Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report 9± 38K
2: EX-27 Financial Data Schedule for First Quarter 10-Q 1 5K
Midwest Real Estate Shopping Center,
L.P.
3: EX-99 Brookdale Center Appraisal 123± 419K
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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: 1-9331
MIDWEST REAL ESTATE SHOPPING CENTER L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3384643
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets At March 31, At December 31,
1996 1995
Assets
Property held for disposition $ 24,500,000 $ 24,500,000
Cash and cash equivalents 5,857,086 5,971,023
Restricted cash 1,819,579 1,012,296
Accounts receivable, net of
allowance of $227,500 in 1996 and
$174,600 in 1995 465,839 537,561
Deferred rent receivable 123,093 112,931
Due from affiliates, net 123,270 115,062
Prepaid assets 37,043 92,607
Total Assets $ 32,925,910 $ 32,341,480
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued
expenses $ 1,077,337 $ 623,499
Zero coupon mortgage note payable 39,009,945 38,028,587
Total Liabilities 40,087,282 38,652,086
Partners' Deficit:
General Partner (119,778) (111,270)
Limited Partners (10,700,000
securities outstanding) (7,041,594) (6,199,336)
Total Partners' Deficit (7,161,372) (6,310,606)
Total Liabilities and
Partners' Deficit $ 32,925,910 $ 32,341,480
Statement of Partners' Deficit
For the three months ended March 31, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ (6,199,336) $ (111,270) $ (6,310,606)
Net loss (842,258) (8,508) (850,766)
Balance at March 31, 1996 $ (7,041,594) $ (119,778) $ (7,161,372)
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Rental income $ 1,126,903 $ 1,154,032
Escalation income 1,223,013 1,397,889
Interest income 100,318 98,389
Miscellaneous income 73,474 318,527
Total Income 2,523,708 2,968,837
Expenses
Property operating expenses 674,596 682,099
Real estate taxes 617,700 772,358
Interest expense 1,806,358 858,134
Depreciation and amortization -- 295,177
General and administrative 58,318 77,331
Management fee 53,785 51,918
Professional fees 163,717 27,239
Total Expenses 3,374,474 2,764,256
Net Income (Loss) $ (850,766) $ 204,581
Net Income (Loss) Allocated:
To the General Partner $ (8,508) $ 2,046
To the Limited Partners (842,258) 202,535
$ (850,766) $ 204,581
Per limited partnership unit
(10,700,000 outstanding) $ (.08) $ .02
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities:
Net income (loss) $ (850,766) $ 204,581
Adjustments to reconcile net income
(loss) to net cash provided by (used for)
operating activities:
Depreciation and amortization -- 295,177
Increase in interest on zero coupon
mortgage note payable 981,358 858,134
Increase (decrease) in cash arising
from changes in operating assets and
liabilities:
Restricted cash (807,283) --
Accounts receivable 71,722 14,508
Deferred rent receivable (10,162) (10,344)
Due from affiliates, net (8,208) (31,067)
Prepaid assets 55,564 51,216
Accounts payable and accrued expenses 453,838 855,958
Net cash provided by (used for)
operating activities (113,937) 2,238,163
Cash Flows From Investing Activities:
Additions to real estate -- (419,307)
Net cash used for investing activities -- (419,307)
Cash Flows From Financing Activities:
Distributions paid -- (756,565)
Net cash used for financing activities -- (756,565)
Net increase (decrease) in cash and
cash equivalents (113,937) 1,062,291
Cash and cash equivalents, beginning
of period 5,971,023 6,693,502
Cash and cash equivalents, end
of period $ 5,857,086 $ 7,755,793
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 825,000 $ --
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of partner's
deficit for the three months ended March 31, 1996. Results of operations for
the periods are not necessarily indicative of the results to be expected for
the full year.
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
On April 18, 1996, the Partnership announced that the Equitable Life Assurance
Society of the United States ("Equitable"), the holder of a mortgage note
secured by the Partnership's principal asset, Brookdale Center ("Brookdale"), a
regional shopping mall located in Brooklyn Center (Hennepin County), Minnesota,
agreed to postpone the date of the previously announced foreclosure sale of the
property until May 24, 1996 at the earliest. The Partnership and Equitable
have also executed a letter of intent that outlines the principle terms of a
proposed loan work-out relating to Brookdale and, if necessary, a plan of
reorganization for the Partnership under Chapter 11 of the Bankruptcy Code that
would be supported by Equitable.
The proposed terms contemplate that while the Mortgage would remain in default,
the Partnership would seek to market Brookdale to a third-party buyer. In the
event no acceptable third-party offer is received by November 15, 1996, or a
third party fails to close the acquisition by December 1, 1996, both the
Partnership and Equitable would have the right to transfer ownership of
Brookdale to Equitable and Equitable's participant, EML Associates ("EML"), for
a $500,000 cash purchase price. Equitable and EML would also be granted certain
limited rights of first refusal to acquire Brookdale. The net sales proceeds
from a third-party buyer, after costs of the sale and amounts owed to Equitable
under any debtor-in-possession financing, would be split as follows: first, up
to $750,000 to the Partnership and $30 million to Equitable on a pari passu
basis, then 50/50 on any additional net sales proceeds up to the next $6
million, with the balance, if any, to the Partnership. The Partnership does
not expect that the net sales proceeds from a third-party buyer, after costs of
the sale and payment of amounts owed to Equitable, will be material to the
Partnership.
Under the Chapter 11 arrangements as contemplated by the agreement, pending
sale, all available cash flow from Brookdale (after payment of property
expenses and administrative costs associated with the bankruptcy) will be paid
to Equitable. Equitable will fund necessary capital and leasing costs pursuant
to a super-priority, non-recourse, debtor-in-possession loan by Equitable
payable upon the disposition of Brookdale.
The contemplated arrangements are subject to the execution of a definitive
agreement, certain conditions precedent, the approval of the Board of Directors
of the Partnership's General Partner, the approval of Equitable's Investment
Committee and the approval of EML and its partners. There can be no assurance
that any definitive agreement will be reached.
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The General Partner has been attempting to sell the Partnership's remaining
property, Brookdale Center (the "Property" or "Brookdale"), and pay off the
Mortgage, which is held by The Equitable Life Assurance Society of the United
States ("Equitable") and secured by the Property. The General Partner was
unable to consummate a sale of the Property and repay the Mortgage prior to
June 30, 1995, the maturity date of the Mortgage. As a result, on July 5,
1995, Equitable issued a notice of default to the Partnership and commenced
advertising Brookdale for a public nonjudicial foreclosure sale to be held on
September 12, 1995. Such date was subsequently postponed on several occasions.
On April 12, 1996, Equitable agreed to postpone the date of the previously
announced foreclosure sale of the property until May 24, 1996 at the earliest.
In addition, the Partnership and Equitable executed a letter of intent that
outlines, as described below, the principle terms of a proposed loan work-out
relating to Brookdale and, if necessary, a plan of reorganization for the
Partnership under Chapter 11 of the Bankruptcy Code that would be supported by
Equitable.
The proposed terms contemplate that while the Mortgage would remain in default,
the Partnership would seek to market Brookdale to a third-party buyer. In the
event no acceptable third-party offer is received by November 15, 1996, or a
third party fails to close the acquisition by December 1, 1996, both the
Partnership and Equitable would have the right to transfer ownership of
Brookdale to Equitable and Equitable's participant, EML Associates ("EML"), for
a $500,000 cash purchase price. Equitable and EML would also be granted certain
limited rights of first refusal to acquire Brookdale. The net sales proceeds
from a third-party buyer, after costs of the sale and amounts owed to Equitable
under any debtor-in-possession financing, would be split as follows: first, up
to $750,000 to the Partnership and $30 million to Equitable on a pari passu
basis, then 50/50 on any additional net sales proceeds up to the next $6
million, with the balance, if any, to the Partnership. The Partnership does
not expect that the net sales proceeds from a third-party buyer, after costs of
the sale and payment of amounts owed to Equitable, will be material to the
Partnership. Under the Chapter 11 arrangements as contemplated by the
agreement, pending sale, all available cash flow from Brookdale (after payment
of property expenses and administrative costs associated with the bankruptcy)
will be paid to Equitable. Equitable will fund necessary capital and leasing
costs pursuant to a super-priority, non-recourse, debtor-in-possession loan by
Equitable payable upon the disposition of Brookdale.The contemplated
arrangements are subject to the execution of a definitive agreement, certain
conditions precedent, the approval of the Board of Directors of the
Partnership's General Partner, the approval of Equitable's Investment Committee
and the approval of EML and its partners.
Since August 2, 1995, General Growth Management, Inc. ("General Growth"), the
current property manager, has acted as the receiver of Brookdale as appointed
by the Minnesota District Court. In such capacity, General Growth collects the
rent proceeds from Brookdale's tenants and applies the proceeds to payments of,
among other things, Brookdale's operating expenses, maintenance costs, real
estate taxes, tenant improvements and leasing commissions, with any remaining
funds to be paid to Equitable for interest due under the Mortgage. From the
date of receivership through March 31, 1996, the net cash flow generated by
Brookdale was not available to the Partnership and is reflected on the
Partnership's balance sheet as restricted cash. During December 1995, $700,000
was forwarded to Equitable and applied to the Mortgage under the terms of the
receivership. In addition, during the first quarter of 1996, an additional
$825,000 was forwarded to Equitable, under the terms of the receivership, and
applied to the Mortgage. The increase in restricted cash from December 31,
1995 to March 31, 1996 is attributable to cash flow generated by Brookdale
partially offset by the $825,000 payment made to Equitable. Debt service
shortfalls, if any, may be advanced by Equitable and added to the principal
amount of the Mortgage. General Growth is being paid a receiver's fee equal to
4.45% of all fixed minimum rents and percentage or overage rents collected, the
same fee it received in its role as property manager. Should the Partnership
and Equitable execute a definitive agreement which includes a plan of
reorganization under Chapter 11 bankruptcy protection, the terms of such
agreement would supersede the terms of the existing court-appointed
receivership.
In an effort to facilitate the sale of Brookdale, the General Partner has
retained Jones Lang Wootton, an international real estate sales and advisory
firm with extensive experience in marketing large assets to the investment
community. We are hopeful that their efforts will result in an acceptable
offer to buy Brookdale. However, the serious difficulties facing the retail
industry, as well as other industry trends, are adversely impacting both sales
opportunities and market values for malls such as Brookdale.
As of the filing date of this report, the following tenants, or their parent
corporations, at the Mall have filed for protection under the U.S. Federal
Bankruptcy Code.
Tenant Square Footage Leased
Stuarts 8,069
J Riggings 2,815
Mr. Bulky 1,566
JW 1,410
Merry Go `Round* 3,378
* vacated in April 1996
These tenants occupy 17,238 square feet, or approximately 8.6% of Brookdale's
leasable area (exclusive of anchor tenants), and at this time their plans to
remain at Brookdale remain uncertain. Pursuant to the provisions of the U.S.
Federal Bankruptcy Code, these tenants may, with court approval, choose to
reject or accept the terms of their leases. Should any of these tenants
exercise the right to reject their leases, this could have an adverse impact on
cash flow generated by Brookdale and revenues received by the Partnership and
the Partnership's negotiations with Equitable with respect to the default on
the Mortgage.
At March 31, 1996, the Partnership had unrestricted cash totaling $5,857,086
compared to $5,971,023 at December 31, 1995. The decrease is due to
expenditures for Partnership operations and the absence of cash flow from
Brookdale being paid to the Partnership, due to the appointment of a receiver
on August 2, 1995 as described above.
Accounts receivable decreased from $537,561 at December 31, 1995 to $465,839 at
March 31, 1996. The decrease reflects the receipt of payments from tenants for
real estate taxes and an increase in the allowance for bad debt expense related
to one Brookdale tenant.
Prepaid assets decreased from $92,607 at December 31, 1995 to $37,043 at March
31, 1996 primarily due to the timing and recognition of payments for prepaid
insurance.
Accounts payable and accrued expenses increased from $623,499 at December 31,
1995 to $1,077,337 at March 31, 1996. The increase is due to the accrual for
1996 real estate taxes for Brookdale, partially offset by payments made for
prior year payables.
Zero coupon mortgage note payable increased from $38,028,587 at December 31,
1995 to $39,009,945 at March 31, 1996 due to the accrual of interest on the
Mortgage which matured on June 30, 1995. Pursuant to its terms, the Mortgage
accrues interest at a default rate of 19% per annum commencing July 1, 1995.
See "Liquidity and Capital Resources" above for a discussion of the default.
Dayton's land and building are owned by DDC, an affiliate of Dayton's, which
leases Dayton's land and building to Dayton's. DDC's lease to Dayton's runs
through July 31, 1996. DDC and Dayton's are subject to an operating agreement
that generally requires Dayton's to operate a Dayton's store in the Dayton's
building until July 31, 1996. Dayton's has not informed the Partnership of any
intention to leave the Mall when its operating covenant expires.
Results of Operations
Cash used for operating activities totaled ($113,937) for the period ended
March 31, 1996 compared to cash provided by operating activities of $2,238,163
for the same period in 1995. The reduced cash flow is primarily due to the
paying of all net cash flow from Brookdale to Equitable, which commenced on
August 2, 1995 (see "Liquidity and Capital Resources" above).
The Partnership recognized a net loss of $850,766 for the period ended March
31, 1996 compared to net income of $204,581 for the same period during 1995.
The change from net income to net loss is primarily due to increased interest
expense on the Mortgage.
Escalation income totaled $1,223,013 for the period ended March 31, 1996
compared to $1,397,889 for the same period in 1995. The decrease is primarily
due to lower recoverable real estate tax income.
Miscellaneous income totaled $73,474 for the three months ended March 31, 1996
compared to $318,527 during the same period in 1995. Miscellaneous income
during the 1995 period primarily consisted of lease buyout settlements for two
Brookdale tenants totaling $314,000, whereas the balance for the 1996 period
primarily consisted of a lease settlement for one Brookdale tenant totaling
$60,000.
Total expenses for the period ended March 31, 1996 totaled $3,374,474 compared
to $2,764,256 for the same period in 1995. The increase reflects increases in
interest expense and professional fees, partially offset by a decrease in
depreciation and amortization and real estate taxes. Real estate taxes for the
three months ended March 31, 1996 totaled $617,700 compared to $772,358 during
the same period in 1995. The decrease is due to a decrease in the assessed
value of Brookdale.
Interest expense for the three months ended March 31, 1996 totaled $1,806,358
compared to $858,134 during the same period in 1995. The increase is primarily
due to the accrual of higher interest on the Mortgage, which is accruing at a
default rate of 19% as described above.
Depreciation and amortization for the period ended March 31, 1996 totaled $0
compared to $295,177 for the same period in 1995. Effective January 1, 1996,
the Partnership's assets are no longer depreciable due to the adoption of
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of,"
which requires the carrying amount of assets held for disposition to be fair
value less costs to sell. Additionally, depreciation and/or amortization
should not be recorded during the period in which assets are being held for
disposition.
Professional fees for the period ended March 31, 1996 totaled $163,717 compared
to $27,239 for the corresponding period in 1995. The increase is primarily due
to higher legal and other professional fees in relation to the situation
surrounding the Mortgage as described under "Liquidity and Capital Resources"
above.
Sales for tenants (exclusive of anchor tenants) who operated at Brookdale for
each of the last two years were approximately $4,593,200 and $4,564,100 for the
two months ended February 29, 1996 and February 28, 1995, respectively. Total
tenant sales (exclusive of anchor tenants) were approximately $5,011,000 and
$4,961,000 for the two months ended February 29, 1996 and February 28, 1995,
respectively. As of March 31, 1996, Brookdale was 73% occupied (exclusive of
anchor and outparcel stores), compared with 78% at March 31, 1995.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(99) Limited Appraisal of Real Property for
Brookdale Center as of January 1, 1996, as
prepared by Cushman & Wakefield, Inc.
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to 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.
MIDWEST REAL ESTATE SHOPPING CENTER, L.P.
BY: MIDWEST CENTERS INC.
General Partner
Date: May 15, 1996 BY: /s/ Paul L. Abbott
Director, President and
Chairman of the Board
Date: May 15, 1996 BY: /s/ Robert J. Hellman
Director, Vice President and
Chief Financial Officer
Dates Referenced Herein and Documents Incorporated by Reference
| This ‘10-Q’ Filing | | Date | | Other Filings |
|---|
| |  |
| | 12/1/96 |
| | 11/15/96 |
| | 7/31/96 |
| | 5/24/96 |
| Filed on: | | 5/15/96 |
| | 4/18/96 |
| | 4/12/96 |
| For Period End: | | 3/31/96 |
| | 2/29/96 |
| | 1/1/96 |
| | 12/31/95 | | 10-K |
| | 9/12/95 |
| | 8/2/95 |
| | 7/5/95 | | 8-K |
| | 7/1/95 |
| | 6/30/95 | | 10-Q |
| | 3/31/95 | | 10-Q |
| | 2/28/95 |
| List all Filings |
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