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 21, 1999
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 and
Section 21E of the Securities Exchange Act of 1934 and Milestone Properties,
Inc. and its wholly-owned subsidiaries (together, the "Company") intends that
such forward-looking statements be subject to the safe harbors created thereby.
Such forward-looking statements involve risks and uncertainties and include, but
are not limited to, statements regarding future events and the Company's plans,
goals and objectives. Such statements are generally accompanied by words such as
"intend," "anticipate," "believe," "estimate," "expect" or similar terms. The
Company's actual results may differ materially from such statements. Factors
that could cause or contribute to such differences include, without limitation,
the following: (i) its plans, strategies, objectives, expectations and
intentions are subject to change at any time at its discretion; (ii) general
economic and business conditions, which may, among other things, affect the
demand for retail space or retails goods, the availability and creditworthiness
of prospective tenants, rental terms and the terms and availability of
financing, are subject to change at any time; (iii) adverse changes in real
estate markets including, among other things, competition with other companies;
(iv) adverse changes in the properties the Company owns which could require the
expenditure of funds to fix or maintain such properties; (v) the general risks
of real estate development and acquisitions, such as changes in demographics,
construction delays, cost overruns, work stoppages and slowdowns, the cost and
availability of skilled labor and weather conditions; (vi) governmental actions
and initiatives, such as seizures of property, condemnation and construction of
alternative roadways; (vii) environmental and safety conditions and hazards;
(viii) the adequacy of Year 2000 compliance measures; and (ix) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission and in the documents incorporated herein by
reference. Although the Company believes that the assumptions underlying its
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, the Company cannot make any assurances that the
results contemplated in such forward-looking statements will be realized. The
inclusion of such forward-looking information should not be regarded as a
representation by the Company or any other person that the future events, plans
or expectations contemplated by the Company will be achieved. Furthermore, past
performance is not necessarily an indicator of future performance.
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, 1999, the Company possessed interests in 33 commercial real
estate properties consisting of (i) 10 properties owned in fee and (ii)
wraparound notes and wraparound mortgage interests in 23 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, 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 21, 1999, five wraparound notes held by the Company on five
separate single-tenant commercial buildings (collectively the "Properties"),
were paid as a result of the sale of the Properties by its owner, an affiliate
of the Company (the partnerships that owned the Properties) to unrelated
parties. In conjunction with the sale of the Properties, the Company, as the
master lessee on a master lease on the Properties, canceled the subject master
lease.
The negotiated sales prices of the Properties aggregated $12,500,000;
of these proceeds, $7,135,000 was used to satisfy the underlying mortgage debt
on the Properties (which represented approximately 13% of the Company's total
liabilities at such time) resulting in the realization of the wraparound notes
held by the Company. The wraparound notes on the Properties represented
approximately 15% of the Company's total assets.
As a result of the sale of the Properties, the payment of the
wraparound notes and the satisfaction of the underlying mortgage debt, the
Company received approximately $5,400,000 in cash and will realize a pre-tax
book gain of approximately $2,200,000 in the fourth quarter of 1999.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro forma financial information:
Consolidated Pro forma balance sheet as of June 30, 1999.
Consolidated Pro forma statements of revenues and expenses for
the six months ended June 30, 1999 and for the year ended
December 31, 1998.
<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: November 3, 1999 /s/ Patrick S. Kirse
-------------------------------------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)
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MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
(Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
ASSETS June 30, 1999 Debit Credit June 30, 1999
------------- ----- ------ -------------
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 6,679,325 $ 5,439,078 $ 409,671 $ 11,708,732
Restricted cash 222,000 222,000
Restricted cash for settlement 1,759,218 1,759,218
Loans receivable 1,408,194 1,408,194
Accounts receivable 675,944 23,398 652,546
Accrued interest receivable 2,049,084 563,345 1,485,739
Due from related party 781,187 781,187
Prepaid expenses and other 975,088 975,088
-------------- ------------
Total current assets 14,550,040 18,992,704
Property, improvements and equipment, net 21,343,571 21,343,571
Wraparound notes, net 30,677,857 10,465,490 20,212,367
Deferred income tax asset, net 2,793,820 141,993 2,651,827
Investment in affiliate 457,469 457,469
Management contract rights, net 155,732 155,732
Goodwill and organizational cost, net 671,930 671,930
-------------- --------------
Total assets $ 70,650,419 $ 64,485,600
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,164,753 3,780 $ 1,160,973
Accrued litigation payable 2,502,636 2,502,636
Accrued interest payable 311,414 311,414
Master lease payable 3,341,537 1,046,178 2,295,359
Current portion of mortgages and notes payable 4,847,135 4,847,135
Income taxes payable 2,763,071 2,763,071
----------------- --------------
Total current liabilities 14,930,546 13,880,588
Mortgages and notes payable 41,281,936 7,215,000 34,066,936
--------------- -------------
Total liabilities 56,212,482 47,947,524
------------------ --------------
Commitments and Contingencies
Stockholders' Equity:
Common stock ($.01 par value, 10,000,000 shares
authorized, 4,943,633 issued and outstanding;
692,591 shares in treasury) 49,436 49,436
Preferred stock (Series A $.01 par value, $10
liquidation preference, 10,000,000 shares
authorized, 2,999,707 shares issued and outstanding) 164 164
Additional paid-in surplus 45,527,013 45,527,013
Accumulated deficit (27,698,258) 2,100,139 (25,598,119)
Shares held in treasury - shares at cost ( 3,440,418) (3,440,418)
------------------ ---------------
Total stockholders' equity 14,437,937 16,538,076
----------------- --------------
Total liabilities and stockholders' equity $ 70,650,419 $ 64,485,600
================= ===============
</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, 1999
<TABLE>
<CAPTION>
Pro-Forma Adjustments Pro Forma
June 30, 1999 Debit Credit June 30, 1999
------------- ------ ------- -------------
REVENUES:
<S> <C> <C> <C>
Rent $ 3,989,466 $ 737,534 $ 3,251,932
Interest income 2,741,371 575,355 2,166,016
Revenue from management company operations 328,898 5,000 323,898
Tenant reimbursements 535,450 535,450
Management and reimbursement income 40,823 40,823
Percentage rent 178,446 178,446
Gain on realization of wraparound notes 1,273,793 1,273,793
---------------------- ----------------
Total revenues 9,088,247 7,770,358
---------------------- -----------------
EXPENSES:
Master lease expense 3,623,396 $ 922,361 2,701,035
Interest expense 1,989,245 326,195 1,663,050
Depreciation and amortization 382,921 382,921
Salaries, general and administration 1,435,042 11,716 1,423,326
Property expenses 942,364 23,645 918,719
Expenses for management company operations 444,399 444,399
Professional fees 342,172 342,172
------------------------- --------------------
Total expenses 9,159,539 7,875,622
------------------------
Loss before income tax (71,292) (105,264)
Provision for income taxes 200,250 141,993 342,243
------------------------- ---------------------
Net loss attributable to common stockholders $ (271,542) $ (447,507)
======================== =====================
Loss per common share, basic and diluted $ (0.06) $ (0.11)
======================
Weighted average common shares outstanding 4,250,992 4,250,992
======================== ======================
See Accompanying Notes to Consolidated Pro Forma Financial Statements
</TABLE>
<PAGE>
MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF REVENUES AND EXPENSES
(Unaudited)
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Pro-Form Adjustments Pro Forma
December 31, 1998 Debit Credit December 31, 1998
----------------- ------ ------- -----------------
REVENUES:
<S> <C> <C> <C>
Rent $ 9,747,973 $ 1,446,992 $ 8,300,981
Interest income 8,191,371 1,230,658 6,960,713
Revenue from management company operations 457,546 5,000 452,546
Tenant reimbursements 1,002,691 13,458 989,233
Management and reimbursement income 83,091 83,091
Percentage rent 414,875 30,654 384,221
Gain on sale of real estate related assets 5,617,844 5,617,844
------------------------- -------------------
Total revenues 25,515,391 22,788,629
------------------------ ------------------
EXPENSES:
Master lease expense 12,359,713 $ 1,836,644 10,523,069
Interest expense 5,474,451 896,762 4,577,689
Depreciation and amortization 913,527 913,527
Salaries, general and administration 2,873,482 8,930 2,864,552
Property expenses 1,682,791 30,097 1,652,694
Expenses for management company operations 1,031,690 1,031,690
Professional fees 1,273,555 1,273,555
Settlement Fees 7,084,238 7,084,238
------------------------- --------------------
Total expenses 32,693,447 29,921,014
------------------------- --------------------
Loss before income taxes (7,178,056) (7,132,385)
Provision for income taxes 1,253,056 232,571 1,485,627
-------------------------- ------------------
Net loss attributable to common stockholders $ (8,431,112) $ (8,618,012)
========================== =====================
Loss per common share, basic and diluted $ (1.99) $ (2.03)
========================= =====================
Weighted average common shares outstanding 4,235,245 4,235,245
========================= =====================
See Accompanying Notes to Consolidated Pro Forma Financial Statements
</TABLE>
<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 Properties, the
payment of the wraparound notes and the satisfaction of the underlying mortgage
debt, (hereinafter referred to as the "Transaction") occurred on June 30, 1999.
The accompanying unaudited consolidated pro forma statements of revenues and
expenses for the year ended December 31, 1998 and for the six months ended June
30, 1999 are presented as if the Transaction occurred as of January 1, 1998.
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, 1998 and the Company's
Form 10-Q for the period ended June 30, 1999. 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 received approximately
$5,400,000 in cash and will realize a pre-tax book gain of approximately
$2,200,000 in the fourth quarter of 1999. Such non-recurring gain is not
reflected in the accompanying June 30, 1999 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,
1999 or what the actual results of operations of the Company would have been
assuming the Transaction occurred as of January 1, 1998 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 Properties:
(i) wraparound notes 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 Properties: (i) rental and other revenues, (ii) property operating expenses,
(iii) interest expense on the underlying debt, (iv) interest income on the
wraparound notes, (v) master lease expenses and (vi) any other items and
expenses.
