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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-12002
MARK CENTERS TRUST
(Exact name of registrant in its charter)
MARYLAND 23-2715194
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 THIRD AVENUE, KINGSTON, PENNSYLVANIA 18704
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(717) 288-4581
Indicate by check mark whether the registrant (1) has 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
As of May 20, 1996, there were 8,543,452 common
shares of beneficial interest, par value $.001
per share, outstanding.
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MARK CENTERS TRUST
FORM 10-Q
INDEX
Part I: Financial Information Page
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets as of
March 31, 1996 and as of December 31, 1995 1
Consolidated statements of operations for
the three months ended March 31, 1996 and 1995 2
Consolidated statements of cash flows for
the three months ended March 31, 1996 and 1995 3
Notes to consolidated financial statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II:Other Information
Signatures 18
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Part I. Financial Information
Item 1. Financial Statements
MARK CENTERS TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1996 1995
ASSETS (audited)
Rental property - at cost:
Land $ 25,270 $ 25,270
Buildings and improvements 259,027 258,827
Construction-in-progress 10,767 7,060
-------- --------
295,064 291,157
Less accumulated depreciation 64,055 61,269
-------- --------
Total rental property 231,009 229,888
Cash and cash equivalents 3,482 3,068
Rents receivable - less allowance
for doubtful accounts of $477 and
$509, respectively 4,356 5,200
Prepaid expenses 1,077 1,352
Due from related parties 310 384
Furniture, fixtures and equipment,
net 724 796
Deferred charges 7,346 4,905
Tenant security and other deposits 1,441 3,922
------- -------
$249,745 $249,515
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $108,335 $107,975
Lines of credit 44,793 43,853
Accounts payable and accrued expenses 9,713 7,058
Accrued contingent payable to
Principal Shareholder 6,156 6,156
Rents received in advance and tenant
security deposits 1,241 1,466
------- -------
Total Liabilities 170,238 166,508
------- -------
Minority interest 12,669 13,228
------- -------
Shareholders' equity:
Common shares, $.001 par value,
authorized 50,000,000 shares, issued
and outstanding 8,543,452 shares 9 9
Additional paid-in capital 66,829 69,770
Retained earnings -- --
------- -------
Total Shareholders' Equity 66,838 69,779
------- -------
$249,745 $249,515
======= =======
See accompanying notes to consolidated financial statements
1
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MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(in thousands except for per share data)
March 31, March 31,
1996 1995
Revenue:
Minimum rents $ 8,466 $ 7,847
Percentage rents 602 769
Additional rents-
expense reimbursements 1,944 1,541
Other 223 259
------- -------
Total revenue 11,235 10,416
------- -------
Expenses:
Property operating 2,817 2,158
Real estate taxes 1,298 1,119
Depreciation and amortization 3,202 2,853
General and administrative
expenses 758 731
------- -------
Total operating expenses 8,075 6,861
------- -------
Operating income 3,160 3,555
Interest and financing
expenses 2,974 2,353
------- -------
Income before minority
interest 186 1,202
Minority interest (52) (216)
------- -------
Net income $ 134 $ 986
======= =======
Net income per common share $ .02 $ .12
======= =======
See accompanying notes to consolidated financial statements
2
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MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND 1995
(in thousands)
March 31, March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 134 $ 986
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of leasing
costs 2,968 2,563
Amortization of deferred financing costs 234 290
Minority interest 52 216
Provision for bad debts 194 134
------- -------
3,582 4,189
Changes in assets and liabilities:
Rents receivable 651 868
Prepaid expenses 274 58
Due from related parties 75 51
Tenant security and other deposits 467 (147)
Accounts payable and accrued expenses 20 (147)
Rents received in advance and tenant
security deposits (224) (224)
------- -------
Net cash provided by operating activities 4,845 4,648
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and improvements (3,892) (4,091)
Increase (decrease)in accounts payable
related to construction in progress 2,633 (2,661)
Payment to Principal Shareholder for
acquisition of land -- (1,500)
Deferred leasing and other charges (2,761) (1,127)
Expenditures for furniture, fixtures and
equipment -- (77)
------- -------
Net cash used in investing activities (4,020) (9,456)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages (2,060) (45,326)
Proceeds received on mortgage notes 3,360 56,463
Reduction in debt service escrow 2,014 --
Payment of deferred financing costs (39) (367)
Dividends paid (3,075) (3,073)
Distributions to Principal Shareholder (611) (617)
------- ------
Net cash (used in) provided by
financing activities (411) 7,080
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 414 2,272
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,068 3,021
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,482 $ 5,293
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest, net
of $189 and $358, respectively $ 2,993 $ 2,534
======= =======
See accompanying notes to consolidated financial statements
3
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MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include the consolidated
accounts of Mark Centers Trust (the "Company") and its majority
owned partnerships, including Mark Centers Limited Partnership (the
"Operating Partnership"), and have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with instruction to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The information
furnished in the accompanying consolidated financial statements
reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of the aforementioned
consolidated financial statements for the interim periods.
Operating results for the three month period ended March 31, 1996
are not necessarily indicative of the results that may be expected
for the fiscal year ended December 31, 1996.
The aforementioned consolidated financial statements should be read
in conjunction with the notes to the aforementioned consolidated
financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
2. ORGANIZATION AND FORMATION OF THE COMPANY
The Company was formed as a Maryland Real Estate Investment Trust
("REIT") on March 4, 1993 by Marvin L. Slomowitz (the "Principal
Shareholder"), the principal owner of Mark Development Group (the
"Predecessor"), to continue the business of the Predecessor in
acquiring, developing, renovating, owning and operating shopping
center properties. The Company effectively commenced operations on
June 1, 1993 with the completion of its initial public offering,
whereby it issued an aggregate of 8,350,000 common shares of
beneficial interest to the public at an initial public offering
price of $19.50 per share (the "Offering"). The proceeds of the
Offering were used to repay certain property-related indebtedness,
for costs associated with the Offering and transfer of the
properties to the Company and for working capital. The acquisition
of the properties was recorded by the Company at the historical
cost reflected in the Predecessor's financial statements since
these transactions were conducted with entities deemed to be
related parties.
4
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MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company currently owns and operates thirty-nine properties
consisting of thirty-four neighborhood and community shopping
centers, three enclosed malls and two mixed use (retail/office)
properties. In addition, the Company currently has one community
shopping center under construction in New Castle, Pennsylvania. All
of the Company's assets are held by, and all of its operations are
conducted through, the Operating Partnership. The Company will at
all times be the sole general partner of, and owner of a 51% or
greater interest in, the Operating Partnership. In excess of 99%
of the minority interest in the Operating Partnership is owned by
the Principal Shareholder who is the principal limited partner of
the Operating Partnership.
3.SHAREHOLDERS' EQUITY AND MINORITY INTEREST
The following table summarizes the change in the shareholders'
equity and minority interest since December 31, 1995:
(in thousands)
Shareholders' Minority
Equity Interest
Balance at December 31, 1995 $69,779 $13,228
Income for the period January 1 through
March 31, 1996 134 52
Distributions to Principal Shareholder -- (611)
Dividends paid, $.36 per share (3,075) --
------- -------
Balance at March 31, 1996 $66,838 $12,669
======= =======
5
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4. RELATED PARTY TRANSACTIONS
As of March 31, 1996 amounts due from related parties consisted of
the following (in thousands):
Accrued management fees due from Principal
Shareholder for certain operating properties
owned by the Principal Shareholder $ 23
Accrued ground rent due from Blackman Plaza
Partners (a limited partnership in which the
Principal Shareholder is a 1% general partner) 261
Other amounts due the Company from the Principal
Shareholder 26
-------
$310
=======
Concurrent with the Offering, the Company obtained acquisition
options to acquire six properties that were under development by
the Principal Shareholder ("Acquisition Options"). Upon exercising
an option, the Company immediately obtains title, completes all
development and, depending on the Company's return on its
investment, pays the Principal Shareholder all or a portion of an
amount (the "Contingent Payment Amount") equal to (i) land
acquisition costs, (ii) third party development costs, (iii)
allocated overhead expenses and (iv) leasing commissions for all
tenant leases signed prior to the Offering, and also pays an
incentive payment equal to 5% of construction costs (excluding
engineering, architectural and other "soft" costs). The Contingent
Payment Amount will be reduced proportionately to the extent that,
within two years after completion of construction, the annualized
net operating income derived from operation of the properties as to
which options have been exercised does not generate a return on the
Company's investment of at least 13.5%, giving effect to the
payment of the Contingent Payment Amount.
Payment of the Contingent Payment Amount, which is made within 24
months after construction has substantially been completed and
after certain other conditions have been met, will be made by the
issuance to the Principal Shareholder of Operating Partnership
Units.
6
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MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. RELATED PARTY TRANSACTIONS, continued
In February 1996, the Board of Trustees of the Company and the
Principal Shareholder agreed to terminate all outstanding
Acquisition Options (other then the Acquisition Option pertaining
to the New Castle property which had been terminated in May 1995),
execute a new agreement as to the Development Property for which
the Acquisition Option had been previously exercised and
construction suspended, and review the purchase price for the
properties for which Acquisition Options had been previously
exercised and construction completed. The Principal Shareholder's
and Board's decision was intended to eliminate the appearance of
potential conflicts of interest arising between the Principal
Shareholder and the Company in the context of the Acquisition
Options, and to eliminate potential disputes arising from the
complex manner in which the reimbursement to the Principal
Shareholder for the Development Properties was calculated.
The Company and the Principal Shareholder agreed that the Principal
Shareholder will repurchase the Columbia Towne Centre property in
Hudson, New York in exchange for a note in the original principal
amount equal to approximately $3 million, representing the
Company's investment in the property since its exercise of the
Acquisition Option. Accordingly, the Company has adjusted the
contingent amount payable in the financial statements to reflect
this agreement.
The Company and the Principal Shareholder agreed to terminate the
Acquisition Option for the New Castle property in May 1995. The
Company has entered into a new agreement with the Principal
Shareholder to purchase the New Castle, Pennsylvania, site in
exchange for a note in the original principal amount equal to the
lower of its appraised value or the amount in which the principal
Shareholder had invested in the property less amounts advanced to
the Principal Shareholder for certain pre-development costs. In
February 1996, they have also agreed to terminate the Acquisition
Options for the Gettysburg, Pennsylvania and Dallas, Pennsylvania
sites, as the Company no longer has any interest in developing
these sites.
7
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MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. RELATED PARTY TRANSACTIONS, continued
With respect to the Route 6 Mall and the Bradford Towne Centre
properties, which are completed and currently operating, the
Company and the Principal Shareholder are continuing to review any
payments required under the Acquisition Options. The Acquisition
Options currently provide that the Company would be required to pay
the Principal Shareholder an amount based upon the Company
achieving a 13.5% return on its investment (on each property
individually). At March 31, 1996, if the purchase price was
calculated under this provision, no amounts would be due to the
Principal Shareholder. However, since the Company and the
Principal Shareholder are continuing to review this agreement, the
Company has not adjusted the contingent amount payable of
$6,156,000 to the Principal Shareholder in the financial statements
as of March 31, 1996. In addition to the Acquisition Option
relating to the Route 6 Mall, the Principal Shareholder conveyed
approximately two acres of land which became part of the Route 6
Mall. The Board of Trustees and the Principal Shareholder
currently are discussing the extent of the Company's obligation to
the Principal Shareholder in respect to his conveyance of this
parcel.
5. PER SHARE DATA
Primary earnings per share are computed based on 8,563,053 and
8,564,036 shares outstanding, which represent the weighted average
number of shares outstanding (including restricted shares) during
the three month periods ended March 31, 1996 and 1995,
respectively. Fully diluted earnings per share is based on an
increased number of shares that would be outstanding assuming the
exercise of share options at the market price at the end of the
period. Since fully diluted earnings per share is not materially
dilutive or anti-dilutive, such amounts are not presented.
6. SUBSEQUENT EVENT
On May 17, 1996, the Board of Trustees of the Company approved and
declared a quarterly dividend for the quarter ended March 31, 1996
of $0.36 per common share. The dividend is to be paid on June 28,
1996 to the shareholders of record as of May 30, 1996.
8
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion is based on the consolidated financial
statements of Mark Centers Trust (the "Company") as of March 31,
1996 and 1995.
This information should be read in conjunction with the
accompanying consolidated financial statements and notes thereto.
These financial statements include all adjustments which, in the
opinion of management, are necessary to reflect a fair statement of
the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. Operating results
for the three month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year
ending December 31, 1996.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 to Three Months
Ended March 31, 1995
Total revenue increased approximately $819,000, or 7.9%, to $11.2
million for the quarter ended March 31, 1996 compared to $10.4
million for the quarter ended March 31, 1995. This increase was
primarily due to increases in minimum rents, and expense
reimbursements resulting from new leasing activity associated with
a shopping center acquisition and expansion and development
activity following the first quarter of 1995. Of the increase in
total revenue, minimum rent increased approximately $619,000, or
7.9% to $8.5 million. Recovery from tenants of increased snow
removal expenses also contributed to the increase in expense
reimbursements for the quarter ended March 31, 1996. These were
offset in part by a decrease in percentage rent due primarily to
seasonal factors.
Operating expenses increased approximately $1.2 million, or 17.7%,
to $8.1 million during the quarter ended March 31, 1996 compared
to $6.9 million for the quarter ended March 31, 1995. The
increase in operating expenses were primarily attributable to
increased costs related to snow removal due to the extremely harsh
winter experienced in the Northeast totalling $416,000, certain
non-recurring expenses related to the termination of development
activity in Gettysburg, PA and legal expenses related to certain
litigation totalling $254,000 and increased real estate taxes and
depreciation and amortization totalling $528,000 related to an
increase in the Company's portfolio from a property acquisition and
its expansion and development activity.
9
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Mortgage and related interest charges increased approximately
$621,000 from the quarter ended March 31, 1995 compared to the
quarter ended March 31, 1996. This increase is primarily due to
higher average outstanding borrowings related to acquisition,
expansion and development activity.
As a result of the aforementioned changes in revenues and expenses,
income before minority interest for the quarter ended March 31,
1996 decreased $1.0 million to $186,000 from $1.2 million for the
quarter ended March 31, 1995.
10
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FUNDS FROM OPERATIONS
For the Quarter Ended March 31, 1996 and 1995
(in thousands, except per share amounts)
March 31, March 31,
Revenue 1996 1995
Minimum rents (a) $ 8,406 $ 7,793
Percentage rents 602 769
Additional rents-expense reimbursements 1,944 1,541
Other 223 259
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Total revenue 11,175 10,362
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Expenses
Property operating (b) 2,740 2,145
Real estate taxes 1,298 1,119
General and administrative 751 720
------- -------
Total operating expenses 4,789 3,984
------- -------
Operating income 6,386 6,378
Interest and financing expense 2,975 2,353
------- -------
Funds from operations (c) 3,411 4,025
Amortization of deferred financing costs (234) (290)
Depreciation of non real estate assets (57) (52)
------- -------
Adjusted funds from operations (d) $ 3,120 $ 3,683
======= =======
Funds from operations per share(c)(e) $ .34 $ .40
======= =======
Adjusted funds from operations
per share (d)(e) $ .31 $ .36
======= =======
Reconciliation of Adjusted Funds from Operations to Net Income
determined in accordance with Generally Accepted Accounting
Principles (GAAP)
Adjusted funds from operations above $ 3,120 $ 3,683
Depreciation and amortization of
leasing costs (2,911) (2,511)
Straight-line rents and related
write-offs net (8) 40
Minority interest (52) (216)
Other non-cash adjustments (15) (10)
------- -------
Net income $ 134 $ 986
======= =======
Net income per share (f) $ .02 $ .12
======= =======
11
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(a) Excludes income from straight-lining of rents.
(b) Represents all expenses other than depreciation, amortization,
write-off of unbilled rent receivables recognized on a
straight-line basis and the non-cash charge for compensation
expense related to the Company's restricted share plan.
(c) Funds from operations as defined by NAREIT prior to the 1995
White Paper on Funds from Operations as net income (computed
in accordance with generally accepted accounting principles)
excluding gains (or losses) from debt restructuring and sales
of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint
ventures.
(d) Commencing in 1996, the Company has adopted the new NAREIT
definition of Funds from Operations which does not add back
amortization of deferred financing costs and depreciation of
non real estate assets.
(e) Assumes full conversion of 1,623,000 and 1,621,000 Operating
Partnership Units into common shares of the Company for the
quarters ended March 31, 1996 and 1995, respectively, for a
total of 10,166,452 and 10,157,765 shares, respectively.
(f) Net income per share is computed based on the weighted average
number of shares outstanding for the quarters ended March 31,
1996 and 1995 of 8,563,053 and 8,564,036, respectively
12
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had $18.3 million outstanding on its
Fleet Bank line of credit. Although the maximum loan amount is $25
million, the $6.7 million additional sum is not currently available
because $1.7 million is subject to certain occupancy requirements
at Ledgewood Mall and the remaining $5.0 million is subject to
certain borrowing base restrictions. The terms of the facility
include interest at Fleet's Prime rate plus 1/4% or LIBOR plus 200
basis points, a May 31, 1997 maturity date, and certain affirmative
and negative covenants. The facility is secured by mortgages on
six of the Company's properties.
At March 31, 1996, the Company had $20.5 million outstanding on a
$22.5 million revolving credit facility from Mellon Bank, N.A.
which is secured by mortgages on six of the Company's properties.
The additional $2.0 million under this line of credit for property
acquisitions, development, improvements and general working capital
is not currently available because it is subject to certain
collateral base borrowing restrictions. Advances under the facility
bear interest at a floating rate equal to the prime rate plus 1/2%
or LIBOR plus 200 basis points. The facility matures October 6,
1996.
The Company also has $6.0 million outstanding on its $6.0 million
revolving line of credit facility with Firstrust Savings Bank which
bears interest at a fixed rate of 8.75% and is secured by mortgages
on three of the Company's properties. The facility matures
December 20, 1996.
At March 31, 1996, the Company had $2.8 million outstanding on a
construction loan from Mellon Bank, N.A. which is secured by one of
the Company's properties. The $4.7 million facility bears interest
equal to the bank's prime rate plus 1/2% or LIBOR plus 225 basis
points and matures May 15, 1997.
The Company has additional mortgage indebtedness of $105.5 million
outstanding which bear fixed rates of interest ranging from 7.7% to
9.11% and have maturities ranging from September 9, 1999 to June 1,
2008.
At March 31, 1996, the Company's capitalization consisted of $153.1
million of debt and $110.6 million of market equity (using a March
31, 1996 market price of $10.875 per share). The Company's interest
coverage ratio was 2.1 to 1. Of the total outstanding debt, $111.5
million, or 73%, is carried at a fixed rate and the remaining $41.6
million, or 27%, is carried at variable rates.
13
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LIQUIDITY AND CAPITAL RESOURCES, continued
The Company currently estimates that capital outlays for tenant
improvements, related renovations and other property improvements
will require $2.9 million during the remainder of 1996.
Additionally, capital outlays for ongoing property development in
New Castle, Pennsylvania will be $11.3 million. Of these capital
outlays, $4.3 million has been recorded and is reflected in
accounts payable and accrued expense balances at March 31, 1996.
The Company may experience a cash shortfall in the second quarter
as a result of the delay in obtaining construction financing for
the New Castle, Pennsylvania, project and the Company's decision to
continue to fund out of operations ($2.1 million as of March 31,
1996) the development of the project in order to take advantage of
certain construction cost economies and to meet certain tenant
deadlines. Construction loan financing was affected by the
postponement of the signing of the third anchor tenant's lease
which will result in a reduction in the amount of financing and
will increase the Company's short term reliance on cash from
operations to meet this commitment. Although the Company has not
yet received a commitment, it expects to obtain financing of
approximately $10 million which the Company anticipates will permit
it to meet its cash requirements for this project. In addition,
short term cash availability has been negatively impacted as a
result of the $2.5 million purchase of the Jamesway lease at
Ledgewood Mall to make space available for a large national
discount department store at significantly increased rentals, the
unanticipated requirement for the repayment of $1.8 million of debt
caused by the Rich's bankruptcy in Auburn, Maine, and certain other
tenant bankruptcies which occurred in late 1995 and early 1996.
In order to meet the 1996 capital requirements and to provide for
dividend payments, in addition to cash from operating activities,
and in addition to the New Castle construction loan mentioned
above, the Company expects to close on a committed $1.5 million
increase in the Firstrust Savings Bank line of credit which
requires the pledging as collateral the Troy Plaza in Troy, New
York. Although it has not yet received final commitment, the
Company expects to obtain an additional $2 million in short-term
borrowing and during the third quarter of 1996 the Company expects
to complete a significant refinancing of its existing lines of
credit to long-term, permanent, fixed rate, non-recourse debt of
approximately $60 million which will provide approximately $20
million of additional working capital. While there can be no
assurance that these financing transactions will be completed the
Company believes they will be concluded in an orderly fashion to
meet the Company's current and longer term capital needs.
14
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The Company's outstanding indebtedness encumbers 31 of its 39
properties. All of the remaining properties, with the exception of
one property which the Company owns as ground lessor under a long-
term ground lease, remain unencumbered, and therefore are available
to secure potential future borrowings. Pursuant to covenants under
the lines of credit with Fleet Bank and Mellon Bank, approval is
needed from these lenders prior to the Company encumbering any
additional properties.
In March 1996, the Company paid a dividend of $.36 per share,
representing approximately 90% of its reported funds from
operations (95% based on the new NAREIT definition of funds from
operations adopted by the Company in 1996), for the quarter ended
December 31, 1995.
HISTORICAL CASH FLOW
Historically, the principal sources for funding operations,
renovations, expansion, development and acquisitions have been
funds from operations and construction and permanent secured debt
financings, as well as short term construction and line of credit
borrowing from various lenders.
The following discussion of historical cash flow compares the
Company's cash flow for the three months ended March 31, 1996 with
the Company's cash flow for the three months ended March 31, 1995.
Net cash provided by operating activities increased from $4.6
million for the three months ended March 31, 1995 to $4.8 million
for the three months ended March 31, 1996. This increase was
primarily attributable to increased cash flow from tenant security
and other deposits offset by decreased cash flow from income before
depreciation and amortization.
Investing activities used $4.0 million during the three months
ended March 31, 1996, a decrease in cash used of $5.4 million from
the same period in 1995 due to decreased expenditures for real
estate and improvements offset by increased use of cash in deferred
leasing costs associated with the Company's leasing activities.
Net cash used in financing activities was $411,000 for the three
months ended March 31, 1996 representing a $7.5 million decrease
from net cash provided by financing activities of $7.1 million for
the three months ended March 31, 1995. This decrease is primarily
attributable to a decrease in net proceeds received on mortgage
notes.
15
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INFLATION
The Company's long-term leases contain provisions designed to
mitigate the adverse impact of inflation on the Company's net
income. Such provisions include clauses enabling the Company to
receive percentage rents based on tenants' gross sales, which
generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates during
14 the terms of the leases. Such escalation clauses are often
related to increases in the consumer price index or similar
inflation indexes.
In addition, many of the Company's leases are for terms of less
than ten years, which permits the Company to seek to increase rents
upon re-rental at market rates if rents are below the then existing
market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby
reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation.
16
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
17
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has fully caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MARK CENTERS TRUST
By: /s/ Marvin L. Slomowitz
Marvin L. Slomowitz
Chief Executive Officer and
Trustee (Principal Executive
Officer)
/s/ Joshua Kane
Joshua Kane
Senior Vice President
Chief Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
Date: May 20, 1996
18
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<NAME> MARK CENTERS TRUST
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0
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