-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eu59Pe6ladzWvZAkSDod4Vt8HwcoDYqJ40XOCiNImkyNUb1y1w/9rIlzeMLGvuna VEFq2DUZZYmBiJGrfREwYQ== 0000808460-98-000002.txt : 19980330 0000808460-98-000002.hdr.sgml : 19980330 ACCESSION NUMBER: 0000808460-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONCORD MILESTONE PLUS L P CENTRAL INDEX KEY: 0000808460 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 521494615 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-16757 FILM NUMBER: 98576733 BUSINESS ADDRESS: STREET 1: 5200 TOWN CENTER CIR STREET 2: 4TH FLOOR CITY: BOCA RATON STATE: FL ZIP: 33486 BUSINESS PHONE: 4073949260 10-K 1 ANNUAL REPORT Exhibit Index p.29 Exhibits begin p. (n/a) Total pages: 47 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1997 Commission file number 000-16757 CONCORD MILESTONE PLUS, L.P. (Exact name of registrant as specified in its charter) DELAWARE 52-1494615 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 150 EAST PALMETTO PARK ROAD, 4TH FLOOR BOCA RATON, FLORIDA 33432 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (561) 394-9260 ------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Class A Interests ("Class A Interests"), each such interest representing an assignment of one Class A Limited Partnership Interest held by CMP Beneficial Corp., a Delaware corporation (the "Assignor"), under the Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") of Concord Milestone Plus, L.P. (Title of Class) Class B Interests ("Class B Interests"), each such interest representing an assignment of one Class B Limited Partnership Interest held by the Assignor under the Partnership Agreement. (Title of Class) 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The Class A and Class B Interests are not traded on any established public trading market. DOCUMENTS INCORPORATED BY REFERENCE NONE 1 PART I Item 1. Business. (a) General Development of Business. Concord Milestone Plus, L.P. (the "Partnership") was organized as a Delaware limited partnership on December 12, 1986 with CM Plus Corporation, a Delaware corporation (the "General Partner"), as its general partner. The General Partner is wholly owned by Concord Assets Group, Inc. ("Concord"). The Partnership is engaged in the business of owning and operating three shopping centers. CMP Beneficial Corp., a wholly owned subsidiary of Concord, was organized under Delaware law in December 1986 for the sole purpose of holding limited partnership interests in the Partnership for the benefit of holders of the Class A Interests and Class B Interests and has engaged in no business activities other than fulfilling its obligations under the Amended and Restated Agreement of Limited Partnership of the Partnership (the "Partnership Agreement"). (b) Industry Segment Information. The Partnership has only one industry segment, commercial real estate. See Item 8, "Financial Statements and Supplementary Data", of this report for a summary of the Partnership's operations for the last three fiscal years. (c) Narrative Description of Business. The Partnership was formed for the purpose of investing in existing income-producing commercial and industrial real estate, such as shopping centers, office buildings, free-standing commercial buildings, warehouses and distribution centers. The Partnership currently owns and operates three shopping centers, one located in Searcy, Arkansas (the "Searcy Property"), one located in Valencia, California (the "Valencia Property") and one located in Green Valley, Arizona (the "Green Valley Property"). The amount of revenues attributable to the Searcy Property, the Valencia Property and the Green Valley Property (collectively, the "Properties") from tenants not affiliated with the Partnership was (i) $457,514, $1,303,348 and $1,262,050, respectively, for the fiscal year ended December 31, 1997; (ii) $409,186, $1,354,547 and $1,196,679, respectively, for the fiscal year ended December 31, 1996; and (iii) $441,239, $1,388,592 and $1,204,137, respectively, for the fiscal year ended December 31, 1995. See Item 2, "Properties", of this Report for additional information as to the Properties, including a description of the competitive conditions affecting them. 1 Employees The Partnership employs six people at the Green Valley Property and one person at the Searcy Property who provide general maintenance and security services. Milestone Property Management, Inc., an affiliate of the General Partner, provides all management services for the Partnership and is reimbursed for its cost of administrative services provided to the Partnership, including the pro rata cost of personnel. Aside from its officers, the General Partner has no employees. See Item 11, "Compensation", of this Report. Item 2. Properties. The Properties consist of three shopping centers: the Searcy Property, the Valencia Property and the Green Valley Property. For the purposes of this section, the following is a glossary of terms: a. Occupancy rate - The rate of the actual leased area (square footage) to gross leaseable area (square footage) as of the end of the fiscal year (December 31). b. Leasable area - The area (square footage) for which rent can be charged. c. Average effective annual rental per square foot - The average rental rate received per square foot of leased space taking rental concessions and discounts into consideration. d. Total rent - Minimum annual base rent plus percentage rental revenue. Refinancing of Bonds Payable As of September 30, 1997, the Partnership, with the assistance of Tri-Stone Mortgage Company, an affiliate of the General Partner, closed three new fixed rate first mortgage loans (the "Mortgage Loans") from Westco Real Estate Finance Corp. (the "Lender") in the amounts of $2,865,000, $8,445,000 and $5,400,000, respectively. Tri-Stone Mortgage Company did not receive any compensation for its services. All three Mortgage Loans are secured by first mortgages on all three of the Properties. Prior to September 30, 1997, the Properties were encumbered by mortgages granted by the Partnership to United States Trust Company of New York, as trustee for the benefit of the holders of the Partnership's Escalating Rate Collateralized Mortgage Bonds due November 30, 1997 (the "Bonds"). The Partnership used the proceeds of the Mortgage Loans and available cash to redeem all of the outstanding Bonds. An aggregate of $17,015,650 was paid to the holders of the Bonds in connection with such redemption, of which $16,452,000 was applied to prepay the principal of the Bonds and $563,650 was applied to pay interest accrued on the Bonds through the redemption date. 2 The Mortgage Loans and related terms at December 31, 1997 for the Properties are summarized as follows: Principal Monthly Balance at Payments of December Interest Principal Property/Location 31, 1997 Rate % and Interest - ----------------- -------------- ------ ------------ Searcy, AR $2,861,153 8.125 $21,640 Valencia, CA 8,429,458 8.125 65,881 Green Valley, AZ 5,392,963 8.250 41,252 --------- ------ Total $16,683,574 $128,773 ========== ======= The Mortgage Loans require payments of principal and interest through and including September 1, 2007. On October 1, 2007, the balance of principal and interest is estimated to be $2,505,981, $7,003,227, and $4,738,096 for the Searcy, Valencia and Green Valley Properties, respectively, and will be due and payable. Subsequent to October 31, 2003 and prior to May 31, 2007, each Mortgage Loan may be prepaid in whole but not in part on any payment date with a prepayment penalty equal to the greater of (i) 1% of the outstanding principal balance at such time, or (ii) the excess, if any, of the present value of the remaining scheduled principal and interest payments (including any balloon payment), discounted at the Discount Rate (as defined below), over the amount of principal being prepaid. The Mortgage Loans may be prepaid without penalty on any payment date after May 31, 2007. The Discount Rate is a rate determined as of the week ending prior to the prepayment date and is based on the published rates of U.S. Government securities having maturities approximating the maturity date of the Mortgage Loans. The Mortgage Loans are each secured by first mortgages on all three of the Partnership's Properties and a default under any of the Mortgage Loans constitutes a default on all of the Mortgage Loans. Each mortgage may be released at the Partnership's option after the corresponding Mortgage Loan is fully paid provided that no event of default exists under any of the Mortgage Loans, the mortgagee has not given the Partnership notice of any event which, with the passage of time, would constitute an event of default, and certain other conditions are satisfied. In connection with the Green Valley Mortgage Loan, the Partnership has deposited $150,000 into an escrow account (the "Green Valley Escrow Account") with the Lender. The funds held in the Green Valley Escrow Account may be released upon the execution of a new lease or renewal lease, with a termination date of July 31, 2004 or later, by Abco, a tenant of the Green Valley Property and the satisfaction of certain other conditions. 3 In connection with the Valencia Mortgage Loan, the Partnership deposited $45,000 into an escrow account (the "Valencia Escrow Account") with the Lender. Such amount was released to the Partnership during February 1998 after a certain environmental condition existing at the Property was shown to require no further action to the satisfaction of the State of California Environmental Protection Agency Department of Toxic Substances Contract ("DOTSC"). The cost of the various tests, studies, legal representation and negotiations with the DOTSC relating to the resolution of this environmental problem was approximately $71,000, all of which was accrued and expensed during 1997. CM Plus Corporation, the general partner of the Partnership, guarantees certain limited recourse obligations under the Mortgage Loans. The Searcy Property Searcy, Arkansas Location. The Searcy Property is situated on an irregularly shaped parcel of approximately 10.78 acres, which has frontages on Race Avenue and Front Street in the City of Searcy, Arkansas. Searcy, the county seat of White County, is located in the central portion of the State of Arkansas, approximately 50 miles northeast of Little Rock, Arkansas. The Searcy Property is part of a larger shopping complex known as the Town and Country Plaza. In addition to the Searcy Property, the Town and Country Plaza consists of an approximately seven acre parcel (formerly the site of a free-standing Wal-Mart department store) and five adjacent out parcels totaling 3.86 acres. The Searcy Property is situated on the west side of Front Street, just west of U.S. Route 64, 67 and 167, and the south side of State Route 36 (Race Avenue). The Searcy Property is part of a two-mile stretch of commercial development along Race Avenue that is the main shopping area for the city, county and surrounding areas. Searcy's marketing area includes all of White County and portions of surrounding counties. Town and Country Plaza comprises the major portion of this main shopping area. Race Avenue is densely improved with strip shopping centers, car dealerships, fast food franchises, motels, restaurants, gas stations, banks, a hospital, a vocational-technical school and free-standing commercial businesses. Description. The Searcy Property, which was completed in July 1985, is a one-story masonry and steel building whose exterior is painted concrete block with masonry, brick and glass fronts. The Searcy Property contains 78,436 gross leasable square feet divided into nine units. The entire Town and Country Plaza has parking for 970 cars of which approximately 570 parking spaces are allocated to the Searcy Property. Operating and Tenant Information. As of March 4, 1998, there were eight tenants (including two anchor tenants) and one vacancy at the Searcy Property. The occupancy rate was 95.5%, 92.9% and 95.5% for 1997, 1996 and 1995, respectively. The average effective annual rental per square foot was $5.57, $5.24, and $5.33 for 1997, 1996, and 1995, respectively. 4 The two anchor tenants, a J.C. Penney department store and a Stage Store ("Stage"), occupy 10% or more of the gross leasable area of the Searcy Property. J.C. Penney, a clothing and apparel department store, occupies 39,396 square feet or 50.2% of the gross leasable area of the Searcy Property. Stage, a clothing and apparel store, occupies 15,600 square feet or 19.9% of the gross leasable area of the Searcy Property. The principal provisions of the leases with these anchor tenants are summarized below. J.C. Penney operates its department store under a lease that commenced October 2, 1985, as amended on November 5, 1996, and originally expired December 31, 2007, subject to eight five-year renewal options exercisable by J.C. Penney. On November 5, 1996, the lease was amended, to allow for J.C. Penney's expansion. Pursuant to the amendment, the expanded store opened for business on September 1, 1997, thereby changing the expiration date to 10 years from the expanded store opening date (August 31, 2007). The expansion includes 12,902 square feet of additional land, which includes 5,600 square feet of pad space previously occupied by smaller tenants. In 1997, J.C. Penney built on the 7,302 square feet of unoccupied land. The additional annual base rent due to the expansion was $40,000 and, as of January 1, 1997, the annual minimum base rent increased to $205,600 ($5.21 per square foot). The lease provides for annual percentage rent equal to 1.5% of the tenant's gross receipts in excess of $11,820,004. The total rent received from J.C. Penney in 1997 was $205,600. In addition, J.C. Penney is required to reimburse the Partnership (as an offset against percentage rent) a pro rata share of any increases in real estate taxes over the highest tax paid by the Partnership during any of the first three years of operation. J.C. Penney is also required to reimburse the Partnership for common area maintenance expenses in annual amounts per square foot of tenant space as follows: $.20 for years 1-5, $.25 for years 6-10, $.30 for years 11-15, $.35 for years 16-20 and $.50 during the option periods. J.C. Penney is required to maintain comprehensive public liability insurance of not less than $1,000,000 per occurrence of bodily injury or death and not less than $100,000 per occurrence for property damage. J.C. Penney has the right to discontinue use of the premises as a J.C. Penney retail store business, or sublet or assign the premises, at any time. This right is subject to certain notice requirements and the Partnership's option to cancel the lease. As long as the lease remains in effect after 30 days of discontinued use, J.C. Penney must pay, in addition to the annual minimum rent, additional rent equal to the average of the amounts paid as percentage rent for each lease year during the period between the commencement of the lease and the time when it discontinues use of the premises. Stage has given notice of its intention to discontinue its operations effective April 30, 1998. Stage will still be responsible for the basic minimum rental and the average of the amounts actually received each lease year under the provisions for contingent additional rentals including real estate taxes, common area maintenance and insurance. The annual minimum rent is $81,900 ($5.25 per square foot). The total rent received from Stage in 1997 was $81,900. 5 The other six tenants at the Searcy Property provide a variety of goods and services, including furniture, family shoes, ladies apparel and jewelry. These leases have varying lease terms ranging from 2 to 14 years and provide for annual minimum rents aggregating $104,793 and ranging from $6.00 per square foot to $9.00 per square foot (a weighted average of $7.54 per square foot). Most of the leases contain provisions for additional rent calculated as a specified percentage of the tenant's gross receipts above fixed minimum amounts and for reimbursement of all or a portion of the tenant's pro rata share of real estate taxes, insurance and common area maintenance expenses. One tenant leasing 1,560 square feet is on a month to month rental agreement. The following table shows selected lease expiration information for the Searcy Property (assuming no renewals or cancellations): Gross % of Total Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent - ------------ --------- --------- ---------- --------- 1998 1 2,867 $24,513 6.3% 1999 2 4,800 28,800 7.3% 2000 1 5,973 (1) --- 2001 2 20,280 124,020 31.6% 2007 1 39,396 205,600 52.4% Month to Month 1 1,560 9,360 2.4% Vacancies 3,560 --- --- -- ------ --------- ------- Total 8 78,436 $392,293 100.0% = ====== ========= ====== (1) This tenant currently pays 4% of gross sales in lieu of all rental obligations Real estate taxes on the Searcy Property are based on a tax rate of 3.41% of assessed valuation. The current assessed valuation of the Searcy Property is approximately $754,000 and real estate taxes for 1997 were approximately $26,000. Real estate taxes are subject to increases in the future that may result from reassessment and/or increases in the tax rate. The Partnership's adjusted federal income tax basis for the Searcy Property is approximately $3,207,000 of which $430,000 is allocated to land and $2,777,000 to the building and improvements. For financial statement purposes, the Partnership depreciates the cost of the building over 31.5 years and improvements over 5 to 12 years using the straight-line method of cost recovery. In the opinion of the General Partner, the Searcy Property is adequately insured. 6 Competition. There are three shopping centers within two miles to the west of the Town and Country Plaza on Race Avenue. The first shopping center consists of a Goody's department store and a Heilig-Meyers furniture store. The second shopping center consists of a Fred's discount store, Warehouse Foods, a Sears catalog store and two satellite stores. The third center consists of a Kroger food store and a Revco drugstore. Directly across the street from the Searcy Property is a Wal-Mart superstore. The Wal-Mart which relocated from the Town and Country Plaza in 1992, has since vacated and subdivided its superstore. Books-A-Million, Anthony's (owned by Stage), Hibetts Sports and TSC Tractor Supply currently occupy this space. Old Orchard Shopping Center Valencia, California Location. The Valencia Property is situated on an approximately 9.94-acre parcel that has frontages on Lyons Avenue and Orchard Village Road in the town of Valencia, California. Valencia is located in the Santa Clarita Valley in Los Angeles County, approximately 35 miles north of Los Angeles. Old Orchard Shopping Center is located on the northwest corner of Lyons Avenue and Orchard Village Road in a heavily developed commercial area. Lyons Avenue is improved with shopping centers, fast food restaurants, housing developments and free standing convenience stores. The surrounding area is densely populated with apartments, condominiums and single family residences. In 1996, a 78,000 square foot shopping center opened on Old Orchard Street across from the Valencia Property. This center includes a 46,000 square foot Ralph's Supermarket, a 16,000 square foot drugstore and 16,000 square feet of smaller stores. This shopping center has had an adverse impact on tenant sales but it has not materially adversely affected the occupancy rate at the Valencia Property. Description of the Property. Old Orchard Shopping center is an eight building, one-story masonry and steel shopping center complex that was originally constructed in 1965. During 1985 and 1986 the shopping center was renovated and enlarged to 103,413 square feet of gross leasable area. The exterior construction is pre-cast concrete, fluted block and decorative tile. The shopping center has over 500 parking spaces. Operating and Tenant Information. As of March 4, 1998 there were 20 tenants (including two anchor tenants) and three vacancies at the Valencia Property. The occupancy rate was 93.9, 97.1%, and 100%, in 1997, 1996, and 1995, respectively. The average effective annual rental per square foot was $11.43, $11.98 and $11.65 for 1997, 1996, and 1995, respectively. The two anchor tenants, Lucky Stores, Inc. ("Lucky Stores"), a full service grocery store, and Rite Aid Pharmacy ("Rite Aid") (which purchased Thrifty during 1997), a full service drug store, occupy 10% or more of the gross leasable area of the Valencia Property. Lucky Stores occupies 31,842 square feet or 30.8% of the gross leasable area of the Valencia Property. Thrifty occupies 18,125 square feet or 17.5% of the gross leasable area of the Valencia Property. The principal provisions of the leases with these anchor tenants are summarized below. 7 Lucky Stores operates under a lease that commenced on July 1, 1986 and expires June 30, 2006, subject to four five-year renewal options exercisable by Lucky Stores. The annual base rent is $300,000 per year ($9.42 per square foot). The lease also provides for percentage rent equal to 1.25% of gross annual sales in excess of $38,000,000, less amounts paid by Lucky Stores for property taxes and assessments and insurance premiums. The total rent received from Lucky Stores in 1997 was $300,000. If the Valencia Property is occupied or used for specified, prohibited purposes, the percentage used in calculating percentage rent will be reduced to an amount not less than .625%. Lucky Stores is required to reimburse the Partnership for a pro rata share of real estate taxes, insurance and common area maintenance expenses (but Lucky Stores' consent is required for any single expenditure regarding the maintenance, insurance and lighting of the Property in excess of $5,000). Lucky Stores has the right to assign or sublet the lease. Rite Aid operates under a lease that commenced on March 25, 1965 and expires May 31, 2005, subject to four five-year renewal options exercisable by Rite Aid. Rent is payable monthly in an amount equal to 3% of the tenant's gross sales for the previous month, but not less than $45,000 annually. The total rent received from Rite Aid in 1997 was $109,787. Rite Aid is not required to reimburse the Partnership for any real estate taxes or operating expenses. Rite Aid may not sublet or assign its space without prior written consent of the Partnership, except to one of its affiliates. The other 18 stores in the Old Orchard Shopping Center are leased to tenants providing a variety of goods and services, including automotive, fast food, gourmet food, apparel, banking, hardware, specialty gifts, beauty supplies, dry cleaning and hairstyling. These leases have varying lease terms ranging from 3 to 35 years and provide for annual minimum rents aggregating $721,845 and ranging from $9.69 per square foot to $30.90 per square foot (a weighted average of $15.31 per square foot). Many of the leases contain provisions pursuant to which the Partnership is entitled to participate in specified percentages of tenant's gross receipts above fixed minimum amounts and to receive reimbursement for the tenant's pro rata share of operating expenses, including real estate taxes, insurance and common area maintenance expenses. In addition, many of the leases provide that after the lease expires the tenant may continue to occupy the space subject to the existing lease, except that annual minimum rent will increase by 25% to 50%. The following table shows selected lease expiration and vacancy information for the Valencia Property (assuming no renewals or cancellations): 8 Gross % of Total Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent ------------ ------------- --------- ---------- --------- 1998 5 11,752 $197,003 18.5% 1999 3 6,700 115,771 10.9% 2000 3 11,880 117,598 11.0% 2002 4 7,090 155,502 14.6% 2003 1 420 10,053 .9% 2005 3 27,429 170,910 16.0% 2006 1 31,842 300,000 28.1% Vacancies - 6,300 - --- -------- --------- ------- Total 20 103,413 $1,066,837 100.0% == ======= ========= ====== The Valencia Property is subject to real estate taxes at the rate of 1.44% of assessed valuation. The current assessed valuation of the Valencia Property is $8,961,000 and the total tax for 1997 on the Valencia Property was approximately $128,600. Real estate taxes are subject to increases in the future that may result from reassessment and/or increases in the tax rate. The Partnership's adjusted federal income tax basis for the Valencia Property is $11,102,000 of which $6,500,000 is allocated to land and $4,602,000 is allocated to the buildings and improvements. For financial statement purposes the Partnership depreciates the cost of the buildings over 31.5 years and improvements over 5 to 10 years using the straight-line method of cost recovery. In the opinion of the General Partner, the Valencia Property is adequately insured. Competition. Within two miles of the Valencia Property there are competing shopping facilities at Newhall Plaza with a Von's Food Store and 10 satellite stores, Granary Square with a Hughes Food Market, Long's Drugstore and 26 satellite stores, a Safeway Supermarket complimented by 14 satellite stores and the Alpha Beta Center with Alpha Beta Food stores and 16 satellite stores. In 1992, a strip center anchored by a Ralph's Foods opened within a mile of the Valencia Property. Green Valley Mall Green Valley, Arizona Location. The Green Valley Property, a mall complex known as the Green Valley Mall, is situated on an approximately 21.31-acre parcel in the Town of Green Valley, Arizona. It has frontages on Interstate 19 and Esperenza Boulevard, with additional access from La Canada Road. Green Valley is a planned adult community located in Pima County in the Santa Cruz River Valley approximately 25 miles south of Tucson. Green Valley has two hotels and a number of office buildings, several community centers and six 18 hole golf courses. The Green Valley Property is located at intersection 65 of Interstate 19 and Esperenza Boulevard and serves Pima County, as well as Santa Cruz County to the south. 9 Description of the Property. Green Valley Mall is an open-air shopping complex originally built in the 1960's and expanded at various times throughout the 1970's and 1980's. The shopping center is comprised of several buildings, including some that are free standing, totaling 194,000 gross leasable square feet (adjusted by 1,400 square feet representing the mall office and maintenance space). The exterior construction is a combination of adobe block, split face block and painted concrete block. The mall has approximately 975 parking spaces. Operating and Tenant Information. As of March 4, 1998, there were 73 tenants (including three anchor tenants) and 10 vacancies at the Green Valley Property. The anchor tenants are an ABCO Supermarket (the only tenant that occupies 10% or more of the gross leasable area of the Green Valley Property), an Ace Hardware store, and Beall's Outlet. The occupancy rate was 89.3%, 90.2%, and 92.0%, for 1997, 1996, and 1995, respectively. The average effective annual rental per square foot was $5.87, $5.52, and $5.25, for 1997, 1996, and 1995, respectively. ABCO Supermarket occupies 38,983 square feet or approximately 20% of the gross leasable area of the Green Valley Property. The principal provisions of the lease with this anchor tenant are summarized below. ABCO Supermarket operates its store under a lease that expires July 31, 1999, subject to five five-year renewal options exercisable by ABCO Supermarket. The annual base rent is $68,060 ($1.75 per square foot). The lease provides for annual percentage rent equal to 1% of annual gross sales in excess of $4,000,000. The total rent received from ABCO Supermarket in 1997 was $97,290. The tenant is required to reimburse the Partnership a pro rata share of real estate taxes and common area maintenance expenses and is required to maintain liability insurance of not less than $300,000 for personal injury or death of any one person, $500,000 for injury or death of any number of persons in any one incident, and $100,000 for damage to property resulting from any one incident. ABCO Supermarket may not sublet the space or assign the lease without the Partnership's consent. The other 72 tenants in the mall provide a wide variety of retail goods and services, including fast food, apparel, hairstyling, insurance, books, specialty gifts, mortgage services, accounting, greenery, printing, and banking. These leases have varying lease terms ranging from 1 to 25 years and provide for payment of annual minimum rents aggregating $904,754 and ranging from $.78 per square foot to $16.72 per square foot (a weighted average of approximately $6.74 per square foot). Some of the leases contain provisions pursuant to which the Partnership is entitled to participate in a specified percentage of the tenant's gross receipts above fixed minimum amounts. Most of the leases require the tenant to reimburse the Partnership for all or some portion of the tenant's pro rata share of operating expenses including real estate taxes, insurance and common area maintenance expenses. The following table shows selected lease expiration (assuming no renewals or cancellations) and vacancy information: 10 Gross % of Total Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent ------------ ------------- -------- --------- --------- 1998 20 28,906 $160,827 16.5% 1999 19 56,985 227,239 23.4% 2000 16 37,106 299,491 30.8% 2001 10 25,866 166,514 17.1% 2002 4 7,731 73,917 7.6% 2003 2 4,866 26,644 2.7% Month to month 2 11,760 18,182 1.9% Vacancies - 20,780 - - --- ------ -------- ------- Total 73 194,000 $972,814 100.0% == ======= ======= ====== Real estate taxes on the Green Valley Property are based on a primary tax rate of 7.43% per $100 of assessed value and a secondary tax rate of 4.13% per $100 of assessed value. The Green Valley Property is currently assessed at $1,390,000 for purposes of the primary rate and $1,757,000 for purposes of the secondary rate. Real estate taxes for 1997 are approximately $176,000. Real estate taxes are subject to increases in the future that may result from reassessment and/or increases in the tax rate. The Partnership's adjusted federal income tax basis for the Green Valley Property is $9,525,000, of which $5,100,000 is allocated to land and $4,425,000 to the buildings and improvements. For financial statement purposes, the Partnership depreciates the cost of the buildings over 31.5 years and improvements over 5 to 10 years using the straight-line method of cost recovery. In the opinion of the General Partner, the Green Valley Property is adequately insured. In 1993 and 1994, the General Partner determined, based on the current market conditions and projected future cash flows that the Partnership's investment in the Green Valley Property was impaired and recorded a $1,000,000 and $1,085,932, non-cash charge against earnings to write-down the property, respectively. In 1997, 1996 and 1995, the General Partner determined that an additional write-down was not necessary based on the projected future cash flows of the Property. Competition. The Green Valley Property competes directly with the 142,500 square foot Continental Shopping Plaza located at Continental Road and Interstate 19 approximately one mile south of the Green Valley Property. The Continental Shopping Plaza is anchored by a Safeway Supermarket. There is a shopping center located 3 miles to the north of the Green Valley Property in the newly incorporated town of Sahuarita. This shopping center includes a 65,000 square foot Wal-Mart Department Store and a 42,000 square foot Bashas' Food Store as anchor tenants plus 25,000 square feet of space for local tenants. Another center, which is located to the north of the 11 Green Valley Property, was anchored by a 45,000 square foot Kmart and 10,000 square feet of space for local tenants, and closed during 1995. A quadruplex theater is planned for the vacant Kmart to be opened in March of 1999. Since the incorporation of this town, several large areas have been rezoned for commercial development. One area located 2.5 miles north of Green Valley, called "The Quorum", was actively developed within the last 18 months. New development consists of a Full Service Gas Station/Dairy Queen with car wash, a new Holiday Inn Express, Dorson's Furniture Store, Golf etc., Carpet One, a Bar & Grill, and a Burger King which will open March of 1998. Commitments and Contingencies Investments in real property create a potential for environmental liability on the part of the owner, operator or developer of such real property. If hazardous substances are discovered on or emanating from any of the Properties, the Partnership and/or others may be held strictly liable for all costs and liabilities relating to the clean-up of such hazardous substances. The Partnership is not aware of any other environmental conditions that will have a material effect on the financial statements. Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders. None 12 PART II Item 5. Market for Registrant's Units and Related Security Holders Matters. (a) Class A and Class B Interests are not traded on any established public trading market and no organized market has developed for the interests in the Partnership. Sales of the Class A and Class B Interests occur from time to time through independent broker-dealers, but to the best of the Partnership's knowledge, there are no market makers for the interests. Recently published information relating to other real estate limited partnerships (which may not be analogous to the Partnership) indicates that sales of limited partnership interests in those partnerships occur at substantial discounts from the amounts of the original investments. (b) As of March 4, 1998, 1,518,800 Class A Interests and 2,111,072 Class B Interests were held by approximately 1,363 and 1,460 holders, respectively. (c) The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make quarterly distributions of cash to its partners depending upon distributable cash flow and certain other conditions. Such distributions were suspended subsequent to the first quarter of 1997 due to the cost of addressing an environmental issue identified at the Valencia Property and payment of certain expenses. Pursuant to the Partnership Agreement, distributable cash flow (as defined) for each fiscal quarter is distributed as follows: (i) first, 99% to the holders of the Class A Interests as a group and 1% to the General Partner until the holders of the Class A Interests have received an amount of cumulative distributions necessary to provide such holders with a non-compounded 10.5% cumulative annual return (determined in accordance with the Partnership Agreement); (ii) next, 90% to the holders of the Class A Interests and 10% to the General Partner until the holders of the Class A Interests have received distributions of distributable capital proceeds (i.e., net proceeds of a sale or other disposition or a refinancing of Properties available for distribution) and uninvested offering proceeds equal to $10.00 for each Class A Interest plus an amount of cumulative distributions necessary to provide such holders with a cumulative, non-compounded 12.5% annual return (determined in accordance with the Partnership Agreement on their Adjusted Priority Base Amount as defined) (a "12.5% Priority Return"); and (iii) thereafter, 85% to the holders of the Class B Interests, 5% to the holders of the Class A Interests and 10% to the General Partner. Pursuant to the Partnership Agreement, distributable capital proceeds are distributed as follows: (i) first, 100% to the holders of the Class A Interests as a group until they have received distributions of distributable capital proceeds and uninvested offering proceeds equal to $10.00 for each Class A Interest plus an amount of cumulative distributions necessary to provide such holders with a 12.5% Priority Return; and (ii) thereafter, 85% to the holders of the Class B Interests and 15% to the General Partner. 13 Distributable cash flow, as defined in the Partnership Agreement, means, with respect to any period, (i) revenues and payments (which do not include refundable deposits or unearned rent) of the Partnership received in cash during such period, and reserves set aside out of revenues during prior periods and no longer needed for the Partnership's business, but not including cash proceeds attributable to a capital transaction (as defined), Bond proceeds or capital contributions (as defined), less (ii) the sum of (A) amounts paid in cash by the Partnership during such period for operating expenses of the Partnership (excluding amounts paid from reserves or funds provided by capital contributions or loans), for debt payments, and for compensation to a removed General Partner and other fees or payments to the General Partner, (B) any capital expenditures with respect to Properties, and (C) any amount set aside for the restoration, increase or creation of reserves. Distributable cash flow is deemed to include the amount of any income tax withheld with respect to revenues that are includable in distributable cash flow. During its two most recent fiscal years, the Partnership has made the following cash distributions with respect to the Class A Interests: Amount of Portion Distribution Distribution Representing With Respect Per 100 Class a Return of To Quarter Ended: A Interests (1) Capital (2) ----------------- --------------- ------------- March 31, 1997 $3.29 $3.29 June 30, 1997 (3) $0 $0 September 30, 1997 (3) $0 $0 December 31, 1997 (3) $0 $0 March 31, 1996 $3.29 $3.29 June 30, 1996 $3.29 $3.29 September 30, 1996 $3.06 $3.06 December 31, 1996 $3.30 $3.30 - --------------------------------- (1) The amounts listed represent distributions of distributable cash flow. (2) That portion of the total "Amount of Distribution per 100 Class A Interests" which is a return of capital. Return of capital is defined as distributions in excess of cumulative net income. (3) The Partnership suspended making distributions subsequent to the first quarter of 1997 due to cost of addressing an environmental issue identified at the Valencia, Property, and payment of certain expenses relative to the refinancing. There have been no distributions with respect to the Class B Interests. 14 In general, profits are allocated annually among the holders of Class A Interests and Class B Interests and the General Partner, first in the ratio and to the extent that they receive distributions of distributable cash flow. Profits will next be allocated 100% to holders of Class A Interests until their capital accounts equal the greater of zero or their Adjusted Priority Base Amounts (as defined in the Partnership Agreement) plus their 12.5% Priority Return. Any additional profits will be allocated to the holders of Class B Interests and the General Partner to increase their capital accounts to reflect the manner in which they are expected to share in further distributions. Gain arising upon the sale of a Property or otherwise is allocated first to holders of Class A Interests and Class B Interests and the General Partner to eliminate any deficits in their capital accounts, and then to the holders of the Class A Interests and Class B Interests and the General Partner to increase their capital accounts to reflect the manner in which they are expected to share in further distributions. In general, losses are allocated first to the holders of Class B Interests and the General Partner in the ratio and to the extent of any positive balances in their capital accounts; then, to the holders of Class A Interests to the extent of any positive balances in their capital accounts; and finally, 100% to the General Partner. Item 6. Selected Financial Data. The following page sets forth a summary of the selected financial information for the Partnership. The information below should be read in conjunction with the audited financial statements. Notes to Selected Financial Data Schedule: (a) All income allocated with respect to Equity Units was allocated with respect to the 100 Class A Interests in each such unit. No income was allocated with respect to Class B Interests. (b) The net (loss) income per 100 Class A Interests has been calculated by dividing the net (loss) income for the period by the average number of Class A Interests outstanding for the period and multiplying that quotient by 100. (c) Distributions have been allocated based upon the dates that Class A Interests were issued. Distributions with respect to each fiscal quarter of the Partnership are paid 60 days following the end of that fiscal quarter. No distributions were paid with respect to Class B Interests. (d) Return of Capital is defined as distributions in excess of cumulative net income. (e) The net losses for 1994 and 1993 include write-downs of $1,085,932 and $1,000,000, respectively, for impairment of the Green Valley Property. 15 CONCORD MILESTONE PLUS, L.P. (A Limited Partnership) Selected Financial Data
For Years Ended December31, 1997 1996 1995 1994 1993 ------------ ------------ ------------ ------------ ----------------- ..................................... Operating Statement Data: Revenue .................................$ 3,046,796 $ 3,009,663 $ 3,061,279 $ 3,156,657 $ 3,106,835 Net loss ................................ (271,920) (238,119) (307,810) (1,317,075)(e) (1,225,028)(e) Balance Sheet Data: Total assets ............................ 22,051,864 22,086,775 22,537,617 23,005,298 24,386,240 Long term debt .......................... 16,683,574 16,473,060 16,425,967 16,334,737 16,217,540 Total liabilities ....................... 17,216,080 16,877,282 16,893,481 16,853,645 16,717,506 Statement of Partners' (Deficit) Capital: General Partner .................... (74,207) (70,470) (66,124) (61,049) (45,878) Class A Interests .................. 4,909,991 5,279,963 5,710,260 6,212,702 7,714,612 Class B Interests .................. 0 0 0 0 0 Total .............................. 4,835,784 5,209,493 5,644,136 6,151,653 7,668,734 Per 100 Class A Interests (a): Net loss (b): ...................... (17.90) (15.68) (20.27) (86.72) (80.66) Distributions (c): ................. 3.29 12.94 13.15 13.04 29.34 Return of Capital (d): ............. 3.29 12.94 13.15 13.04 29.34
See Notes to Selected Financial Data 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Partnership commenced a public offering of Equity Units and Bond Units (together, "Units") on April 8, 1987 in order to fund the Partnership's real property acquisitions. The Partnership terminated the public offering of Units on April 2, 1988. On April 14, 1988, the Partnership held its final closing on the sale of Units. The Partnership was fully subscribed to with a total of 16,452 Bond Units and 15,188 Equity Units from which the Partnership received aggregate net proceeds (after deduction of sales commissions, discounts and selling agent's expense otherwise required to be reimbursed to the General Partner and its Affiliates) of $29,285,960. Of such total amounts, 15,954 Bond Units and 15,188 Equity Units were sold by the Partnership during 1988 from which the Partnership received net proceeds (after deduction of sales commissions, discounts and selling agent's expense allowance and credit for organization and offering expenses) of $19,599,176. The Partnership purchased three shopping centers with the proceeds from this offering. No further acquisitions are planned and the Partnership has no plans to raise additional capital. On September 30, 1997, the Partnership closed three new fixed rate first mortgage loans in the amounts of $2,865,000, $8,445,000 and $5,400,000, respectively. All three Mortgage Loans are secured by first mortgages on the Searcy Property, the Valencia Property, and the Green Valley Property. The Partnership used the proceeds of the Mortgage Loans and available cash to redeem all of the outstanding Bonds. The Mortgage Loans are described in further detail in Item 2. Properties Section. The Partnership has an agreement with Milestone Property Management, Inc. ("MPMI"), an affiliate of the General Partner, to provide management services to the Properties. In addition, MPMI is responsible for leasing space at the properties and actively monitors all vacancies to ensure the highest occupancy rate possible. All leasing is performed by MPMI and the terms of the leases are negotiated on a lease by lease basis. Year 2000 Compliance The Partnership has and will continue to make certain investments in its software systems and applications to ensure that the Partnership is year 2000 compliant. It is anticipated that the project will be completed by internal staff without significant contributions from outside contractors. Management believes that the financial impact to the Partnership of ensuring its year 2000 compliance has not been and is not anticipated to be material to the Partnership's financial position or results of operations. 17 Changes in Competitive Conditions Searcy Property The Searcy Property has experienced a revitalization over the past three years after the Partnership found it necessary to negotiate rent reductions to prevent vacancies in 1994. On September 1, 1997, the J.C. Penney expansion was completed and the new expanded store opened for business. The expansion increased their existing space by 12,902 square feet. The General Partner believes the 1997 expansion has had a positive effect on the center and should increase the traffic for the other tenants. The subdivision and leasing of the former Wal-Mart superstore has had both a positive and negative effect on the center. Books-A-Million, Hibetts Sports, TSC Tractor and Anthony's (owned by Stage) currently occupy this space. The General Partner believes these new stores, especially the bookstore, will continue to be an excellent draw to the center. However, effective April 30, 1998, Stage will vacate its store primarily due to their purchase of Anthony's. Stage, which occupies 15,600 square feet, continues to be obligated under its lease until August 2001; therefore cash flows from the property is not expected to be materially affected until such lease expires. Valencia Property The Valencia Property has a number of competing shopping facilities within the immediate area. In the spring of 1996, a 78,000 square foot shopping center opened on Old Orchard Street across from the Valencia Property. This center includes a 46,000 square foot Ralph's Supermarket, a 16,000 square foot drugstore and 16,000 square feet of smaller stores. This shopping center had an adverse impact on tenant sales as evidenced by a drop in percentage rent revenue in 1997 but it has not materially adversely affected the occupancy rate at the Valencia Property. Green Valley Property Strong competition in the surrounding areas caused the General Partner to make capital improvements (such as canopies, painting, new signage and general appearance) at the Green Valley Property. Although occupancy has been down slightly over the past three years, the average effective annual rental per square foot has increased over the same period. Continued development of both commercial and residential areas is expected in the Green Valley area. The General Partner believes it will have continued success in negotiating lease renewals and bringing new tenants into the center. 18 In 1993 and 1994, the General Partner determined, based on the current market conditions and projected future cash flows, that the Partnership's investment in the Green Valley Property was impaired and recorded a $1,000,000 and $1,085,932, non-cash charge against earnings to write-down the property, respectively. During 1997, 1996 and 1995, the General Partner determined that an additional write-down was not necessary based on the projected future cash flows of the Property. Results of Operations Comparison of Year Ended December 31, 1997 to 1996. Revenues of the Partnership increased $37,133, or 1.23%, to $3,046,796 in 1997 from $3,009,663 in 1996 primarily due to the net effect of the following: (1) Rent - A decrease in base rent of $40,230, or 1.56%, to $2,543,384 in 1997 from $2,583,614 in 1996 primarily due to a decrease in percentage rent revenue at the Valencia Property due to decreased tenant sales and a drop in the occupancy rate to 93.9% in 1997 from 97.1% in 1996. (2) Reimbursed Expenses - An increase in reimbursed expenses of $71,869, or 17.73%, to $477,312 in 1997 from $405,443 in 1996 primarily due to increased recovery percentages on both common area expenses and real estate taxes. Additionally, refunds given to tenants in 1996, due to an incorrect billing in a prior year, were charged to revenue in 1996. (3) Other Income - An increase in other income of $5,494 primarily due to transfer fees paid by an investor in 1997. Management and property expenses remained consistent, increasing only $13,846, or 1.72% to $816,817 from $802,971 in 1996, due to concerted efforts by management to contain costs at the Properties. Professional fees and other expenses increased $77,674, or 74.45%, to $181,998 in 1997 from $104,324 in 1996, primarily due to the costs associated with the investigation and subsequent resolution of chemical contamination in the soil at a site at the Valencia Property. Interest expense increased $32,967, or 2.10%, to $1,602,762 in 1997 from $1,569,795 in 1996 primarily due to the scheduled increase in the interest rate on the Bonds from 9.50% in 1996 to 10.0% in 1997. Depreciation and amortization expense decreased $54,271, or 8.50%, to $584,414 in 1997 from $638,685 in 1996, primarily due to a decrease in amortization of net bond premium and discount in 1997. 19 Comparison of Year Ended December 31, 1996 to 1995. Revenues of the Partnership decreased $51,616, or 1.69%, to $3,009,663 in 1996 from $3,061,279 in 1995 primarily due to the net effect of the following: (1) Rent - An increase of $10,107, or 0.39%, to $2,583,614 in 1996 from $2,573,507 in 1995. Rent increased due to the net effect of a large new tenant at the Valencia Property increasing rental revenue; a decrease in rents due to a drop in the occupancy at the Searcy Property; and a decrease in tenant sales at the Valencia Property, which decreased percentage rents. (2) Reimbursed Expenses - A decrease of $50,103, or 11.00%, to $405,443 in 1996 from $455,546 in 1995. Reimbursed expenses decreased due to lower reimbursed sales tax income due to a decline in the sales tax rate from 2% to 1% at the Green Valley Property; and refunds given to tenants in 1996 due to an incorrect billing in a prior year which were charged to revenue in 1996. (3) Other Income - A decrease in other income of $11,620 primarily due to reduced interest income on lower average cash balances in 1996 than in 1995. Management and property expenses decreased $100,715, or 11.14%, to $802,971 in 1996 from $903,686 in 1995 primarily due to the net effect of the following: (1) Searcy Property - A decrease in management and property expenses at the Searcy Property of $5,517, or 6.88%, to $74,516 in 1996 from $80,233 in 1995. Management and property expenses declined in 1996 primarily as a result of a general decrease in operating expenses in 1996. (2) Valencia Property - A decrease in management and property expenses at the Valencia Property of $29,497, or 11.91%, to $218,095 in 1996 from $247,592 in 1995. Management and property expenses declined in 1996 primarily due to a decrease in insurance expense of approximately $18,000 due to a lower premium in 1996. (3) Green Valley Property - A decrease in management and property expenses at the Green Valley Property of $65,701, or 11.41%, to $510,160 in 1996 from $575,861 in 1995. Management and property expenses declined in 1996 primarily due to (1) a decrease in sales tax expense of approximately $12,000 due to a decrease in the tax rate to 1% in 1996 from 2% in 1995, (2) a decrease in repairs and maintenance of approximately $23,000 and (3) a decrease in insurance expense of approximately $14,000 due to a lower premium in 1996. 20 Professional fees and other expenses decreased $37,272, or 26.32%, to $104,324 in 1996 from $141,596 in 1995 primarily due to the net effect of (1) a decrease in legal fees of approximately $51,000 due to the settlement in 1995 of a civil rights suit brought against it by a former employee, and (2) an increase in accounting fees of approximately $10,000 due to an increase in audit fees in 1996. Interest expense increased $44,557, or 2.92%, to $1,569,795 in 1996 from $1,525,238 in 1995 primarily due to the scheduled increase in the interest rate on the Bonds from 9.50% in 1995 to 10.0% in 1996. Depreciation and amortization expense decreased $18,525, or 2.82%, to 638,685 in 1996 from $657,210 in 1995 primarily due to the net effect of (1) an increase in depreciation expense of approximately $27,000 due to building improvement expenditures in 1996, and (2) a decrease in amortization expense of approximately $46,000 due to a decrease in the amortization of the net bond premium and discount in 1996. Liquidity and Capital Resources The General Partner believes that the Partnership's expected revenue and working capital is sufficient to meet the Partnership's current operating requirements for the remainder of the year. Nevertheless, because the cash revenues and expenses of the Partnership will depend on future facts and circumstances relating to the Partnership's properties, as well as market and other conditions beyond the control of the Partnership, a possibility exists that cash flow deficiencies may occur. Currently, a significant amount of the Partnership's working capital is still in the control of the Lender as funds held in escrow pending resolution of certain circumstances even though $45,000 deposited into an escrow account was released during February 1998 as certain environmental improvements to the Valencia Property were satisfactorily completed and approved by the State of California Environmental Protection Agency. There are currently no material commitments for capital expenditures. The Partnership suspended making distributions subsequent to the first quarter of 1997 due to the cost of addressing an environmental issue identified at the Valencia Property and payment of certain expenses relative to the refinancing. However, future debt service payments on the Mortgage Loans will be approximately $100,000 lower per year than the annualized 1997 scheduled payments on the redeemed Bonds. The Partnership is anticipating resuming distributions as soon as the Partnership's working capital requirements are funded. Management is not aware of any other trends, events, commitments or uncertainties that will or are likely to materially impact the Partnership's liquidity. Net cash provided by operating activities of $479,718 for the year ended December 31, 1997 was comprised of (i) net loss of $271,920, (ii) adjustments of $584,414 for depreciation and amortization and (iii) a net change in operating assets and liabilities of $167,224. 21 Net cash provided by operating activities of $414,368 for the year ended December 31, 1996 was comprised of (i) net loss of $238,119, (ii) adjustment of $638,685 for depreciation and amortization, and (iii) a net change in operating assets and liability of $13,802. Net cash used in investing activities of $94,486 for the year ended December 31, 1997 was comprised of capital expenditures for building improvements. Net cash used in investing activities of $110,596 for the year ended December 31, 1996 was comprised of capital expenditures for building improvements and other assets at all three properties. Net cash used in financing activities of $453,447 for the year ended December 31, 1997 included (i) redemption of Bonds payable of $16,452,000, (ii) funds held in escrow of $269,895, (iii) debt financing costs of $313,337, (iv) proceeds from mortgages loans payable of $16,710,000, (v) principal repayments on mortgages loans payable of $26,426 and (vi) cash distributions to partners of $101,789. Net cash used in financing activities of $196,524 for the year ended December 31, 1996 was comprised of cash distributions to partners. New Accounting Standards In February 1998, the Financial Accounting Standards Board ("FASB")issued Statement of Financial Accounting Standards ("SFAS") No 132, "Employers Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132 revises employers disclosures about pension and other postretirement benefit plans. It standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures that are no longer as useful as they were when FASB Statements No. 87, "Employers Accounting for Pensions", No. 88, "Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits", and No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions", were issued. SFAS No. 132 suggests combined formats for presentation of pension and other postretirement benefit disclosures. SFAS No. 132 also permits reduced disclosures for nonpublic entities. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. It is not anticipated that this statement will have any material effect on disclosures presented by the Partnership. 22 In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Enterprises that have no items of other comprehensive income in any period presented are excluded from the scope of this Statement. SFAS No. 130 is effective for both interim and annual periods beginning after December 15, 1997. Comparative financial statements provided for earlier periods are required to be reclassified to reflect the provisions of this statement. Because the Partnership has no items of other comprehensive income, SFAS No. 130 will not have any material effect on current or prior period financial statement displays presented by the Partnership. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 131 is effective for financial statements periods beginning after December 15, 1997. SFAS No. 131 will not have any material effect on current or prior period segment disclosures presented by the Partnership, because the Partnership operates as a single segment. Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data, shown by index on page 36, begin on page 37 of this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 23 PART III Item 10. Directors and Officers of the Registrant. The names, offices held and the ages of the directors and executive officers of the General Partner and of CMP Beneficial Corp. are as follows: Has Served As a Director and/or Name Age Position Held Officer Since (1) - --------------------- --- ------------------ ----------------- Leonard S. Mandor (3) 51 President Inception (2) and Director Robert A. Mandor (3) 45 Vice President Inception and Director Harvey Shore 52 Vice President December 24, 1987 Joseph P. Otto 44 Vice President October 3, 1997 and Secretary Patrick Kirse 29 Treasurer and October 3, 1997 Controller - ---------------------------------- (1) Each director and officer of the General Partner and CMP Beneficial Corp. will hold office until the next annual meeting of the General Partner and CMP Beneficial Corp. and until his successor is elected and qualified. (2) The General Partner was incorporated on December 12, 1986 and CMP Beneficial Corp. was incorporated on December 18,1986. (3) Robert A. Mandor and Leonard S. Mandor are brothers. LEONARD S. MANDOR is the Chief Executive Officer and a Director of Concord. Mr. Mandor is the Chairman of the Board, Chief Executive Officer and a Director of Milestone Properties, Inc. Mr. Mandor has been associated with Concord since its inception in 1981. ROBERT A. MANDOR is the President and a Director of Concord. For at least the past five years he has served as the President, Chief Financial Officer, and a Director of Milestone Properties, Inc. Mr. Mandor has been associated with Concord since its inception. 24 HARVEY SHORE joined Concord in 1983 and is a Senior Vice President. He also serves as a Senior Vice President and Secretary of Milestone Properties, Inc. Before joining Concord he worked at Chase Manhattan Bank as a Vice President. JOSEPH P. OTTO was appointed Vice President and Secretary of the Partnership by the Board in October 1997 to fill a vacancy. Mr. Otto is also a Vice President of Concord and has been associated with Concord since 1984. Mr. Otto is also a Vice President and Director of Milestone Properties, Inc. PATRICK S. KIRSE also serves as a Vice President of Milestone Properties, Inc. He is a CPA licensed in the state of Missouri. Before joining Milestone he worked as a senior auditor with Deloitte & Touche LLP. On February 2, 1995, the Securities and Exchange Commission filed a civil complaint against Concord in the United States District Court for the District of Columbia in connection with the proxy solicitation conducted with respect to the merger of Concord Milestone Income Fund, L.P. and Concord Milestone Income Fund II, L.P. into a publicly held corporation, Milestone Properties, Inc., in 1990. The complaint alleged that Concord violated the anti-fraud provisions of the Securities Exchange Act of 1934 through the forgery of investors' signatures on proxy cards and further alleged that Concord failed to provide certain investors in the affected partnerships with lists of partners, as required under the proxy rules. In April, 1995, Concord consented, without admitting or denying the Commission's allegations, to the entry of a final judgment ordering it to pay a civil penalty of $500,000 and enjoining it from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-7 thereafter. Compliance with Section 16(a) of the Exchange Act. Based on the General Partner's review of Forms 3, 4 and 5 furnished to the Partnership, there were no late reports filed during 1997. Item 11. Compensation. During 1997, the Partnership paid or accrued: (i) Pursuant to the Partnership Agreement, $1,018 to the General Partner as a distribution of distributable cash flow (See Item 5 "Market for Registrant's Units and Related Security Holders Matters" of this Report for a description of distributable cash flow). (ii) $25,000 to Milestone Property Management, Inc. ("MPMI"), an affiliate of the General Partner, for administrative services rendered to the Partnership. Pursuant to an agreement between MPMI and the Partnership, the Partnership reimburses MPMI for administrative services provided to the Partnership, such as payroll, rent, supplies and utilities, in an amount equal to $25,000 per year. 25 (iii) $107,725 to MPMI for property management fees for the fiscal year ended December 31, 1997. Pursuant to the management agreement between the Partnership and MPMI, property management fees are equal to a percentage of gross revenues not to exceed 5 percent for multiple tenant property for which MPMI performs leasing services, 3 percent for multiple tenant property for which MPMI does not perform leasing services and 1 percent for single tenant property. The management fees are 3 percent for the Searcy Property, 4 percent for the Valencia Property and 5 percent for the Green Valley Property. The management fee for any Property may not exceed competitive fees for comparable services reasonably available to the Partnership in the same geographic area as the property in question. Gross revenues are defined in the management agreement to mean, with respect to each Property, all base, additional and percentage rents collected from the Property but exclude all other receipts or income with respect to that Property, such as, (i) receipts arising out of any sale of assets or of all or part of the Property, condemnation proceeds and other items of a similar nature; (ii) payments made by tenants for over-standard finish out improvements or other amortization; (iii) income derived from interest on investments, security deposits utility deposits; (iv) proceeds of claims under insurance policies; (v) abatements or reductions of taxes; (vi) security deposits made by tenants; or (vii) any portions of rentals which are specifically designated as amortization of, or interest on, tenant moving expenses, takeover expenses or similar items in the nature of advances by the Partnership. No officer, director, or employee of the General Partner received any direct compensation from the Partnership during the fiscal year ended December 31, 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) The General Partner does not know of any beneficial owner of five percent or more of the issued and outstanding Class A Interests. The General Partner knows of only one owner of five percent or more of the issued and outstanding Class B Interests, the information as to which is set forth below as of March 4, 1998: Amount and Nature of Percent Title Name and Address of Beneficial of of Class Beneficial Owner Ownership Class Class B The Guardian Life 572,292* 27.1% Interests Insurance Company of America 203 Park Avenue South New York, NY 10003 - ----------------------- 26 * To the best of the Partnership's knowledge, The Guardian Life Insurance Company of America has sole voting power and investment power with respect to these securities. (b) The General Partner, together with its affiliates and the officers and directors of the General Partner, own less than 1% of the issued and outstanding Class A Interests and less than 1% of the issued and outstanding Class B Interests. The number of shares of stock, no par value, of Concord (which is the parent of the General Partner) beneficially owned by all directors of the General Partner and CMP Beneficial Corp. and all directors and officers of the General Partner and CMP Beneficial Corp. as a group as of March 4, 1998 is set forth in the following table: Amount and Nature of Percent Name of Beneficial of Beneficial Owner Ownership Class ----------------- --------- ------ Leonard S. Mandor 267 67% Robert A. Mandor 133 33% Item 13. Certain Relationships and Related Transactions. See Items 1, "Business," 5, "Market for Registrant's Units and Related Security Holders Matters," 10, "Directors and Officers of the Registrant," and 11, "Compensation," of this Report for details. See also Note 5 of the Notes to Financial Statements of the Partnership's Financial Statements included in this Report. 27 PART IV Item 14. Exhibits, Financial Statements, Financial Schedule, and Reports on Form 8-K. (a) Financial Statements and Financial Schedule See Index to Financial Statements and Financial Schedule included herewith on page 34 of this Report. (b) No reports of Form 8-K were filed for the three months ended December 31, 1997. (c) Exhibits: Location of Exhibit in Sequential Exhibit Numbering Number Description of Document System 3.1 Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P. Incorporated herein by reference to Exhibit A to the Registrant's Prospectus included as Part I of the Registrant's Post-Effective Amendment No. 3 to the Registrant's Registration Statement on Form S-11 (the "Registration Statement") which was declared effective on April 3, 1987. 3.2 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P., included as Exhibit 3.2 to Registrant's Form 10-K for the fiscal year ended December 31, 1987 ("1987 Form 10-K"), which is incorporated herein by reference. 3.3 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P. included as Exhibit 3.3 to the 1987 Form 10-K, which is incorporated herein by reference. 3.4 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P. included as Exhibit 3.4 to the 1987 Form 10-K, which is incorporated herein by reference. 28 3.5 Amendment No. 4 to Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P. included as Exhibit 3.5 to the 1987 Form 10-K, which is incorporated herein by reference. 3.6 Amendment No. 5 to Amended and Restated Agreement of Limited Partnership of Concord Milestone Plus, L.P. included as Exhibit 3.6 to Registrant's Form 10-K for the fiscal year ended December 31, 1988, which is incorporated herein by reference. 4. Form of Indenture relating to Escalating Rate Collateralized Mortgage Bonds due November 30, 1997 between Concord Milestone Plus, L.P. and United States Trust Company of New York, as Trustee. Incorporated herein by reference to Exhibit 4 to the Registration Statement. 4.1 Form of Supplemental Indenture. Incorporated herein by reference to Exhibit 4.7 to the Registrant's Post-Effective Amendment No. 1 ("Post-Effective Amendment No. 1") to the Registration Statement. 4.2 Form of Escalating Rate Collateralized Mortgage Bond due November 30, 1997 included as Exhibit 4.2 to the 1987 Form 10-K, which is incorporated herein by reference. 4.3 Form of certificate evidencing Class A Interests included as Exhibit 4.3 to the 1987 Form 10-K, which is incorporated herein by reference. 4.4 Form of certificate evidencing Class B Interests included as Exhibit 4.4 to the 1987 Form 10-K, which is incorporated herein by reference. 10.1 Property purchase agreements. Incorporated herein by reference to Exhibit 10.1 to the Registration Statement. 10.2 Form of property management agreement. Incorporated herein by reference to Exhibit 10.2 of the Registration Statement. 29 10.3 First Amendment to Management Agreement by and between Concord Milestone Plus, L.P. and Concord Assets Management, Inc. Incorporated herein by reference to Exhibit 10.3 of the 1988 Form 10-K. 10.4 Second Amendment to Management Agreement by and between Concord Milestone Plus, L.P. and Concord Assets Management, Inc. Incorporated herein by reference to Exhibit 10.4 of the 1988 Form 10-K. 10.5 Omitted intentionally. 10.6 Omitted intentionally. 10.7 Mortgage Promissory Note executed by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, in the principal amount of $7,523,500 and secured by a mortgage on certain property located in Valencia, California. Incorporated herein by reference to Exhibit 10.5 to the 1987 Form 10-K. 10.8 Mortgage Promissory Note executed by Concord Milestone Plus, L.P. in favor of United States Trust Company as trustee, in the principal amount of $6,296,000 and secured by a mortgage on a certain property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.8 to the 1988 Form 10-K. 10.9 Deed of Trust and Uniform Commercial Code Security Agreement and Financing Statement with Assignment of Leases, Rents and Profits executed by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, with respect to property located in Valencia, California. Incorporated herein by reference to Exhibit 10.6 to the 1987 Form 10-K. 30 10.10 Mortgage Deed of Trust and Uniform Commercial Code Security Agreement and Financing Statement with Assignment of Leases, Rents and Profits, in favor of United States Trust Company of New York, as trustee, with respect to certain property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.10 to the 1988 Form 10-K. 10.11 Amended and Restated Mortgage Promissory Note executed by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, in the principal amount of $2,632,500 and secured by a mortgage on certain property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.7 of the 1987 Form 10-K. 10.12 Mortgage, Deed of Trust and Uniform Commercial Code Security Agreement and Financing Statement with Assignment of Leases, Rents and profits by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, with respect to property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.8 of the 1987 Form 10-K. 10.13 Modification of Mortgage, Deed of Trust and Uniform Commercial Code Security Agreement and Financing statement with Assignment of Leases, Rents and Profits by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, with respect to property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.9 of the 1987 Form 10-K. 10.14 Second Modification to Mortgage, Deed of Trust and Uniform Commercial Code Security Agreement and Financing Statement with Assignment of Leases, Rents and Profits by Concord Milestone Plus, L.P. in favor of United States Trust Company of New York, as trustee, with respect to property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.10 of the 1987 Form 10-K. 31 10.15 Fixed Rate Note, dated September 23, 1997, executed by the Partnership in favor of Lender, relating to the property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.1 of the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (the "September 1997 10-Q"). 10.16 Mortgage, Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.2 of the September 1997 10-Q. 10.17 Assignment of Leases and Rents, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.3 of the September 1997 10-Q. 10.18 Environmental Liabilities Agreement, dated September 23, 1997, executed by the Partnership and CM Plus Corporation for the benefit of Lender, relating to the property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.4 of the September 1997 10-Q. 10.19 Tenant Occupancy Escrow and Security Agreement, dated September 23, 1997, by and between the Partnership and the Lender, relating to the property located in Green Valley, Arizona. Incorporated herein by reference to Exhibit 10.5 of the September 1997 10-Q. 10.20 Fixed Rate Note, dated September 23, 1997, executed by the Partnership in favor of Lender, relating to the property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.6 of the September 1997 10-Q. 10.21 Mortgage, Deed of Trust and Security Agreement, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.7 of the September 1997 10-Q. 32 10.22 Assignment of Leases and Rents, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.8 of the September 1997 10-Q. 10.23 Environmental Liabilities Agreement, dated September 23, 1997, executed by the Partnership and CM Plus Corporation for the benefit of Lender, relating to the property located in Searcy, Arkansas. Incorporated herein by reference to Exhibit 10.9 of the September 1997 10-Q. 10.24 Fixed Rate Note, dated September 23, 1997, executed by the Partnership in favor of Lender, relating to the property located in Valencia, California. Incorporated herein by reference to Exhibit 10.10 of the September 1997 10-Q. 10.25 Deed of Trust, Assignment of leases, and Rents, Security Agreement and Fixture Filing, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Valencia, California. Incorporated herein by reference to Exhibit 10.11 of the September 1997 10-Q. 10.26 Assignment of Leases and Rents, dated September 23, 1997, executed by the Partnership for the benefit of Lender, relating to the property located in Valencia, California. Incorporated herein by reference to Exhibit 10.12 of the September 1997 10-Q. 10.27 Environmental Liabilities Agreement, dated September 23, 1997, executed by the Partnership and CM Plus Corporation for the benefit of Lender, relating to the property located in Valencia, California. Incorporated herein by reference to Exhibit 10.13 of the September 1997 10-Q. 10.28 Environmental Escrow and Security Agreement, dated September 23, 1997, by and between the Partnership and the Lender, relating to the property located in Valencia, California. Incorporated herein by reference to Exhibit 10.14 of the September 1997 10-Q. 33 27. Financial Data Schedule Article 5 included for Electronic Data Gathering, Analysis, and Retrieval (EDGAR) purposes only. This Schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of revenues and expenses of the Partnership as of and for the fiscal year ended December 31, 1997, and is qualified in its entirety by reference to such financial statements. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized on March 20, 1998. CONCORD MILESTONE PLUS, L.P. By: CM PLUS CORPORATION, General Partner By: /s/ Leonard S. Mandor Leonard S. Mandor, President CMP BENEFICIAL CORP. (Registrant of Beneficial Interests) By: /s/ Leonard S. Mandor Leonard S. Mandor, President Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the dates indicated. By: /s/ Leonard S. Mandor March 20, 1998 ----------------------------------------------- Leonard S. Mandor President (Principal Executive Officer) and Director of CM Plus Corporation and CMP Beneficial Corp. By: /s/ Robert A. Mandor March 20, 1998 ----------------------------------------------- Robert A. Mandor Vice President and Director of CM Plus Corporation and CMP Beneficial Corp. By: /s/ Patrick Kirse March 20, 1998 ----------------------------------------------- Patrick Kirse Treasurer and Controller (Principal Accounting Officer) of CM Plus Corporation and CMP Beneficial Corp. 35 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE Page No. 1.Financial Statements: a. Concord Milestone Plus, L.P. 1. Independent Auditors' Report ............................. 37 2. Balance Sheets, December 31, 1997 and December 31, 1996.. 38 3. Statements of Revenues and Expenses for the Years Ended December 31, 1997, 1996 and 1995 ......................... 39 4. Statements of Changes in Partners' Capital for the Years Ended December 31, 1997, 1996, 1995 ...................... 40 5. Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 ................................. 41 6. Notes to Financial Statements ............................ 42 2.Financial Schedule: a. Real Estate and Accumulated Depreciation (Schedule III) ...... 51 b. Schedules not filed: All Schedules except Schedule III have been omitted as the required information is not applicable or the information is shown in the financial statements or notes thereto. 36 INDEPENDENT AUDITORS' REPORT Concord Milestone Plus, L.P.: We have audited the accompanying balance sheets of Concord Milestone Plus, L.P. (the "Partnership") as of December 31, 1997 and 1996 and the related statements of revenues and expenses, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule of real estate and accumulated depreciation. These financial statements and the financial statement schedule of real estate and accumulated depreciation are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule of real estate and accumulated depreciation based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Concord Milestone Plus, L.P. at December 31, 1997 and 1996 and the results of its operations, changes in partners' capital and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, the financial statement schedule of real estate and accumulated depreciation, when considered in relation to the basic financial statements, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche, LLP New York, New York March 20, 1998 37 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) BALANCE SHEETS DECEMBER 31, 1997 and 1996
December 31, December 31, 1997 1996 Property, at cost Building and improvements .................................................................. $ 15,453,945 $ 15,359,462 Less: accumulated depreciation ............................................................. 5,413,087 4,829,534 ------------ ------------ Building and improvements, net ............................................................. 10,040,858 10,529,928 Land ....................................................................................... 10,987,034 10,987,034 ------------ ------------ Total property ............................................................................. 21,027,892 21,516,962 Cash and cash equivalents ..................................................................... 257,905 326,120 Accounts receivable ........................................................................... 123,152 146,728 Restricted cash ............................................................................... 269,895 -- Debt financing costs, net ..................................................................... 305,504 -- Prepaid expenses and other assets, net ........................................................ 67,516 96,965 ------------ ------------ Total assets ............................................................................... $ 22,051,864 $ 22,086,775 ============ ============ Liabilities: Mortgage loans payable ........................................................................ $ 16,683,574 -- Bonds payable, net ............................................................................ -- $ 16,473,060 Accrued interest .............................................................................. 117,308 137,100 Accrued expenses and other liabilities ........................................................ 341,263 255,137 Accrued expenses payable to affiliates ........................................................ 73,935 11,985 ------------ ------------ Total liabilities .......................................................................... 17,216,080 16,877,282 ------------ ------------ Commitments and Contingencies Partners' capital General partner ............................................................................ (74,207) (70,470) Limited partners: Class A Interests, 1,518,800 ............................................................. 4,909,991 5,279,963 Class B Interests, 2,111,072 ............................................................. -- -- ------------ ------------ Total partners' capital .................................................................... 4,835,784 5,209,493 ------------ ------------ Total liabilities and partners' capital .................................................... $ 22,051,864 $ 22,086,775 ============ ============
See Accompanying Notes to Financial Statements 38 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF REVENUES AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
December 31, December 31, December 31, 1997 1996 1995 Revenues: Rent ...................................................................... $ 2,543,384 $ 2,583,614 $ 2,573,507 Reimbursed expenses ....................................................... 477,312 405,443 455,546 Interest and other income ................................................. 26,100 20,606 32,226 ----------- ----------- ----------- Total revenues ......................................................... 3,046,796 3,009,663 3,061,279 ----------- ----------- ----------- Expenses: Interest expense .......................................................... 1,602,762 1,569,795 1,525,238 Depreciation and amortization ............................................. 584,414 638,685 657,210 Management and property expenses .......................................... 816,817 802,971 903,686 Administrative and management fees to related party ....................................................... 132,725 132,007 141,359 Professional fees and other expenses ...................................... 181,998 104,324 141,596 ----------- ----------- ----------- Total expenses ......................................................... 3,318,716 3,247,782 3,369,089 ----------- ----------- ----------- Net loss ............................................................... $ (271,920) $ (238,119) $ (307,810) =========== =========== =========== Net loss attributable to: Limited partners ....................................................... $ (269,201) $ (235,738) $ (304,732) General partner ........................................................ (2,719) (2,381) (3,078) ----------- ----------- ----------- Net loss .................................................................. $ (271,920) $ (238,119) $ (307,810) =========== =========== =========== Loss per weighted average Limited Partnership 100 Class A Interests outstanding ..................................................... $ (17.90) $ (15.68) $ (20.27) =========== =========== =========== Weighted average number of 100 Class A interests outstanding ............................................. 15,188 15,188 15,188 =========== =========== ===========
See Accompanying Notes to Financial Statements 39 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31,1997, 1996 and 1995
General Class A Class B Total Partner Interests Interests PARTNERS' CAPITAL (DEFICIT) December 31, 1994 $6,151,653 $(61,049) $6,212,702 - Distributions (199,707) (1,997) (197,710) - Net Loss (307,810) (3,078) (304,732) - ---------- -------- ---------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1995 5,644,136 (66,124) 5,710,260 - Distributions (196,524) (1,965) (194,559) - Net Loss (238,119) (2,381) (235,738) - ---------- -------- ---------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1996 5,209,493 (70,470) 5,279,963 - ---------- -------- ---------- ------------- Distributions (101,789) (1,018) (100,771) - Net Loss (271,920) (2,719) (269,201) - --------- ------- --------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1997 $4,835,784 $(74,207) $4,909,991 - ========= ======== ========= =============
See Accompanying Notes to Financial Statements 40 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
December 31, December 31, December 31, 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(271,920) $(238,119) $(307,810) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 584,414 638,685 657,210 Change in operating assets and liabilities - net: Decrease (increase) in accounts receivable 23,576 (32,631) 55,714 Decrease (increase) in prepaid expenses and other assets, net 15,364 61,846 (21,230) Decrease (increase) in due from affiliate, net - 47,879 (47,879) (Decrease) increase in accrued interest (19,792) 6,854 3,428 Increase (decrease) in accrued expenses and other liabilities 86,126 (82,131) (15,995) Increase (decrease) in accrued expenses payable to affiliates 61,950 11,985 (38,827) ------------- ---------- ---------- Net cash provided by operating activities 479,718 414,368 284,611 ------------ --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property improvements (94,486) (96,984) (210,052) Purchase of other asset - (13,612) - ---------- --------- ---------- Net cash used in investing activities (94,486) (110,596) (210,052) ---------- --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of bonds payable (16,452,000) - - Restricted cash (269,895) - - Debt financing costs (313,337) - - Proceeds from mortgage loans payable 16,710,000 - - Principal repayments on mortgage loans payable (26,426) - - Cash distributions to partners (101,789) (196,524) (199,707) ----------- -------- -------- Net cash used in financing activities (453,447) (196,524) (199,707) ----------- -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (68,215) 107,248 (125,148) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 326,120 218,872 344,020 ----------- --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 257,905 $ 326,120 $ 218,872 =========== ========== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $1,622,554 $1,562,941 $1,521,810 ========== ========== =========
See Accompanying Notes to Financial Statements 41 CONCORD MILESTONE PLUS, L.P. NOTES TO FINANCIAL STATEMENTS December 31, 1997, 1996 and 1995 1. Organization and Capitalization Concord Milestone Plus, L.P., a Delaware limited partnership (the "Partnership"), was formed on December 12, 1986, to invest in existing income-producing commercial and industrial real estate, such as shopping centers, office buildings, free-standing commercial warehouses and distribution centers. Currently, the Partnership owns and operates three shopping centers (the "Properties"), one located in Searcy, Arkansas (the "Searcy Property"), one located in Valencia, California (the "Valencia Property") and one located in Green Valley, Arizona (the "Green Valley Property"). The Partnership commenced a public offering on April 8, 1987 in order to fund the Partnership's real property acquisitions. The Partnership terminated its public offering on April 2, 1988 and was fully subscribed to with a total of 16,452 Bond Units and 15,188 Equity Units issued. Each Bond Unit consisted of $1,000 principal amount of the Partnership's Escalating Rate Collateralized Mortgage Bonds (the "Bonds") due November 30, 1997 and 36 Class B Interests ("Class B Interests"), each such interest representing an assignment of one Class B Limited Partnership Interest held by CMP Benefit Corp., a Delaware corporation (the "Assignor"), under the Amended and Restated Agreement of Limited Partnership of the Partnership Agreement (the "Partnership Agreement"). Each Equity Unit consisted of 100 Class A Interests ("Class A Interests"), each interest representing an assignment of one Class A Limited Partnership Interest held by the Assignor under the Partnership Agreement, and 100 Class B Interests. Capital contributions to the Partnership consisted of $15,187,840 from the sale of the Equity Units and $592,272 from the sale of the Class B Interests that comprised the Bond Units. 2. Summary of Significant Accounting Policies Basis of Accounting, Fiscal Year The Partnership's records are maintained on the accrual basis of accounting for both financial and tax purposes. Its fiscal year is the calendar year. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 42 Base Rents Base rents are recognized on a straight-line basis over the terms of the related leases, including free rent, if any, and lease step ups. Property Property is carried at cost, and depreciated on a straight-line basis over the estimated useful life of 31.5 years. Building improvements are carried at cost, and depreciated on a straight-line basis using an estimate useful life of 5 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life or the remaining term of the lease. The Partnership's policy is to quarterly assess any impairment in value by making a comparison of the current and projected operating cash flows of each of its properties over its remaining useful life, on an undiscounted basis, to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to the estimated fair value to reflect an impairment in the value of the asset. The Partnership determined that an adjustment to the carrying amount of its property was not necessary in 1997, 1996 and 1995. 43 Income Taxes The Partnership makes no provision for income taxes because all income and losses are allocated to the partners and holders of Class A Interests and Class B Interests for inclusion in their respective tax returns. The tax bases of the Partnership's net assets and liabilities are $2,792,337 and 2,699,056 higher than the amounts reported for financial statement purposes at December 31, 1997 and 1996,respectively, due to the utilization of different estimated useful lives for the depreciation of property for tax and financial reporting purposes and the write-down of property during 1993 and 1994 for financial reporting purposes. Discount on Bonds Payable and Debt Financing Costs The Partnership amortized the original issue discount on bonds payable using the effective interest method over the term of the Bonds. The costs to obtain the new Mortgage Loans were capitalized and are being amortized over the term of such mortgages using the effective interest method. Loss Per Class A Interest In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" which establishes standards for computing and presenting earnings per share. The new standard replaces the presentation of primary earnings per share prescribed by Accounting Principles Board Opinion No. 15 ("APB 15"), "Earnings per Share" with a presentation of basic earnings per share and also requires dual presentation of basic and diluted earnings per share on the face of the statement of operations for all entities with complex capital structures. The Partnership has no dilutive interests. Loss per Class A interest amounts are computed by dividing net loss allocable to the limited partners by the weighted average number of 100 Class A Interests outstanding during the year. SFAS No. 128 will not have any material effect on current or prior period financial statement displays presented by the Partnership. Capital Structure In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information About Capital Structure." SFAS No. 129 establishes certain standards for disclosing information about an entity's capital structure. SFAS No. 129 is effective for financial statement periods ending after December 15, 1997. SFAS No. 129 will not have any material effect on current or prior period financial statement displays presented by the Partnership. 44 Use of Estimates in the Preparation of Financial Statements The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications were made to the accompanying 1995 and 1996 financial statements to conform with the 1997 presentation. 3. Partnership Agreement Pursuant to the terms of the Partnership Agreement the general partner of the Partnership, CM Plus Corporation, a Delaware corporation (the "General Partner"), is liable for all general obligations of the Partnership to the extent not paid by the Partnership. Holders of Class A Interests and Class B Interests are not liable for expenses, liabilities or obligations of the Partnership beyond the amount of their contributed capital. 45 All distributable cash, capital proceeds, profit, gain or loss from Partnership operations are generally allocated 1 percent to the General Partner and 99 percent to the holders of Class A Interests. The holders of Class B Interests were specifically allocated certain organization and offering expenses to the extent of their positive capital account balances, thus reducing their account balance to zero. After the holders of Class A Interests have received the 12.5 percent Priority Return (as defined in the Partnership Agreement) all distributable cash is allocated in a ratio of 85 percent to the holders of Class B Interests, 5 percent to the holders of Class A Interests and 10 percent to the General Partner. Since the inception of the Partnership, all income and distributable cash with respect to the Equity Units has been allocated to the holders of Class A Interests because they have not received the 12.5 percent Priority Return. Therefore, no income has been allocated to the holders of Class B Interests. 4. Properties On August 20, 1987, the Partnership purchased the Searcy Property, a shopping center in Searcy, Arkansas from Concord Milestone Plus of Arkansas Limited Partnership, an affiliated entity, for $4,050,000. On January 22, 1988, the Partnership purchased the Valencia Property, a shopping center in Valencia, California from Concord Milestone Plus of California Limited Partnership, an affiliated entity, for $11,575,000. On April 15, 1988, the Partnership purchased the Green Valley Property, a shopping center in Green Valley, Arizona from Concord Milestone Plus of Arizona Limited Partnership, an affiliated entity, for $9,687,000. 46 Minimum base rental income under non-cancelable tenant lease agreements, having lease terms expiring from one to nine years, at December 31, 1997 are as follows: Year Ended December 31 Amount 1998 $2,456,745 1999 2,025,503 2000 1,648,368 2001 1,286,345 2002 997,996 Thereafter 2,767,333 Total $11,182,290 The above table does not include contingent rental amounts. The total contingent rentals received in 1997, 1996, and 1995 were $163,307, $188,716, and $185,117, respectively. A majority of the leases contain provisions for additional rent calculated as a specified percentage of the tenant's gross receipts above fixed minimum amounts and for reimbursement of all or a portion of the tenant's pro rata share of real estate taxes, insurance and common area maintenance expenses. There was no tenant in 1997 whose rents exceed 10% of the Partnership's total revenue. 5. Related Party Transactions The Partnership pays fees for customary property management services ("Management Fees") equal to a percentage of gross revenues from the Properties, not to exceed 5 percent. The Management Fees are 3 percent for the Searcy Property, 4 percent for the Valencia Property and 5 percent for the Green Valley Property. Management Fees incurred for the years ended December 31, 1997, 1996, and 1995 were $107,725, $107,007, and $116,359, respectively. Management Fees are payable to Milestone Property Management, Inc., a Delaware corporation and affiliate of the General Partner ("MPMI"). The Partnership also paid $25,000 to MPMI for administrative services for the years ended December 31, 1997, 1996 and 1995. As of December 31, 1997 and 1996, the Partnership accrued $33,542 and $11,985, respectively, payable to Milestone Properties, Inc. ("MPI"), an affiliate of the General Partner for administrative and management fees. Additionally, as of December 31, 1997, the Partnership owes $40,393 to Concord Assets Group, an affiliate, relating to funds borrowed in conjunction with the bond refinancing. Tri-Stone Mortgage Company, an affiliate of the General Partner, assisted the Partnership in obtaining three new fixed rate Mortgage Loans. No fee was paid to Tri-Stone for their assistance. 47 6. Mortgage Loans Payable As of September 30, 1997, the Partnership, with the assistance of Tri-Stone Mortgage Company, an affiliate of the General Partner, closed three new fixed rate first mortgage loans (the "Mortgage Loans") from Westco Real Estate Finance Corp. (the "Lender") in the amounts of $2,865,000, $8,445,000 and $5,400,000, respectively. All three Mortgage Loans are secured by cross-collateralized first mortgages on the Partnership's shopping centers. Prior to September 30, 1997, the shopping centers were encumbered by mortgages granted by the Partnership for the benefit of the holders of the Partnership's Bonds. The Partnership used the proceeds of the Mortgage Loans and available cash to redeem all of the outstanding Bonds. An aggregate of $17,015,650 was paid to the holders of the Bonds in connection with such redemption, of which $16,452,000 was applied to prepay the principal of the Bonds and $563,650 was applied to pay interest accrued on the Bonds through the redemption date. Bonds Payable consist of Bonds outstanding at December 31, 1996 in the principal amount of $16,452,000. The Bonds had an effective interest rate of 9.66%. The Mortgage Loans and related terms at December 31, 1997 are summarized as follows: Principal Monthly Balance at Payments of December Interest Principal Property/Location 31, 1997 Rate % and Interest ----------------- -------------- ------ ------------ Searcy, AR $2,861,153 8.125 $21,640 Valencia, CA 8,429,458 8.125 65,881 Green Valley, AZ 5,392,963 8.250 41,252 --------- ------ Total $16,683,574 $128,773 ========== ======= The Mortgage Loans require payments of principal and interest through and including September 1, 2007. On October 1, 2007, the balance of principal and interest estimated to be $2,505,981, $7,003,227, and $4,738,096 for the Searcy, Valencia and Green Valley Properties, respectively, will be due and payable. Subsequent to October 31, 2003 and prior to May 31, 2007 each Mortgage Loan may be prepaid in whole but not in part on any payment date with a prepayment penalty equal to the greater of (i) 1% of the outstanding principal balance at such time, or (ii) the excess, if any, of the present value of the remaining scheduled principal and interest payments (including any balloon payment) over the amount of principal being prepaid. The Mortgage Loans may be prepaid without penalty on any payment date after May 31, 2007. 48 The scheduled principal payments of the Mortgage Loans at December 31, 1997 are as follows: Year Ending December 31 1998 $170,520 1999 185,171 2000 197,149 2001 218,023 2002 236,758 Thereafter 15,675,953 Total $16,683,574 In connection with the Green Valley Mortgage Loan, the Partnership has deposited $150,000 into an escrow account with the lender. The funds held in this escrow account may be released upon the execution of a new lease or renewal lease, with a termination date of July 31, 2004 or later, by a specified tenant of the Green Valley shopping center and the satisfaction of certain other conditions. In connection with the Valencia Mortgage Loan, the Partnership deposited $45,000 into an escrow account with the lender. The funds held were released during February 1998 following the issuance of a "No Further Action" letter by the Department of Toxic Substance Control, a branch of the State of California Environmental Protection Agency ("CalEPA"). CM Plus Corporation, the general partner of the Partnership, guarantees certain limited recourse obligations under the Mortgage Loans. 7. Commitments and Contingencies In conjunction with the refinancing of the Bonds, the lender engaged an independent environmental and geotechnical consulting firm to perform environmental due diligence on the properties at the Partnership's expense. After various tests, the consultant identified chemical contamination in the soil at a site at the Old Orchard Shopping Center in Valencia, California which it believed was attributable to improper handling of dry cleaning solvent by a tenant and its predecessors. During February 1998, the CalEPA issued a No Further Action letter with respect to the investigation and remediation at the Valencia Property. The cost to satisfactorily remedy this environmental problem was approximately $71,000, which was expensed during 1997. 49 Investments in real property create a potential for environmental liability on the part of the owner, operator or developer of such real property. If hazardous substances are discovered on or emanating from any of the Properties, the Partnership and/or others may be held strictly liable for all costs and liabilities relating to the clean-up of such hazardous substances. The Partnership is not aware of any other environmental conditions that will have a material effect on the financial statements. 50 CONCORD MILESTONE PLUS, L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997
Costs Capitalized Subsequent Gross Amount at Initial Cost to Acquisition which Carried at Close of Period (A) --------------------------- ------------- ------------------------------------- Land Building & Building & Building & Description and Location Encumbrances Land Improvements Improvements Land Improvements Total - ------------------------------- ------------ ------------ ------------ ------------ ----------- ------------ -------------- Town & Country Plaza $2,861,153 $430,000 $3,620,000 $385,142 $430,000 $4,005,142 $4,435,142 Searcy, AR Old Orchard Shopping Center 8,429,458 6,500,000 5,075,000 1,336,406 6,500,000 6,416,906 12,916,906 Valencia, CA Green Valley Mall 5,392,963 5,100,000 4,587,000 1,493,363 4,057,034 5,031,897 9,088,931 Green Valley, AZ --------- --------- --------- --------- --------- --------- --------- $16,683,574 $12,030,000 $13,282,000 $3,214,911 $10,987,034 $15,453,945 $26,440,979 ========== ========== ========== ========= ========== ========== ========== Accumulated Date Depreciation Description and Location Depreciation(B) Acquired Life - ------------------------------- -------------- ------------ -------- Town & Country Plaza $1,324,345 08/20/87 31.5 years Searcy, AR Old Orchard Shopping Center 2,062,402 01/22/88 31.5 years Valencia, CA Green Valley Mall 2,026,340 04/15/88 31.5 years Green Valley, AZ --------- $5,413,087 ========= 1997 1996 1995 1994 1993 {A) Reconciliation of investment properties owned: Beginning balance $26,346,496 $26,249,510 $26,039,458 $27,050,431 $27,787,658 Property acquisitions/improvements 94,483 96,986 210,052 74,959 262,773 Write-down of property 0 0 0 (1,085,932) (1,000,000) ---------- ----------- ------------ ----------- ----------- Balance at end of period $26,440,979 $26,346,496 $26,249,510 $26,039,458 $27,050,431 ========== ========== ========== ========== ========== (B) Reconciliation of accumulated depreciation: Beginning balance $4,829,534 $4,253,132 $3,695,110 $3,122,666 $2,570,521 Depreciation expense 583,553 576,402 558,022 572,444 552,145 ----------- ----------- ----------- ----------- ----------- Balance at end of period $ 5,413,087 $4,829,534 $4,253,132 $3,695,110 $3,122,666 ========== ========= ========= ========= =========
51 EX-27 2 FDS
5 1 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 257,905 0 123,152 0 0 0 26,440,979 5,413,087 22,051,864 0 16,683,574 0 0 0 4,835,784 22,051,864 0 3,046,796 0 1,715,954 0 0 1,602,762 (271,920) 0 0 0 0 0 (271,920) (17.90) (17.90)
-----END PRIVACY-ENHANCED MESSAGE-----