settlement relates to rental income owed to the
Partnership pursuant to the tenant's lease. This amount was recognized as
settlement income for financial statement purposes.
Higher average cash balances were available for investment during the first
quarter of 1998 due to the proceeds received in connection with the sale of the
<PAGE>
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 the nine months ended
September 30, 1998 as compared to the same period in 1997. Lower average cash
balances were available for investment during the quarter ended September 30,
1998, as compared to the same period in 1997. As a result, interest income on
short-term investments decreased during the quarter ended September 30, 1998 as
compared to the same period in 1997.
The Partnership recognized other income during 1998 primarily due to refunds
received from vendors.
As a result of lower portfolio management and professional fees incurred by the
Partnership, administrative expenses decreased during 1998 as compared to the
same period in 1997.
Provisions were charged to income when the General Partner believed an
impairment had occurred to the value of the Centre. Determinations of fair
value were made based on the estimated sales price of the Centre less closing
costs and market conditions. During the quarters ended June 30, 1997 and
September 30, 1997, the Partnership recognized provisions for investment
property writedown of $2,000,000 and $1,000,000, respectively, to provide for
changes in the estimate of the fair value of the Centre.
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 extraordinary items and classified as debt
extinguishment expense.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased approximately $693,000 as of
September 30, 1998 when compared to December 31, 1997 primarily due to the
payment of accrued real estate taxes and property accounts payable related to
1997. The Partnership used cash flow of approximately $732,000 to fund its
operating activities. The operating activities reflect the payment of accrued
real estate taxes and the payment of property accounts payable related to 1997,
the operations of the Centre and the payment of administrative expenses, which
were partially offset by the receipt of interest income earned on short-term
investments, settlement income and refunds received from vendors. 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 $13,398,000 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.
<PAGE>
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 was retained by the
Partnership until July 1998, at which time the funds were released in full.
This amount was reserved to provide for the maximum potential liability of the
Partnership pursuant to the sale contract. The available proceeds from the sale
were distributed to Limited Partners in March 1998. See Note 7 of Notes to
Financial Statements for additional information.
In July 1998, the Partnership received $85,000 from a settlement with a former
tenant of the Centre. The settlement relates to rental income owed to the
Partnership pursuant to the tenant's lease.
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 litigation with a
former tenant at the property. A trial is currently scheduled for January 1999.
If this litigation can be resolved and no new contingencies arise, the General
Partner would anticipate promptly terminating the Partnership.
To date, 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. 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
- -----------------------------------------
(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 June 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 nine month period ending
September 30, 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended September 30, 1998.
<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: November 13, 1998
---------------------------
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1543
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1549
<PP&E> 0
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<TOTAL-ASSETS> 1549
<CURRENT-LIABILITIES> 47
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1502
<TOTAL-LIABILITY-AND-EQUITY> 1549
<SALES> 0
<TOTAL-REVENUES> 355
<CGS> 0
<TOTAL-COSTS> 25
<OTHER-EXPENSES> 151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 75
<INCOME-TAX> 0
<INCOME-CONTINUING> 75
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<NET-INCOME> (171)
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</TABLE>
