U.S. 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) October 1, 1998
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)
150 East Palmetto Park Road, 4th Floor, Boca Raton, FL 33486
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (561) 394-9533
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements include statements regarding the intent, belief
or current expectations of Milestone Properties, Inc. and its wholly-owned
subsidiaries (together, the "Company") and its management, and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of 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 other things, the
following: general economic and business conditions, which will, among other
things, affect the 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
environment/safety requirements.
The Company is engaged in the business of owning, acquiring, managing,
developing and investing in commercial real estate and real estate related
assets. At June 30, 1998, the Company possessed interests in 33 commercial real
estate properties consisting of (i) six fee interests and (ii)wraparound notes
and wraparound mortgage interests in 27 commercial real properties
(individually, each an "Underlying Property" and collectively, the "Underlying
Properties"). As master lessee under individual leases on each of the Underlying
Properties, the Company leases an entire Underlying Property (e.g., a shopping
center or single tenant commercial property) from the master lessor (a
partnership affiliated with the Company that owns the Underlying Property) and
re-leases such Underlying Property, pursuant to operating leases, to the
tenant(s) who occupy such property.
Item 2. Disposition of Assets.
On October 1, 1998, a wraparound note held by the Company on a 285,655
square foot shopping center property located in South Williamson, Kentucky (the
"South Williamson Property"), was paid as a result of the sale of the South
Williamson Property by its owner, an affiliate of the Company (the partnership
that owns the South Williamson Property), to an unrelated party. In conjunction
with the sale of the South Williamson Property, the Company, as the master
lessee on a master lease on the South Williamson Property, canceled such master
lease.
The negotiated sale price of the South Williamson Property was
approximately $14,873,655 in cash. Of the gross proceeds $14,773,655 was used to
satisfy the underlying mortgage debt on the South Williamson Property (which
represented approximately 21% of the Company's total liabilities at such time)
resulting in the realization of the wraparound note held by the Company. The
wraparound note on the South Williamson Property represented approximately 13%
of the Company's total assets.
As a result of the sale of the South Williamson Property, the payment
of the wraparound note and the satisfaction of the underlying mortgage debt, the
Company will realize a book gain of approximately $4,400,000 in the fourth
quarter of 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro forma financial information:
Pro forma consolidated balance sheet as of June 30, 1998.
Pro forma consolidated statements of revenues and expenses for
the six months ended June 30, 1998 and for the year ended
December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MILESTONE PROPERTIES, INC.
(Registrant)
Date: October 16, 1998 /s/ Patrick S. Kirse
---------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
(Unaudited)
June 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
June 30, 1998 Debit Credit June 30, 1998
------------- ----- ------ -------------
ASSETS
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 12,865,320 $ 100,000 $ 12,965,320
Restricted cash 222,000 222,000
Loans receivable 1,479,274 1,479,274
Accounts receivable 897,520 $ 74,230 823,290
Accrued interest receivable 3,779,958 1,181,972 2,597,986
Due from related party 485,444 485,444
Prepaid expenses and other 1,625,507 1,625,507
------------ ---------------
Total current assets 21,355,023 20,198,821
Property, improvements and equipment, net 23,167,422 23,167,422
Wraparound notes, net 52,874,991 12,028,060 40,846,931
Deferred income tax asset, net 5,114,060 5,114,060
Investment in preferred stock 1,337,600 1,337,600
Management contract rights, net 242,316 242,316
Goodwill and organizational cost, net 601,938 601,938
-------------- -------------
Total assets $ 104,693,350 $ 91,509,088
=============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,097,264 $ 1,097,264
Accrued interest payable 242,019 242,019
Master lease payable 6,911,321 2,097,000 4,814,321
Current portion of mortgages and notes payable 37,742,544 14,881,136 22,861,408
Income taxes payable 2,822,119 260,284 3,082,403
----------------- --------------
Total current liabilities 48,815,267 32,097,415
Mortgages and notes payable 31,700,071 31,700,071
--------------- -------------
Total liabilities 80,515,338 63,797,486
------------------ -------------
Commitments and Contingencies
Stockholders' Equity:
Common stock ($.01 par value, 10,000,000 shares
authorized, 4,943,036 issued and outstanding;
692,591 shares in treasury) 49,431 49,431
Preferred stock (Series A $.01 par value, $10
liquidation preference, 10,000,000 shares
authorized, 3,000,251 shares issued and outstanding) 30,004 30,004
Additional paid-in surplus 48,105,395 48,105,395
Accumulated deficit (20,566,400) 3,533,590 (17,032,810)
Shares held in treasury - 692,591 shares at cost ( 3,440,418) (3,440,418)
------------------ ---------------
Total stockholders' equity 24,178,012 27,711,602
----------------- -------------
Total liabilities and stockholders' equity $ 104,693,350 $ 91,509,088
================== ==============
</TABLE>
See Accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF REVENUES AND EXPENSES
(Unaudited)
For the Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Pro-Forma Adjustments Pro Forma
June 30, 1998 Debit Credit June 30, 1998
------------- ------ ------- -------------
REVENUES:
<S> <C> <C> <C> <C>
Rent $ 5,344,220 $ 928,999 $ 4,415,221
Interest income 4,467,931 1,181,972 3,285,959
Revenue from management company operations 295,045 13,000 282,045
Tenant reimbursements 533,602 533,602
Management and reimbursement income 55,986 55,986
Percentage rent 311,007 311,007
Gain on realization of wraparound notes 81,890 81,890
-------------- -------------
Total revenues 11,089,681 8,965,710
-------------- ------------
EXPENSES:
Master lease expense 6,891,666 $ 2,097,000 4,794,666
Interest expense 3,100,605 661,184 2,439,421
Depreciation and amortization 406,021 406,021
Salaries, general and administration 1,164,960 1,164,960
Property expenses 992,512 16,496 976,016
Expenses for management company operations 562,696 562,696
Professional fees 527,639 527,639
-------------- -------------
Total expenses 13,646,099 10,871,419
-------------- ------------
Loss before income tax (2,556,418) (1,905,709)
-------------- -------------
(Benefit) provision for income taxes (985,622) 260,284 50 (725,388)
-------------- --------------
Net loss $ (1,570,796) $ (1,180,321)
=============== ==============
Loss attributable to common stockholders $ (0.37) $ (0.28)
=============== ==============
Weighted average common shares outstanding 4,219,548 4,219,548
============= =============
</TABLE>
See Accompanying Notes to Consolidated Pro Forma Financial Statements
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF REVENUES AND EXPENSES
(Unaudited)
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Pro-Form Adjustments Pro Forma
December 31, 1997 Debit Credit December 31, 1997
----------------- ------ ------- -----------------
REVENUES:
<S> <C> <C> <C> <C>
Rent $ 10,280,548 $ 1,818,860 $ 8,461,688
Interest income 13,355,849 2,534,136 10,821,713
Revenue from management company operations 512,303 13,000 499,303
Tenant reimbursements 1,261,217 45,086 1,216,131
Management and reimbursement income 407,286 407,286
Percentage rent 450,423 450,423
Amortization of discount - available-for-sale securities 313,551 313,551
Unrealized loss on treasury notes sold short (316,887) (316,887)
Gain on sale of real estate related assets 316,061 316,061
Gain on sale of available-for-sale securities 3,511,560 3,511,560
------------ --------------
Total revenues 30,091,911 25,680,829
------------- --------------
EXPENSES:
Master lease expense 13,787,465 $ 4,194,000 9,593,465
Interest expense 9,119,554 1,659,419 7,460,135
Depreciation and amortization 847,385 847,385
Valuation allowance on wraparound notes 2,590,132 2,590,132
Salaries, general and administration 3,955,434 3,955,434
Property expenses 1,718,346 32,684 1,685,662
Expenses for management company operations 1,304,166 1,304,166
Professional fees 921,394 145 921,249
------------ -------------
Total expenses 34,243,876 28,357,628
------------ -------------
Loss before income taxes (4,151,965) (2,676,799)
(Benefit) provision for income taxes (721,234) 590,086 50 (131,198)
-------------- -------------
Net loss $ (3,430,731) $ (2,545,602)
============== =============
Loss attributable to common stockholders $ (0.82) $ (0.61)
============== =============
Weighted average common shares outstanding 4,206,550 4,206,550
============== =============
</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
(Unaudited)
1. Basis of Presentation
The accompanying unaudited 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 unaudited consolidated
pro forma balance sheet is presented as if the sale of the South Williamson
Property, the payment of the wraparound note and the satisfaction of the
underlying mortgage debt, (hereinafter referred to as the "Transaction")
occurred on June 30, 1998. The accompanying unaudited consolidated pro forma
statements of revenues and expenses for the year ended December 31, 1997 and for
the six months ended June 30, 1998 are presented as if the Transaction occurred
as of January 1, 1997.
The unaudited consolidated pro forma financial statements should be read
in conjunction with the financial statements and footnotes included thereto in
the Company's Form 10-K for the year ended December 31, 1997 and the Company's
Form 10-Q for the period ended June 30, 1998. The unaudited 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 Transaction have been reflected in the
unaudited consolidated pro forma financial statements.
As a result of the Transaction, the Company will realize a book gain of
approximately $4,400,000 in the fourth quarter of 1998. Such non-recurring gain
is not reflected in the accompanying June 30, 1998 unaudited consolidated pro
forma financial statements.
The unaudited consolidated pro forma financial statements are not
necessarily indicative of the Company's actual financial position at June 30,
1998 or what the actual results of operations of the Company would have been
assuming the Transaction occurred as of January 1, 1997 nor are they necessarily
indicative of the Company's results of operations for future periods.
2. Adjustments to Unaudited Consolidated Pro Forma Financials
All of the adjustments are to reflect the effects of the Transaction. For
the unaudited consolidated pro forma balance sheet, such adjustments reflect the
cash proceeds realized from the Transaction, the elimination of the South
Williamson Property's: (i) wraparound note and related accrued interest
receivable, (ii) balance of the underlying debt, (iii) master lease payable and
(iv) tenant receivables and other assets and liabilities. For the unaudited
consolidated pro forma statements of revenues and expenses, such adjustments
reflect the elimination of the South Williamson Property's: (i) rental and other
revenues, (ii) property operating expenses, (iii) interest expense on the
underlying debt, (iv) interest income on the wraparound note, (v) master lease
expense and (vi) income taxes and other expenses.
