UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------ ------------
Commission file number 0-16717
-------
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
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
<PAGE>
PART I
Item 1. Business
- ----------------
Outlet Centre Partners (the "Registrant") is a limited partnership formed in
1987 under the laws of the State of Illinois, which raised $30,000,000 from
sales of Limited Partnership Interests. The Registrant owned (through
subsidiaries) the Factory Outlet Centre (the "Centre") located in Bristol,
Wisconsin until its sale in January 1998. The Partnership Agreement provides
that the proceeds from any sale or refinancing of the Centre will not be
reinvested in new acquisitions. The Registrant's operations currently consist
of interest earned on short-term investments and the payment of administrative
expenses.
Pursuant to the Partnership Agreement, when all interests in real estate are
sold or otherwise disposed of and the General Partner is not then aware of any
remaining contingencies, the Registrant will be dissolved. In January 1998, the
Registrant sold the Centre, its only real estate investment. The Registrant has
recently concluded litigation with a former tenant at the property, and there
are currently no contingencies outstanding. Therefore, the General Partner
commenced liquidation of the Registrant, and on March 23, 1999, the
Registrant's registration under the Securities Exchange Act of 1934 was
terminated and the Registrant was dissolved.
During January 1998, the Registrant sold the Centre in an all cash sale for
$15,000,000, less a credit of $935,000 resulting in a net sale price of
$14,065,000. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources" for
additional information.
The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by the Registrant.
The officers and employees of Balcor Partners-XXII, the General Partner of the
Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.
Item 2. Property
- ----------------
As of December 31, 1998, the Registrant did not own any properties.
In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.
See Notes to Financial Statements for other information regarding the former
real estate property investment.
Item 3. Legal Proceedings
- --------------------------
<PAGE>
The Registrant is not subject to any material pending legal proceedings, nor
were any such proceedings terminated during the fourth quarter of 1998.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant
during 1998.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- -------------------------------------------------------------------------
Matters
- -------
The Registrant was terminated in the State of Illinois on March 22, 1999.
On March 23, 1999, the Registrant's registration under the Securities Exchange
Act of 1934 was terminated.
For information regarding previous distributions, see Financial Statements,
Statement of Partners Capital and "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations-Liquidity and Capital
Resources".
As of December 31, 1998, the number of record holders of Limited Partnership
Interests of the Registrant was 1,966.
Item 6. Selected Financial Data
- -------------------------------
Year ended December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Total income $382,647 $5,210,432 $5,186,143 $5,411,464 $5,500,853
Provision for
investment prop-
erty writedown None 3,548,157 None None None
Income (loss) before
extraordinary
item 10,682 (4,583,555) (744,997) (203,933) (118,837)
Net loss (234,976) (4,583,555) (744,997) (203,933) (118,837)
Net loss per
Limited
Partnership
Interest - Basic
and Diluted (7.83) (185.61) (24.58) (6.73) ( 3.92)
Total assets 1,553,418 16,935,014 22,039,698 23,620,607 24,143,296
Mortgage note
payable None 12,279,304 12,431,154 12,568,420 12,692,502
Distributions per
Limited Partnership
Interest (A) 63.53 22.12 22.108 5.527 None
(A) These amounts include a distribution of original capital of $58.00 for
1998.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
- ---------------------
<PAGE>
Operations
- ----------
Summary of Operations
- ---------------------
During January 1998, Outlet Centre Partners (the "Partnership") sold the Centre
and incurred debt extinguishment expense. Income from operations decreased
during 1998 as a result of the sale of the property. During 1997, the
Partnership recognized a provision for investment property writedown. In
addition, property operations decreased at the Centre during 1997 as compared
to 1996 primarily due to higher property operating expenses. The recognition of
the provision for investment property writedown during 1997 resulted in a
larger net loss during 1997 as compared to 1998 and 1996. Further discussion of
the operations of the Centre is summarized below.
1998 Compared to 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 1998 as compared 1997.
In 1998, the Partnership received $85,382 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.
The Partnership recognized other income during 1997 in connection with partial
refunds of prior years' insurance premiums relating to the Centre.
Primarily as a result of lower portfolio management and legal fees,
administrative expenses decreased during 1998 as compared to 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 1997, the Partnership recognized a
provision for investment property writedown of $3,548,157 to provide for a
change 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 of
$122,865 and paid a prepayment penalty of $122,793. These amounts were
recognized as an extraordinary item and classified as debt extinguishment
expense.
1997 Compared to 1996
- ---------------------
The Partnership billed tenants on a monthly basis for common area maintenance,
real estate taxes and other expenses of the Centre based on estimates.
<PAGE>
Adjustments were periodically made to these billings once the Partnership had
determined the actual amounts due. During 1997, the Partnership recognized
higher reimbursements than during 1996 related to common area maintenance. In
1996, the adjustment of billings for real estate taxes resulted in decreased
reimbursements from tenants due to a prior year's reduction in the assessed
value of the Centre levied by the local taxing authority. As a result, service
income increased during 1997 when compared to 1996.
Higher tenant related expenditures were incurred in 1997 resulting from
increased costs related to tenant improvements. Additionally, roof, parking lot
and sidewalk repairs were completed in 1997. As a result, property operating
expense increased during 1997 when compared to 1996.
Real estate tax expense decreased during 1997 when compared to 1996 due to a
decrease in the assessed value of the Centre levied by the local taxing
authority.
Primarily as a result of higher tenant-related legal fees and legal fees
related to the sale of the property, administrative expenses increased during
1997 when compared to 1996.
Liquidity and Capital Resources
- -------------------------------
The cash position of the Partnership decreased approximately $704,000 as of
December 31, 1998 when compared to December 31, 1997 due to the payment of
accrued real estate taxes and property accounts payable related to 1997. The
Partnership used cash of approximately $743,000 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 and settlement income. The Partnership's investing activities of
approximately $13,437,000 consisted of the receipt of approximately $13,688,000
of net sales proceeds 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. In March 1999, a final distribution of
$1,615,500 was made to Limited Partners, as discussed below.
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.
<PAGE>
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.
In 1998, the Partnership received $85,382 in 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 then aware of any
remaining contingencies, the Partnership will be dissolved. As discussed above,
the Centre was sold in January 1998. The Partnership has recently concluded
litigation with a former tenant at the property, and there are currently no
contingencies outstanding. Therefore, the General Partner commenced liquidation
of the Partnership. After retaining approximately $116,000 to pay the final
administrative expenses of the Partnership, a final distribution of $1,615,500
($53.85 per Interest) was made to the Limited Partners in March 1999, which
represents all remaining cash reserves, including a capital contribution of
$177,706 from the General Partner pursuant to the Partnership Agreement. The
distribution consisted of $19.64 per Interest of Net Cash Proceeds and $34.21
per Interest of Net Cash Receipts.
The Partnership was terminated in the State of Illinois on March 22, 1999. On
March 23, 1999, the Partnership's registration under the Securities Exchange
Act of 1934 was terminated.
The Partnership made distributions totaling $63.53, $22.12 and $22.11 per
Interest in 1998, 1997 and 1996, respectively. See Statement of Partners
Capital for additional information. Distributions were comprised of $5.53 per
Interest of Net Cash Receipts and $58.00 per Interest of Net Cash Proceeds in
1998. Distributions were comprised entirely of Net Cash Receipts in 1997 and
1996.
Including the final distribution issued in March 1999, Limited Partners have
received distributions totaling $696.53 per $1,000 Interest. Of this amount,
$355.81 per Interest represents a distribution of Net Cash Receipts and $340.72
per Interest represents a distribution of Net Cash Proceeds. In addition,
Limited Partners have received certain tax benefits. Limited Partners did not
recover a substantial portion of their original investment. The General Partner
did not receive any distribution of Net Cash Receipts or Net Cash Proceeds from
the Partnership.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
See Index to Financial Statements in this Form 10-K.
<PAGE>
The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.
The net effect of the differences between the financial statements and the tax
returns is summarized as follows:
December 31, 1998 December 31, 1997
----------------------- -------------------------
Financial Tax Financial Tax
Statements Returns Statements Returns
---------- --------- ---------- ---------
Total assets $1,553,418 $5,628,991 $16,935,014 $24,685,760
Partners' capital
(deficit):
General Partner (177,706) (177,706) (177,706) (15,127)
Limited Partners 1,615,500 5,744,732 3,756,376 11,339,512
Net (loss) income:
General Partner None (162,579) 984,851 514,226
Limited Partners (234,976) (3,688,880) (5,568,406) (1,793,207)
Per Limited Partner-
ship Interest (7.83)(A) (122.96) (185.61)(A) (59.77)
(A) Amount represents basic and diluted net loss per Limited Partnership
Interest.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Partners-XXII, its General Partner, has a
Board of Directors.
(b, c & e) The names, ages and business experience of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:
TITLE OFFICERS
Chairman, President and Chief Thomas E. Meador
Executive Officer
Senior Vice President Alexander J. Darragh
Senior Managing Director, Chief Jayne A. Kosik
Financial Officer, Treasurer
and Assistant Secretary
Thomas E. Meador (age 51) joined Balcor in July 1979. He is Chairman, President
and Chief Executive Officer and has responsibility for all ongoing day-to-day
activities at Balcor. He is a member of the board of directors of The Balcor
Company. He is also a Senior Vice President of American Express Company and is
responsible for its real estate operations worldwide. Prior to joining Balcor,
Mr. Meador was employed at the Harris Trust and Savings Bank in the commercial
real estate division where he was involved in various lending activities. Mr.
Meador received his M.B.A. degree from the Indiana University Graduate School
of Business.
Mr. Meador is on the Board of Directors of Grubb & Ellis Company, a publicly
traded commercial real estate firm. Mr. Meador was elected to the Board of
Grubb & Ellis Company in May 1998. Mr. Meador is also a director of AMLI
Commercial Properties Trust, a private real estate investment trust that owns
office and industrial buildings in the Chicago, Illinois area. Mr. Meador was
elected to the Board of AMLI Commercial Properties Trust in August 1998.
Alexander J. Darragh (age 44) joined Balcor in September 1988 and is
responsible for real estate advisory services for Balcor and American Express
Company. Mr. Darragh received masters' degrees in Urban Geography from Queen's
University and in Urban Planning from Northwestern University.
Jayne A. Kosik (age 41) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.
(d) There is no family relationship between any of the foregoing officers.
<PAGE>
(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1998.
Item 11. Executive Compensation
- -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. The executive officers
receive compensation from The Balcor Company (but not from the Registrant) for
services performed for various affiliated entities, which may include services
performed for the Registrant. However, the General Partner believes that any
such compensation attributable to services performed for the Registrant is
immaterial to the Registrant. See Note 7 of Notes to Financial Statements for
the information relating to transactions with affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the Limited Partnership Interests of the Registrant.
(b) Neither Balcor Partners-XXII nor its partners and officers own any Limited
Partnership Interests of the Registrant.
Relatives of the officers and affiliates of the partners of the General Partner
do not own any interests.
(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
(a & b) See Note 7 of Notes to Financial Statements for additional information
relating to transactions with affiliates.
See Note 3 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a)
(1 & 2) See Index to Financial Statements in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership
previously filed as Exhibit 3 to Amendment No. 1 to Registrant's Registration
Statement on Form S-11 dated April 2, 1987 (Registration No. 33-13097), is
incorporated herein by reference.
(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.
<PAGE>
(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.
(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 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended December 31, 1998.
(c) Exhibits: See Item 14(a)(3) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OUTLET CENTRE PARTNERS
By: /s/ Jayne A. Kosik
-------------------------
Jayne A. Kosik
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Partners-XXII, the
General Partner
Date: March 26, 1999
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------------- ------------------------------- ------------
President and Chief Executive
Officer (Principal Executive
Officer) of Balcor Partners-XXII,
the General Partner
/s/ Thomas E. Meador March 26, 1999
- -------------------- --------------
Thomas E. Meador
Senior Managing Director and Chief
Financial Officer (Principal
Accounting and Financial
Officer) of Balcor Partners-XXII,
the General Partner
/s/ Jayne A. Kosik March 26, 1999
- -------------------- --------------
Jayne A. Kosik
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1998 and 1997
Statements of Partners' Capital, for the years ended December 31, 1998, 1997
and 1996
Statements of Income and Expenses, for the years ended December 31, 1998, 1997
and 1996
Statements of Cash Flows, for the years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
Financial Statement Schedules:
Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Partners of
Outlet Centre Partners:
In our opinion, the accompanying balance sheets and the related statements of
partners' capital, of income and expenses and of cash flows present fairly, in
all material respects, the financial position of Outlet Centre Partners An
Illinois Limited Partnership (the "Partnership") at December 31, 1998 and 1997,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As described in Note 1 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the disposition of all its
real estate interests. As of December 31, 1998, the Partnership no longer has
an ownership interest in any real estate investment, and accordingly has ceased
operations and was dissolved on March 22, 1999.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 24, 1999
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
-------------- --------------
Cash and cash equivalents $ 1,531,299 $ 2,235,787
Accounts and accrued interest receivable 22,119 43,259
Escrow deposits 815,045
Deferred expenses, net of accumulated
amortization of $290,938 in 1997 124,687
-------------- --------------
1,553,418 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
-------------- --------------
$ 1,553,418 $ 16,935,014
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 63,368 $ 356,100
Due to affiliates 52,256 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 115,624 13,356,344
-------------- --------------
Commitments and contingencies
Limited Partners' capital (30,000
Interests issued and outstanding) 1,615,500 3,756,376
General Partner's deficit (177,706) (177,706)
-------------- --------------
Total partners' capital 1,437,794 3,578,670
-------------- --------------
$ 1,553,418 $ 16,935,014
============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1998, 1997, and 1996
Partners' Capital (Deficit) Accounts
---------------------------------------
General Limited
Total Partner Partners
------------- ------------ ------------
Balance at December 31, 1995 $ 10,234,062 $(1,155,107) $11,389,169
Cash distributions to
Limited Partners (A) (663,240) (663,240)
Net loss for the year
ended December 31, 1996 (744,997) (7,450) (737,547)
------------- ------------ ------------
Balance at December 31, 1996 8,825,825 (1,162,557) 9,988,382
Cash distributions to
Limited Partners (A) (663,600) (663,600)
Net loss for the year
ended December 31, 1997 (4,583,555) 984,851 (5,568,406)
------------- ------------ ------------
Balance at December 31, 1997 3,578,670 (177,706) 3,756,376
Cash distributions to
Limited Partners (A) (1,905,900) (1,905,900)
Net loss for the year
ended December 31, 1998 (234,976) (234,976)
------------- ------------ ------------
Balance at December 31, 1998 $ 1,437,794 $ (177,706) $ 1,615,500
============= ============ ============
(A) Summary of cash distributions paid per Limited Partnership Interest
1998 1997 1996
------------- ------------ ------------
First Quarter $ 63.53 $ 5.53 $ 5.527
Second Quarter None 5.53 5.527
Third Quarter None 5.53 5.527
Fourth Quarter None 5.53 5.527
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 years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
Income:
Rental $ 78,237 $ 3,025,675 $ 3,158,015
Service 84,896 2,049,424 1,883,814
Settlement income 85,382
Interest on short-term
investments 134,132 133,612 144,314
Other income 1,721
------------- ------------ ------------
Total income 382,647 5,210,432 5,186,143
------------- ------------ ------------
Expenses:
Interest on mortgage
note payable 103,760 1,253,590 1,268,175
Depreciation 28,191 1,303,047 1,320,673
Amortization 1,822 83,125 83,125
Property operating 7,929 2,670,750 2,251,600
Real estate taxes 13,301 404,667 567,357
Property management fees 4,245 222,020 231,329
Administrative 212,717 308,631 208,881
Provision for investment
property writedown 3,548,157
------------- ------------ ------------
Total expenses 371,965 9,793,987 5,931,140
------------- ------------ ------------
Income (loss) before
extraordinary item 10,682 (4,583,555) (744,997)
Extraordinary item:
Debt extinguishment expense (245,658)
------------- ------------ ------------
Net loss $ (234,976) $(4,583,555) $ (744,997)
============= ============ ============
Income (loss) before
extraordinary item allocated
to General Partner None $ 984,851 $ (7,450)
============= ============ ============
Income (loss) before
extraordinary item allocated
to Limited Partners $ 10,682 $(5,568,406) $ (737,547)
============= ============ ============
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 years ended December 31, 1998, 1997, and 1996
(Continued)
1998 1997 1996
------------- ------------ ------------
Income (loss) before
extraordinary item per Limited
Partnership Interest (30,000
issued and outstanding) -
Basic and Diluted $ 0.36 $ (185.61) $ (24.58)
============= ============ ============
Extraordinary item allocated to
General Partner None None None
============= ============ ============
Extraordinary item allocated to
Limited Partners $ (245,658) None None
============= ============ ============
Extraordinary item per Limited
Partnership Interest (30,000
issued and outstanding)
- Basic and Diluted $ (8.19) None None
============= ============ ============
Net income (loss) allocated to
General Partner None $ 984,851 $ (7,450)
============= ============ ============
Net loss allocated to Limited
Partners $ (234,976) $(5,568,406) $ (737,547)
============= ============ ============
Net loss per Limited
Partnership Interest (30,000
issued and outstanding) -
Basic and Diluted $ (7.83) $ (185.61) $ (24.58)
============= ============ ============
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 years ended December 31, 1998, 1997, and 1996
1998 1997 1996
------------- ------------ ------------
Operating activities:
Net loss $ (234,976) $(4,583,555) $ (744,997)
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 1,303,047 1,320,673
Amortization of deferred
expenses 1,822 83,125 83,125
Provision for investment
property writedown 3,548,157
Net change in:
Accounts and accrued
interest receivable 21,140 286,087 (288,901)
Escrow deposits 28,070 (28,304) (17,091)
Prepaid expenses 37,666 (3,868)
Accounts payable (292,732) 222,676 (3,757)
Due to affiliates 28,338 (10,697) 20,682
Accrued liabilities (403,763) (163,594) (51,535)
Security deposits (41,810) (5,513) (796)
------------- ------------ ------------
Net cash (used in) or provided
by operating activities (742,855) 689,095 313,535
------------- ------------ ------------
Investing activities:
Proceeds from sale of property 14,065,000
Payment of selling costs (376,955)
Earnest money deposit (251,449) 251,449
------------- ------------
Net cash provided by investing
activities 13,436,596 251,449
------------- -----------
Financing activities:
Distributions to Limited
Partners (1,905,900) (663,600) (663,240)
Repayment of mortgage note
payable (12,279,304)
Principal payments on
mortgage note payable (151,850) (137,266)
Release of capital improvement
escrow 786,975 191,600
------------- ------------ ------------
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 years ended December 31, 1998, 1997, and 1996
(Continued)
1998 1997 1996
------------- ------------ ------------
Net cash used in finanacing
activities $(13,398,229) $ (815,450) $ (608,906)
------------- ------------ ------------
Net change in cash and cash
equivalents (704,488) 125,094 (295,371)
Cash and cash equivalents at
beginning of year 2,235,787 2,110,693 2,406,064
------------- ------------ ------------
Cash and cash equivalents at
end of year $ 1,531,299 $ 2,235,787 $ 2,110,693
============= ============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Termination of Partnership Affairs:
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, Outlet Centre Partners (the "Partnership") will be
dissolved. The Factory Outlet Centre was sold in January 1998. The Partnership
has recently concluded litigation with a former tenant at the property, and
there are currently no contingencies outstanding. Therefore, the General
Partner commenced liquidation of the Partnership. After retaining approximately
$116,000 to pay the final administrative expenses of the Partnership, a final
distribution of $1,615,500 ($53.85 per Interest) was made to the Limited
Partners in March 1999, which represents all remaining cash reserves, including
a capital contribution of $177,706 from the General Partner pursuant to the
Partnership Agreement. The distribution consisted of $19.64 per Interest of Net
Cash Proceeds and $34.21 per Interest of Net Cash Receipts. Including this
final distribution, Limited Partners have received cumulative distributions of
$696.53 per $1,000 Interest, of which $355.81 represents Net Cash Receipts and
$340.72 represents Net Cash Proceeds.
The Partnership was terminated in the State of Illinois on March 22, 1999.
On March 23, 1999, the Partnership's registration under the Securities Exchange
Act of 1934 was terminated.
2. Accounting Policies:
(a) The preparation of the financial statements in conformity with generally
accepted accounting principles required the General Partner to make estimates
and assumptions that affected the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could vary from those estimates.
(b) Depreciation expense was computed using the straight-line method. Rates
used in the determination of depreciation were based upon the following
estimated useful lives:
Years
-----
Buildings and improvements 18 - 25
Furniture and fixtures 5
Depreciation expense for capitalized tenant improvements was computed using a
straight-line method over the term of the lease.
Maintenance and repairs were charged to expense when incurred. Expenditures for
improvements were charged to the related asset account.
<PAGE>
(c) The Partnership recorded its investment in real estate at the lower of cost
or fair value, and periodically assessed, but not less than on an annual basis,
possible impairment to the value of its property. The General Partner estimated
the fair value of its property based on the current sales price less estimated
closing costs. In the event the General Partner determined an impairment in
value had occurred, and the carrying amount of the real estate asset would not
have been recovered, a provision was recorded to reduce the carrying basis of
the property to its estimated fair value. The General Partner considered the
method referred to above to result in a reasonable measurement of the
property's fair value, unless other factors affecting the property's value
indicated otherwise.
(d) Deferred expenses consisted of financing fees which were amortized over the
term of the loan agreement. Upon sale, any remaining balance was recognized as
debt extinguishment expense and classified as an extraordinary item.
(e) Revenue was recognized on an accrual basis in accordance with generally
accepted accounting principles. Income from operating leases with significant
abatements and/or scheduled rent increases was recognized on a straight line
basis over the respective lease term. Service income included reimbursements
for operating costs such as real estate taxes, maintenance and insurance and
was recognized as revenue in the period the applicable costs were incurred.
(f) The Partnership calculated the fair value of its financial instruments
based on estimates using present value techniques. The Partnership included
this additional information in the notes to the financial statements when the
fair value was different than the carrying value of those financial
instruments. When the fair value reasonably approximated the carrying value, no
additional disclosure was made.
(g) For financial statement purposes, prior to 1997, the partners were
allocated income and losses in accordance with the provisions in the
Partnership Agreement. In order for the capital account balances to
appropriately reflect the partners' remaining economic interests in the
Partnership, the income (loss) allocations have been adjusted.
(h) Cash and cash equivalents included all unrestricted, highly liquid
investments with an original maturity of three months or less. Cash and cash
equivalents were held or invested primarily in one financial institution.
(i) The Partnership was not liable for Federal income taxes as each partner
recognized his proportionate share of the Partnership income or loss in his tax
return; therefore, no provision for income taxes was made in the financial
statements of the Partnership.
(j) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year-ended December 31, 1997
and had been applied to the prior earnings period presented in the financial
statements. Since the Partnership had no dilutive securities, there was no
difference between basic and diluted net income per Limited Partnership
Interest.
<PAGE>
3. Partnership Agreement:
The Partnership was organized on March 13, 1987. The Partnership Agreement
provided for the admission of Limited Partners through the sale of up to 30,000
Limited Partnership Interests at $1,000 per Interest, 30,000 of which were sold
on or prior to March 9, 1988, the termination date of the offering.
The Partnership through its subsidiaries owned the Factory Outlet Centre (the
"Centre") located in Bristol, Wisconsin. The Partnership Agreement provided
that the General Partner would be allocated 1% of the profits and losses and
the Limited Partners would be allocated 99% of the profits and losses. For
financial statement purposes, prior to 1997, the partners were allocated income
and losses in accordance with the provisions in the Partnership Agreement. In
order for the capital account balances to appropriately reflect the partners'
remaining economic interests in the Partnership, the income (loss) allocations
have been adjusted.
Pursuant to the Partnership Agreement, Net Cash Receipts available for
distribution would be distributed 90% to Limited Partners and 10% to the
General Partner. The General Partner's share of Net Cash Receipts was
subordinated to the receipt by Limited Partners of certain levels of return.
Since the required subordination levels were not met, the General Partner did
not receive any distributions of Net Cash Receipts during the lifetime of the
Partnership. All available Net Cash Proceeds were distributed to the Limited
Partners. Under certain circumstances, the General Partner would have
participated in the Net Cash Proceeds of the sale of the Centre, subject to
certain subordination levels. Since the required subordination levels were not
met, the General Partner did not receive any distributions of Net Cash Proceeds
during the lifetime of the Partnership.
4. Mortgage Note Payable:
The mortgage loan balance at December 31, 1997 was $12,279,304. The Centre was
sold in January 1998 and the mortgage loan was repaid in full. A mortgage
escrow of $815,045 was released to the Partnership upon the repayment of the
mortgage loan in February 1998. See Note 9 of Notes to Financial Statements for
additional information.
During the years ended December 31, 1998, 1997 and 1996, the Partnership
incurred and paid interest expense on the mortgage note payable of $103,760,
$1,253,590 and $1,268,175, respectively.
5. Management Agreement:
The Centre was managed by a third-party management company prior to its sale.
This management agreement provided for fees of 3% of all rental and certain
service receipts collected plus leasing commissions on new leases of up to 3%
of lease revenues.
6. Tax Accounting:
The Partnership maintained its books in accordance with the Internal Revenue
Code, rules and regulations promulgated thereunder and existing interpretations
<PAGE>
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, differ from the tax
returns due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net loss for 1998 in the financial statements is $3,616,483 less than the
tax loss for the same period due principally to the provision for investment
property writedown recognized in the 1997 financial statements.
7. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96
--------------- -------------- --------------
Paid Payable Paid Payable Paid Payable
------- -------- ------ ------- ------ -------
Reimbursement of expenses
to the General Partner,
at cost:
Accounting $4,458 $5,923 $12,996 $3,416 $8,122 $6,869
Data processing 2,328 1,020 2,771 None 1,059 None
Legal 14,923 20,403 21,066 5,536 2,000 1,634
Portfolio management 18,382 24,910 47,283 13,155 31,163 25,972
Other 1,811 None 6,890 1,811 47 138
Since the Limited Partners did not receive Net Cash Proceeds distributions in
an amount equal to their original capital contribution, the General Partner is
required to make a capital contribution of $177,706 to the Partnership upon
dissolution in accordance with the Partnership Agreement. This amount was
included in the Net Cash Proceeds distribution made to the Limited Partners in
March 1999.
Prior to May 1995, the Partnership participated in an insurance deductible
program with other affiliated partnerships in which the program paid claims up
to the amount of the deductible under the master insurance policy for its
properties. The program was administered by an affiliate of the General Partner
which received no fee for administering the program. However, the General
Partner was reimbursed for program expenses. The Partnership paid premiums to
the deductible insurance program relating to claims for periods prior to May 1,
1995 of $6,087 for 1996.
8. Investment Property Writedown:
During 1997, the General Partner determined that an impairment had occurred to
the asset value of the Centre due to continued competition in the market which
had resulted in a decline in the value of the property. As a result, the
property was written down to the sales price less closing costs and the
Partnership recognized a $3,548,157 provision for investment property writedown
during 1997. In January 1998, the Partnership sold the Centre. See Note 9 of
Notes to Financial Statements for additional information.
<PAGE>
9. 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, $376,955 in selling costs and 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.
10. Extraordinary Item:
In connection with the sale of the Centre, the Partnership wrote off the
remaining unamortized deferred financing fees of $122,865 and paid a prepayment
penalty of $122,793. These amounts were recognized as an extraordinary item and
classified as debt extinguishment expense.
11. Settlement Income:
In 1998, the Partnership received $85,382 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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1531
<SECURITIES> 0
<RECEIVABLES> 22
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1553
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1553
<CURRENT-LIABILITIES> 115
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1438
<TOTAL-LIABILITY-AND-EQUITY> 1553
<SALES> 0
<TOTAL-REVENUES> 383
<CGS> 0
<TOTAL-COSTS> 25
<OTHER-EXPENSES> 243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 11
<INCOME-TAX> 0
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> (246)
<CHANGES> 0
<NET-INCOME> (235)
<EPS-PRIMARY> (7.83)
<EPS-DILUTED> (7.83)
</TABLE>
