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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 10, 1997
MILESTONE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-10641 65-0158204
(Commission File Number) ( IRS Employer Identification Number)
5200 Town Center Circle, Boca Raton, FL 33486
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (561) 394-9260
(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Milestone Properties, Inc. ("Milestone") and its wholly owned
subsidiaries (together with Milestone, the "Company") to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among other
things, affect demand for retail space or retail goods, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environmental/safety requirements.
Item 2. Acquisition or Disposition of Assets.
On November 10, 1997, Milestone Asset Management, Inc. ("MAMI"), a
wholly-owned subsidiary of Milestone, sold its remaining holdings of
available-for-sale securities consisting of the Normura Series 1996-MDV B2
("MDV"), DLJ 1994-MF11 B2 ("B2"), and DLJ 1994-MF11 B3 ("B3") (collectively, the
"Certificates") (the "Sale"). MDV was sold to Nomura International Trust
Company, B2 was sold to SunCoast Capital Group, LTD. and B3 was sold to DLJ
Mortgage Capital, Inc. The $16,700,000 par MDV Certificate was sold for
$14,680,344, of which the Company received net proceeds of $4,433,245 and used
the remaining $10,247,099 to pay off the balance of the financing associated
with the Certificate. The $5,000,000 par B2 and the $8,560,000 par B3
Certificates were sold for an aggregate of $12,556,138, of which the Company
received net proceeds of $3,181,273, and used the remaining $9,374,865 to pay
off the balance of the financing associated with the Certificates.
At the time of the sale of the Certificates, MAMI had outstanding U.S.
Treasury Note short positions totaling $25,500,000 associated with the
Certificates, which MAMI had established to mitigate interest rate risk. In
connection with the sale of the Certificates, MAMI closed all of its remaining
U.S. Treasury Note short positions.
In connection with the sale of the Certificates, the close of the U.S.
Treasury note short positions, and the 1997 operations of MAMI, the Company will
pay bonuses of approximately $1,200,000 to several executive officers of the
Company pursuant to a long term incentive plan for management.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro forma financial information:
(1) Pro forma consolidated balance sheet as of September 30,
1997.
(2) Pro forma consolidated statements of revenues and expenses
for the nine months ended September 30, 1997 and for the
year ended December 31, 1996.
Basis of Presentation
The accompanying consolidated pro forma financial statements of the
Company have been prepared in accordance with the instructions to Form 8-K and
to Article 11 of Regulation S - X. The accompanying consolidated pro forma
balance sheet is presented as if the Sale occurred on September 30, 1997. The
accompanying consolidated pro forma statements of revenues and expenses are
presented as if the Sale occurred as of January 1, 1996.
The consolidated pro forma financial statements should be read in
conjunction with the financial statements and footnotes included thereto in the
Company's Form 10-KSB for the year ended December 31, 1996 and the
<PAGE>
Company's Form 10-Q for the period ended September 30, 1997. The consolidated
pro forma financial statements were prepared utilizing the accounting policies
as outlined in such historical financial statements except as noted herein. In
management's opinion, all adjustments, considered necessary for a fair
presentation of the effects of the Sale have been reflected in the consolidated
pro forma financial statements.
As a result of the Sale, the Company will realize an after tax gain of
approximately $2,925,000 in the fourth quarter of 1997. Such non-recurring gain
is before any related bonus and is not reflected in the accompanying
consolidated pro forma financial statements.
The consolidated pro forma financial statements are not necessarily
indicative of the Company's actual financial position at September 30, 1997 or
what the actual results of operations of the Company would have been assuming
the Sale occurred as of January 1, 1996 nor are they necessarily indicative of
the Company's results of operations for future periods.
<PAGE>
SIGNATURES
In accordance with 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.
MILESTONE PROPERTIES, INC.
(Registrant)
Date: November 20, 1997 /s/: Robert A. Mandor
----------------------
Robert A. Mandor
President and Chief Financial Officer
Date: November 20, 1997 /s/: Patrick S. Kirse
----------------------
Patrick S. Kirse
Vice President of Accounting and Controller
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
September 30, 1997
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
ASSETS September 30, 1997 Debit Credit September 30, 1997
------------------ ----- ------ ------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,403,371 7,614,518 (A) 14,017,889
Loans receivable 1,528,985 1,528,985
Accounts receivable 1,156,570 1,156,570
Accrued interest receivable 6,670,810 6,670,810
Due from related party 316,472 316,472
Prepaid expenses and other 433,008 433,008
Reverse repurchase agreements 25,109,375 25,109,375 (C) 0
Available-for-sale securities 25,811,048 25,811,048 (B) 0
------------------- -------------------
Total current assets 67,429,639 24,123,734
Property, improvements and equipment, net 19,734,745 19,734,745
Wraparound notes, net 66,704,261 66,704,261
Deferred income tax asset, net 1,551,916 1,062,344 (D) 2,614,260
Investment in affiliate 2,674,099 2,674,099
Management contract rights, net 313,305 313,305
Goodwill and organizational cost, net 167,148 167,148
------------------- -------------------
Total assets $ 158,575,113 116,331,552
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,171,633 1,200,000 (B) 2,371,633
Accrued interest payable 491,225 128,971 (C) 620,196
Master lease payable 10,423,492 10,423,492
Current portion of mortgages and notes payable 2,958,441 2,958,441
Income taxes payable 2,343,925 271,347 (E) 1,062,344 (D) 3,134,922
Loans payable 19,392,453 19,392,453 (B) 0
Treasury notes sold short 24,980,404 24,980,404 (C) 0
------------------ -----------------
Total current liabilities 61,761,573 19,508,684
Mortgages and notes payable 69,382,575 69,382,575
------------------ ---------------
Total liabilities 131,144,148 88,891,259
------------------ ---------------
Commitments and Contingencies
Stockholders' equity:
Common stock ($.01 par value, 10,000,000
shares authorized, 4,905,959 issued) 49,061 49,061
Preferred stock (Series A $.01 par value, 10,000,000 shares
authorized, 3,033,995 shares issued and outstanding) 30,341 30,341
Additional paid-in surplus 48,105,428 48,105,428
Unrealized holding gain - available-for-sale securities
(Net of tax liability of $1,262,446) 1,893,066 1,893,066 (D) 0
Accumulated deficit (19,206,513) 1,902,394 (D) (17,304,119)
Shares held in Treasury - 692,591 shares at cost (3,440,418) (3,440,418)
----------------- --------------
Total stockholders' equity 27,430,965 27,440,293
-------------------- -------------
Total liabilities and stockholders' equity $ 158,575,113 116,331,552
=================== =============
</TABLE>
See Accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF REVENUES AND EXPENSES
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
Pro-Forma Adjustments Pro Forma
September 30, 1997 Debit Credit September 30, 1997
------------------ ------ ------ ------------------
<S> <C> <C> <C> <C>
REVENUES:
Rent $ 7,968,967 7,968,967
Interest income 9,970,738 2,837,335 (E) 7,133,403
Revenue from management company operations 450,665 450,665
Tenant reimbursements 786,783 786,783
Management and reimbursement income 357,228 357,228
Percentage rent 288,528 288,528
Amortization of discount - available-for-sale securities 278,709 278,709 (E) 0
Unrealized loss on treasury notes sold short (194,073) 194,073 (E) 0
Loss on sale of available-for-sale securities (784,121) (784,121)
------------------ -------------------
Total revenues 19,123,424 16,201,453
------------------ -------------------
EXPENSES:
Master lease expense 10,423,492 10,423,492
Interest expense 6,905,585 1,972,531 (E) 4,933,054
Depreciation and amortization 602,434 602,434
Salaries, general and administration 1,755,863 1,755,863
Property expenses 1,281,214 1,281,214
Expenses for management company operations 981,497 981,497
Professional fees 555,294 555,294
----------------- ---------------------
Total expenses 22,505,379 20,532,848
----------------- ---------------------
Loss before income tax (3,381,955) (4,331,395)
Provision (benefit) for income taxes 259,685 271,347 (E) (11,662)
------------------ ---------------------
Net loss $ (3,641,640) (4,319,733)
================== =====================
Loss per share of common stock $ (0.87) (1.03)
================== =====================
Weighted average number of shares of common stock 4,196,233 4,196,233
================== =====================
</TABLE>
See Accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF REVENUES AND EXPENSES
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro-Forma Adjustments Pro Forma
December 31, 1996 Debit Credit December 31, 1996
----------------- ------ ------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Rent $ 11,382,820 11,382,820
Interest income 17,654,908 2,326,130 (E) 15,328,778
Revenue from management company operations 976,983 976,983
Tenant reimbursements 1,184,462 1,184,462
Management and reimbursement income 835,811 835,811
Percentage rent 266,653 266,653
Amortization of discount - available-for-sale securities 294,079 253,611 (E) 40,468
Unrealized gain on treasury notes sold short 1,217,186 275,795 (E) 941,391
Gain on realization of wraparound notes 260,239 260,239
Loss on Sale of available-for-sale securities (350,699) (350,699)
-------------------- -----------------
Total revenues 33,722,442 30,866,906
-------------------- -----------------
EXPENSES:
Master lease expense 15,008,723 15,008,723
Interest expense 11,961,780 1,620,910 (E) 10,340,870
Depreciation and amortization 783,401 783,401
Valuation allowance on wraparound notes 189,853 189,853
Salaries, general and administration 3,538,634 3,538,634
Property expenses 2,018,249 2,018,249
Expenses for management company operations 1,281,317 1,281,317
Professional fees 1,061,021 1,061,021
-------------------- ----------------
Total expenses 35,842,978 34,222,068
-------------------- ----------------
Loss before income taxes (2,120,536) (3,355,162)
Provision (benefit) for income taxes 366,438 428,624 (E) (62,186)
-------------------- -----------------
Net loss $ (2,486,974) (3,292,976)
==================== =================
Loss per share of common stock $ (0.65) (0.86)
==================== =================
Weighted average number of shares of common stock 3,845,546 3,845,546
=================== =================
</TABLE>
See Accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
September 30, 1997
1. Adjustments to Consolidated Pro Forma Financials:
(A) To reflect the cash proceeds of $7,614,518 from the sale of the
available-for-sale securities.
(B) To reflect the sale of available-for-sale securities and
the repayment of the loans payable amounts which were used to finance
the acquisition of such securities.
(C) To reflect the repurchase of the U.S. Treasury Notes sold
short with the funds held in the reverse repurchase
agreements and to reflect the payment of the accrued interest
on such U.S. Treasury Notes.
(D) To reflect the realization of the cumulative gross unrealized
holding gains on available-for-sale securities and related
deferred tax liability.
(E) To adjust the revenues and expenses as a result of the sale of
the available-for-sale securities and the close of the U.S.
Treasury Notes short positions.
