-----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, MrIxRMjGeQ8ml8y7D4VopVplxXYC4Yy9lF7WURRV7HQPaiGrui8ggH8DyZK6hEkd 5fP7YgGlOzxKPbejlFLYkw== 0000889812-97-000818.txt : 19970329 0000889812-97-000818.hdr.sgml : 19970329 ACCESSION NUMBER: 0000889812-97-000818 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-16757 FILM NUMBER: 97566759 BUSINESS ADDRESS: STREET 1: 5200 TOWN CENTER CIR STREET 2: 4TH FLOOR CITY: BOCA RATON STATE: FL ZIP: 33486 BUSINESS PHONE: 4073949260 10-K405 1 ANNUAL REPORT Exhibit Index p.29 Exhibits begin p. (n/a) Total pages: 48 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, 1996 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 incorporation or organization Identification No.) 5200 TOWN CENTER CIRCLE, 4TH FLOOR BOCA RATON, FLORIDA 33486 (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 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. is a wholly owned subsidiary of Concord which 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 its 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) $409,186, $1,354,547 and $1,196,679, respectively, for the fiscal year ended December 31, 1996; (ii) $441,239, $1,388,592 and $1,204,137, respectively, for the fiscal year ended December 31, 1995; and (iii) $419,757, $1,427,475 and $1,291,654, respectively, for the fiscal year ended December 31, 1994. See Item 2, "Properties", of this Report for additional information as to the Properties, including a description of the competitive conditions affecting them. 2 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 annually 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 leasable 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. Bond Mortgages Each of the Properties is subject to a note together with a related first mortgage or deed of trust on that Property in principal amount up to 65% of the Partnership's purchase price of that Property (a "Bond Mortgage"), which was granted by the Partnership to United States Company of New York, as trustee (the "Trustee") (or, in the case of a deed of trust, to a deed of trustee for the benefit of the Trustee) for the benefit of the holders of the Partnership's Escalating Rate Collateralized Mortgage Bonds due November 30, 1997 (the "Bonds") (see item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for further discussion). The aggregate principal amount of Bonds outstanding as of March 15, 1997 was $16,452,000 and the Bonds are cross collateralized by all three properties. As of that date, the principal amount of the Bond Mortgages, on the Searcy Property, the Valencia Property and the Green Valley Property were $2,632,500, $7,523,500 and $6,296,000, respectively. The Bonds bear interest, payable semi-annually, from the date of issuance at annual rates increasing from 8.15 percent to 10 percent (10 percent, 9.50 percent and 9.25 percent at December 31, 1996, 1995 and 1994, respectively) and mature on November 30, 1997. The Bonds have an effective interest rate of 9.66 percent. Pursuant to the Indenture pursuant to which the Bonds were issued, the Bonds are subject to early redemption (at 101 percent of the principal amount through May 31, 1997, and thereafter without any premium) under certain circumstances. The holders of 3 the Bonds have a first lien on the Properties through the Bond Mortgages. The bond discount is amortized using the effective interest method. 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 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. Competition. There are three shopping centers within two miles to the west of the Town and Country Plaza on Race Avenue. One shopping center consists of an Alco discount department store and a Piggly Wiggly food store. The second shopping center consists of a Fred's discount store, Warehouse Foods, 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 relocated from the Town and Country Plaza in 1992. 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 containing 9 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 15, 1997, there were 9 tenants (including two anchor tenants) and no vacancies at the Searcy Property. The occupancy rate was 92.9%, 95.5%, 100%, 90.9% and 100% for 1996, 1995, 1994, 1993 and 1992, respectively. The average effective annual rental per square foot was $5.03, $5.15, $5.46, $6.05, and $5.82 for 1996, 1995, 1994, 1993 and 1992, 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 expires 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. Effective January 1, 1997, pursuant to the amendment, the December 31, 2007 expiration date will be changed to be 10 years from the time the expanded store is open for business. 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 plans to build on the 7,302 square feet of unoccupied land. The additional base rent due to the expansion is $40,000 and, beginning January 1, 1997, the annual minimum rent is $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 1996 was $165,600. 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: $0.20 for years 1-5, $0.25 for years 6-10, $0.30 for years 11-15, $0.35 for years 16-20 and $0.50 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 operates its store under a lease that expires July 30, 2001, subject to three five-year renewal options exercisable by Stage. The annual minimum rent is $81,900 ($5.25 per square foot). In addition, the lease provides for percentage rent equal to 3% of gross annual sales in excess of $2,600,000. The total rent received from Stage in 1996 was $81,900. Stage is required to reimburse the Partnership a pro rata share of real estate taxes and insurance costs subject to a maximum of $6,240 for real estate taxes and $1,248 for insurance costs in any lease year. Stage is also required to reimburse the Partnership to a maximum of $3,120 for a share of the expenses of maintaining the common areas. 5 The other seven tenants at the Searcy Property provide a variety of goods and services, including furniture, family shoes, ladies apparel and jewelry. These leases have varying original lease terms ranging from 1 to 14 years and provide for annual minimum rents aggregating $126,153 and ranging from $6.00 per square foot to $9.00 per square foot (a weighted average of $7.22 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. Three tenants leasing an aggregate of 6,320 square feet are on month to month rental agreements. The following table shows selected lease expiration information for the Searcy Property (assuming no renewals or cancellations): % of Total Gross 1997 1997 Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent ------------ ------------- --------- ------------- -------- 1997 3 6,320 37,920 9.2% 1998 1 2,867 24,513 5.9% 1999 1 3,600 21,600 5.2% 2000 1 5,973 (1) --- 2001 2 20,280 124,020 30.0% 2007 1 39,396 205,600 49.7% ---- - ------ ------- ------ Total 9 78,436 413,653 100.0% = ====== ======= ====== (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 1996 are 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 $3,311,000 of which $430,000 is allocated to land and $2,881,000 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. Old Orchard Shopping Center Valencia, California Location. The Valencia Property, named the Old Orchard Shopping Center, is situated on an approximately 9.94-acre parcel that has frontages on Lyons Avenue and Orchard Village Road 6 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. 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. 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 15, 1997 there were 20 tenants (including two anchor tenants) and two vacancies at the Valencia Property. The occupancy rate was 97.1%, 100%, 93.5%, 100%, and 97.1% in 1996, 1995, 1994, 1993, and 1992, respectively. The average effective annual rental per square foot was $11.01, $10.15, $10.67, $10.62, $10.98 for 1996, 1995, 1994, 1993, and 1992, respectively. The two anchor tenants, Lucky Stores, Inc. ("Lucky Stores"), a full service grocery store, and Thrifty Drugstore ("Thrifty"), 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. 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 7 in 1996 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 0.625%. 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. Thrifty operates under a lease that commenced on March 25, 1965 and expires May 31, 2005, subject to four five-year renewal options exercisable by Thrifty. 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 Thrifty in 1996 was approximately $137,000. Thrifty is entitled to remodel its premises at any time, at its owns expense, in which event it will have the right to withhold one half of the rent payable in any one full calendar year in excess of the rent paid during the year immediately preceding the completion of the remodeling, until it has withheld its cost of remodeling, but not more than $300,000. Thrifty is not required to reimburse the Partnership for any real estate taxes or operating expenses. Thrifty 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 original lease terms ranging from 3 to 35 years and provide for annual minimum rents aggregating $760,166 and ranging from $7.24 per square foot to $27.82 per square foot (a weighted average of $15.07 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%. 8 The following table shows selected lease expiration and vacancy information for the Valencia Property (assuming no renewals or cancellations): % of Total Gross 1997 1997 Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent ------------ ------------- --------- ---------- ---------- 1997 2 1,800 41,524 3.8% 1998 6 17,062 277,886 25.1% 1999 3 6,700 114,323 10.3% 2000 3 11,880 115,773 10.5% 2002 2 3,700 84,750 7.7% 2005 3 27,429 170,910 15.5% 2006 1 31,842 300,000 27.1% vacancies - 3,000 - - --- ------- --------- ----- Total 20 103,413 1,105,166 100.0% == ======= ========= ===== The Valencia Property is subject to real estate taxes at the rate of 1.41% of assessed valuation. The current assessed valuation of the Valencia Property is $8,786,000 and the total tax for 1996 on the Valencia Property is approximately $124,000. 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 Valencia Property is approximately $11,237,000 of which $6,500,000 is allocated to land and $4,737,000 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. 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 Esperanza 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 a number of hotels and office buildings, a community center and three 18 hole golf courses. The Green Valley Property is located at the intersection of Interstate 19 and Esperenza Boulevard and serves Pima County, as well as Santa Cruz County to the south. 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 9 Supermarket. There is a shopping center located 3 miles to the north of the Green Valley Property which includes a 65,000 square foot Wal-Mart Department Store and a 42,000 square foot Bashsa 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 Green Valley Property and was anchored by a 45,000 square foot Kmart and 10,000 square feet of space for local tenants, closed during 1995. 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 1,550 square feet representing the mall office and maintenance space). The exterior construction is a combination of adobe block, split face black and painted concrete block. The mall has approximately 850 parking spaces. Operating and Tenant Information. As of March 15, 1997, there were 73 tenants (including three anchor tenants) and 7 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 90.2%, 92.0%, 85.4%, 82.8% and 80.0% for 1996, 1995, 1994, 1993, and 1992, respectively. The average effective annual rental per square foot was $5.56, $5.31, $5.56, $5.81 and $5.44 for 1996, 1995, 1994, 1993, and 1992, respectively. ABCO Supermarket occupies 38,983 square feet or 20.09% 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 1996 was $90,560. 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, hair styling, insurance, books, specialty gifts, mortgage services, accounting, greenery, printing, and banking. These leases have varying original lease terms ranging from 1 to 4 years and provide for payment of annual minimum rents aggregating $981,966 and ranging from $.78 per square foot to $15.75 per square foot (a weighted average of approximately $6.99 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 10 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: % of Total Gross 1997 1997 Year of Number of Leasable Annual Annual Expiration Leases Area Minimum Minimum of Lease Expiring (Sq.Ft.) Rent Rent ------------ ----------- ---------- --------- ---------- 1997 16 33,661 200,136 19.1% 1998 20 30,814 175,632 16.7% 1999 16 55,473 210,417 20.0% 2000 8 23,343 235,776 22.5% 2001 9 25,506 143,453 13.7% 2002 3 7,091 66,237 6.3% 2003 1 3,675 18,375 1.7% vacancies - 14,437 - - -- ------- --------- ----- Total 73 194,000 1,050,026 100.0% == ======= ========= ====== Although 71% of the current leases expire in the next three years, the General Partner believes that it will be successful in either renewing these leases or originating new leases for these spaces. However, no assurance can be given that the Partnership will be successful at this, and if so, whether the terms of the leases will be advantageous to the Partnership. Real estate taxes on the Green Valley Property are based on a primary tax rate of 7.41% per $100 of assessed value and a secondary tax rate of 4.10% per $100 of assessed value. The Green Valley Property is currently assessed at $1,254,000 for purposes of the primary rate and $1,256,000 for purposes of the secondary rate. Real estate taxes for 1996 are approximately $144,000. 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 approximately $9,669,000, of which $5,100,000 is allocated to land and $4,569,000 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. Commitments and Contingencies Under various Federal, State and local laws and ordinances and regulations, an owner, operator or developer of real property may be held liable for the costs of removal or remediation of certain hazardous or toxic substances (including asbestos containing materials) on or in such 11 property. Such laws, ordinances and regulations often impose liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The cost of any required remediation of any property and the owner's, operator's or developer's liability therefor is generally not limited under such laws, ordinances and regulations, and could exceed the value of the property and/or the aggregate assets of the owner, operator or developer. While none of the Properties is presently subject to any environmental actions, the presence of such substances, or the failure to properly remediate such substances, may adversely affect the ability to sell or rent the Properties or to borrow using any of the Properties as collateral. 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, 1997, 1,518,800 Class A Interests and 2,111,072 Class B Interests were held by approximately 1,363 and 1,438 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. 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. 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 13 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, 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 March 31, 1995 $3.29 $3.29 June 30, 1995 $3.29 $3.29 September 30, 1995 $3.29 $2.74 December 31, 1995 $3.28 $3.28 - ---------------------------------- (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 net income. There have been no distributions with respect to Class B Interests. 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. 14 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 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 included elsewhere in this Report. (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 net income. 15 CONCORD MILESTONE PLUS, L.P. (A Limited Partnership) Selected Financial Data
For Year For Year For Year For Year For Year Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, 1996 1995 1994 1993 1992 ------------ ------------- ------------ ------------ ------------- Operating Statement Data: Revenue $3,009,663 $3,061,279 $3,156,657 $3,106,835 $3,194,233 Net (loss) income (238,119) (307,810) (1,317,075) (1,225,028) (225,900) Balance Sheet Data: Total assets $22,086,775 $22,537,617 $23,005,298 $24,386,240 $26,125,939 Long term debt 16,473,060 16,425,967 16,334,737 16,217,540 16,071,155 Total liabilities 16,877,282 16,893,481 16,853,645 16,717,506 16,632,859 Statement of Partners' (Deficit) Capital: General Partner ($70,470) ($66,124) ($61,049) ($45,878) ($27,635) Class A Interests 5,279,963 5,710,260 6,212,702 7,714,612 9,520,715 Class B Interests 0 0 0 0 0 Total 5,209,493 5,644,136 6,151,653 7,668,734 9,493,080 Per 100 Class A Interests (a): Net (loss) income (b): First quarter ($3.71) ($3.29) ($4.79) ($4.06) ($3.17) Second quarter (3.56) (5.06) (5.88) (5.75) (5.45) Third quarter (3.35) 0.55 2.37 (5.26) (5.80) Fourth quarter (5.05) (12.47) (78.42) (65.59) (0.45) Distributions (c): First quarter $3.29 $3.29 $3.26 $9.44 $10.25 Second quarter 3.29 3.29 3.26 7.85 8.27 Third quarter 3.06 3.29 3.26 8.79 8.17 Fourth quarter 3.30 3.28 3.26 3.26 12.99 Return of Capital (d): First quarter $3.29 $3.29 $3.26 $9.44 $10.25 Second quarter 3.29 3.29 3.26 7.85 8.27 Third quarter 3.06 2.74 0.89 8.79 8.17 Fourth quarter 3.30 3.28 3.26 3.26 12.99
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. A portion of the total proceeds from the sale of Units was used to acquire three shopping centers, the Searcy Property, the Valencia Property, and the Green Valley Property, which carry mortgages of $2,632,500, $7,523,500 and $6,296,000, respectively. There were no principal repayments through December 31, 1996. New borrowings to purchase property amounted to approximately $14,478,000 and $481,000 during 1988 and 1987, respectively. There have been no additional borrowings to acquire property. The Partnership has an agreement with Milestone Property Management, Inc. ("MPMI"), an affiliate of the General Partner, to provide management services to the Partnership's 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. The Partnership does not have a set policy regarding discounts and rental concessions; however, late in 1994 the Partnership began to give rental concessions and discounts more frequently in order to increase occupancy. In 1996, most new leases included some form of rental concession or discount. The total amount of rental concessions and discounts given to tenants in 1996 was approximately $57,000. For the period ended March 15, 1997, the total amount of rental concessions and discounts given to tenants for new leases was approximately $21,000. 17 Changes in Competitive Conditions Searcy Property Over the past few years, the Searcy Property has been experiencing difficulties stemming from the relocation of the adjacent Wal-Mart (which is under separate ownership) in 1992. In 1994, the Partnership found it necessary to negotiate rent reductions on lease renewals (approximately 25% in some instances) in order to prevent vacancies. However, over the last two years, this trend has been reversing as tenant sales have increased in 1995 and 1996 as evidenced by the increase in percentage rent revenue. Tenant sales increased primarily due to the sale of Beall Ladymon to Specialty Retailer, Inc. (a current tenant) in 1995. The store was completely remodeled and remerchandised, which increased traffic and exposure for the other tenants. In addition, in 1996, the Partnership successfully negotiated an expansion with J.C. Penney, a current tenant, to increase their existing space by 12,902 square feet effective January 1, 1997. J.C. Penney expanded into 5,600 square feet of space previously occupied by smaller tenants in 1996. J.C. Penney has plans to build an expansion on the remaining 7,302 square feet of unoccupied land sometime in 1997. The General Partner believes the 1997 expansion will positively affect the center by increasing traffic for the other tenants. Also adding to the positive traffic flow at the center is the leasing of the former Wal-Mart store. Utilizing this space is a Books-A-Million, a discount book store with a coffee shop and card store. The General Partner believes that this bookstore will be an excellent draw to the center. Based on these factors, the General Partner believes that the Partnership may gradually increase rents as leases are renewed or originated. 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 1996 but it has not materially adversely affected the occupancy rate at the Valencia Property. On January 17, 1994, the Valencia Property sustained damage resulting from an earthquake that occurred in Southern California. Proceeds from the related insurance claim totaled $587,333 and the Partnership had incurred and paid repairs and expenses for this amount as of December 31, 1995. The General Partner believes that the repairs at the Valencia Property have had a positive impact on the center. The remodeling of the fascia canopy and center lighting have given the center a more contemporary look. 18 Green Valley Property Over the past few years, the Green Valley Property has been experiencing leasing problems in the face of an increasingly difficult and over built market. The strong competition combined with the limited trade area required capital improvements in 1994 and 1995 (such as canopies, painting, new signage and general appearance) in order to attract new tenants and maintain the existing tenants. During 1995, to maintain occupancy, the Partnership had to negotiate rent reductions on lease renewals and had to lower the average effective rental on new leases. All these factors have had a positive effect on the leasing activity at the mall in 1996. New tenants have come into the mall and the Partnership has been successful in negotiating several lease renewals. This has allowed the Partnership to maintain the occupancy rate at around 90% throughout the year. In 1993 and 1994, the General Partner determined, based on the current market conditions and projected future cash flows that the Green Valley Property had experienced a decline in market value that was other than temporary and recorded a $1,000,000 and $1,085,932, respectively, non-cash charge against earnings to write down the property. In 1996 and 1995, in accordance with SFAS No. 121, "Accounting for Impairment for Long-Lived Assets" (issued March 1995), the General Partner determined that an additional write down was not necessary based on the projected future cash flows of the Property. The General Partner continues to aggressively manage and promote the Partnership's properties in order to position them to capitalize on any opportunities which may arise in the future. Results of Operations 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) Searcy Property - A decrease in revenues at the Searcy Property of $32,053, or 7.26%, to $409,186 in 1996 from $441,239 in 1995. Revenues declined in 1996 primarily as a result of the drop in the occupancy rate to 92.9% in 1996 from 95.5% in 1995. The drop in occupancy was due to leaving certain spaces vacant in order to accommodate J.C. Penney's expansion. (2) Valencia Property - A decrease in revenues at the Valencia Property of $34,045, or 2.45%, to $1,354,547 in 1996 from $1,388,592 in 1995. Revenues declined in 1996 primarily as a result of a decrease in percentage rent revenue of approximately $36,000 due to decreased tenant sales. 19 (3) Green Valley Property - A decrease in revenues at the Green Valley Property of $7,458, or .62% to $1,196,679 in 1996 from $1,204,137 in 1995. Revenues declined in 1996 primarily due to the net effect of (1) an increase in percentage rent revenue of approximately $23,000 due to increased tenant sales, (2) a decrease in reimbursed revenue of approximately $31,000 due to decreased management and property expenses in 1996. (4) Other Income - A decrease in interest income of approximately $8,500 earned on the Partnership's money market account in 1996. Property operating expenses decreased $110,067, or 10.79%, to $909,978 in 1996 from $1,020,045 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 $6,028, or 6.54%, to $86,168 in 1996 from $92,196 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 $29,294, or 9.90%, to $266,470 in 1996 from $295,764 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 $69,473, or 11.08%, to $557,340 in 1996 from $626,813 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. Professional fees and other expenses decreased $37,272, or 22.37%, to $129,324 in 1996 from $166,596 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 Bond Mortgage from 9.50% in 1995 to 10.0% in 1996. 20 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. Comparison of Year Ended December 31, 1995 to 1994. Revenues of the Partnership decreased $95,378, or 3.0%, to $3,061,279 in 1995 from $3,156,657 in 1994 primarily due to the net effect of the following: (1) Searcy Property - an increase in revenues at the Searcy Property of $21,482, or 5.1%, to $441,239 in 1995 from $419,757 in 1994 due to the net effect of the following: a) a decrease in base rent of approximately $22,000 due to a special agreement reached with a tenant in late 1994 whereby the tenant is required to pay percentage rent in lieu of all rental obligations (this agreement was reached due to the relocation of the Wal-Mart in 1992), b) an increase in percentage rent of approximately $37,000 due to the special agreement stated in a) above and due to improved tenant sales in 1995 and c) an increase in tenant reimbursements of approximately $5,400 due to an increase in common area maintenance expenses in 1995, (2) Valencia Property - a decrease in revenues at the Valencia Property of $38,883, or 2.7%, to $1,388,592 in 1995 from $1,427,475 in 1994 due to the net effect of the following: a) an increase in base rent of approximately $16,000 due to an increase in the occupancy rate in 1995, b) an increase in percentage rent of approximately $10,000 due to improved tenant sales and increased occupancy at the Valencia Property and c) a decrease in tenant reimbursements of approximately $64,000 due to: (i) a decrease in real estate tax reimbursements of approximately $44,000 due to a refund of 1990 taxes received in 1994 and included in real estate tax reimbursements in 1994, (ii) a decrease in common area maintenance reimbursements of approximately $17,000 due to the fact that the Partnership decided not to bill certain items to the tenants in 1995 that were billed in 1994, and (iii) a decrease in insurance reimbursements of approximately $2,500 due to a lower premium in 1995, 21 (3) Green Valley Property - a decrease in revenues at the Green Valley Property of $87,517, or 6.8% to $1,204,137 in 1995 from $1,291,654 in 1994 due to the net effect of the following: a) an increase in base rent of approximately $5,000 due to an increase in the occupancy rate in 1995 , b) a decrease in percentage rent of approximately $28,000 due to decreased tenant sales, c) a decrease in tenant reimbursements of approximately $66,000 due to: (i) a decrease in real estate tax reimbursements of approximately $2,000 due to a decrease in real estate tax expense, (ii) a decrease in sales tax reimbursements of approximately $12,000 due to a decrease in the Arizona sales tax rate from 3 percent to 2 percent in 1995, (iii) a decrease in management fee income of approximately $8,600 due to decreased rental revenue, (iv) a decrease in common area maintenance of approximately $40,000 due to the fact that the Partnership decided not to bill certain items to the tenants in 1995 that were billed in 1994 and due to a decrease in common area maintenance expenses in 1995, and (v) a decrease in insurance reimbursements of approximately $3,000 due to a lower insurance premium in 1995, and (4) Other Income - a general increase in interest income of approximately $10,000 earned on the Partnership's money market account in 1995. Property operating expenses decreased $64,220, or 5.9%, to $1,020,145 in 1995 from $1,084,365 in 1994 primarily due to the net effect of the following: (1) Searcy Property - an increase in management and property expenses at the Searcy Property of $4,968, or 5.7%, to $92,196 in 1995 from $87,228 in 1994 due to the net effect of the following: a) a general increase in common area maintenance expense of approximately $8,600 due to an increase in repairs and maintenance as a result of property aging, and b) a decrease in insurance expense of approximately $3,800 due to a lower premium in 1995, (2) Valencia Property - an increase in management and property expenses at the Valencia Property of $1,279, or .43%, to $295,764 in 1995 from $294,485 in 1994 due to the net effect of the following: a) an increase in real estate tax expense of approximately $13,000, b) a decrease in insurance expense of approximately $17,000 due to a lower premium in 1995, and c) an increase in common area expenses of approximately $5,000, 22 (3) Green Valley Property - a decrease in management and property expenses at the Green Valley Property of $71,411, or 10.2%, to $626,813 in 1995 from $698,224 in 1994 due to the net effect of the following: a) a decrease in real estate tax expense of approximately $8,000, b) a decrease in sales tax expense of approximately $12,000 due to a decrease in the Arizona sales tax rate from 3 percent to 2 percent during 1995, c) a decrease in common area expenses of approximately $33,000 primarily in an effort by management to improve the net operating income of the property, and d) a decrease in insurance expense of approximately $18,000 due to a lower premium in 1995. Professional fees and other expenses increased $41,160, or 32.8% to $166,496 in 1995 from $125,336 in 1994 primarily due to the net effect of the following: (1) An increase in legal fees of approximately $55,000 due to the settlement in 1995 of a civil rights suit brought against it by a former employee, and (2) a decrease in promotions and advertising at all properties of approximately $13,000 in a cost savings effort by management in 1995. Interest expense increased $41,130, or 2.8%, to $1,525,238 in 1995 from $1,484,108 in 1994 primarily due to the scheduled increase in the interest rate on the Bond Mortgage from 9.25% in 1994 to 9.50% in 1995. Depreciation and amortization expense decreased $36,775, or 5.3%, to $657,210 in 1995 from $693,985 in 1994 primarily due to a decrease in the amortization of the Bond discount in 1995. The Bond discount is amortized using the effective interest method. Liquidity and Capital Resources The Bonds mature on November 30, 1997, at which time the outstanding principal balance of $16,452,000 will be due. The Partnership has not yet obtained any commitments for refinancing and has not entered into any agreements to sell any of the Properties. The partnership is currently seeking to refinance the Properties and Tristone Mortgage Company ("Tristone"), an affiliate of the General Partner, is assisting the Partnership, without compensation, in obtaining suitable refinancing. In the event that a refinancing sufficient to satisfy the Bonds appears unlikely, the General Partner will attempt to sell one or more of the Properties. The General Partner believes that the Partnership will be able to obtain adequate proceeds from a refinancing or sale of the Properties, or a combination of the two, to enable the Partnership to satisfy the Bonds on or prior to their maturity. Nevertheless, there can be no assurance the Partnership will be able to raise sufficient proceeds through a refinancing or sale prior to the Bond maturity date, or that the terms of any such refinancing or sale will be attractive to the Partnership. In the event that the Partnership is unable to raise adequate funds to satisfy the Bonds at maturity, there is a risk of foreclosure under the Bond Mortgages. 23 Assuming that the Partnership is able to raise sufficient funds to satisfy the Bonds on or before November 30, 1997, the General |Partner believes that the Partnership will have sufficient working capital to meet its operating requirements through the next 12 months. Nevertheless, because the cash revenues and expenses of the Partnership will depend on future facts and circumstances relating to the Properties, as well as market and other conditions beyond the control of the Partnership, the possibility exists that cash flow deficiencies may occur. There are currently no material commitments for capital expenditures. Net cash provided by operating activities of $400,756 for the year ended December 31, 1996 included a (i) net loss of $238,119, (ii) adjustment of $638,685 for depreciation and amortization, and (iii) a net change in operating assets and liabilities of $190. Net cash provided by operating activities of $284,611 for the year ended December 31, 1995 included a (i) net loss of $307,810, (ii) adjustments of $657,210 for depreciation and amortization and (iii) a net change in operating assets and liabilities of $64,789. Cash used in investing activities of $96,984 for the year ended December 31, 1996 included capital expenditures for building improvements at all three properties. Cash used in investing activities of $210,052 for the year ended December 31, 1995 included capital expenditures for building improvements at the Valencia Property and the Green Valley Property. Cash used in financing activities of $196,524 for the year ended December 31, 1996 included cash distributions to partners. Cash used in financing activities of $199,707 forthe year ended December 31, 1995 included cash distributions to partners. Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data, shown by index on page 34, begin on page 35 of this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 24 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) 50 President Inception (2) and Director Robert A. Mandor (3) 44 Vice President Inception and Director Harvey Shore 51 Vice President December 24, 1987 Joan LeVine 46 Treasurer/ Inception Secretary October 1, 1988 - ---------------------------------- (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. For at least the past five years, Mr. Mandor has served as general partner in 22 Concord-sponsored private real estate programs and 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. 25 HARVEY SHORE (f/k/a Harvey Schuldwach) joined Concord in 1983 and is the 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. JOAN LeVINE (f/k/a Joan Maisano), joined Concord in 1984 and is Vice President, Treasurer and Controller. She also serves as a Senior Vice President and Treasurer of Milestone Properties, Inc. Ms. LeVine is a certified public accountant and is a member of the American Institute of Certified Public Accounts. 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 (of which Leonard and Robert Mandor are the owners and are officers and directors) 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 1996. Item 11. Compensation. During 1996, the Partnership paid or accrued: (i) Pursuant to the Partnership Agreement, $1,965 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. (iii) $107,007 to MPMI for property management fees for the fiscal year ended December 31, 1996. Pursuant to the management agreement between the Partnership and 26 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, 1996. 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, 1997: 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 - ----------------------- * 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. 27 (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, 1997 is set forth in the following table: Amount and Nature of Percent Name of Beneficial Beneficial of (1) Beneficial Owner (2) Ownership (3) Class - ----------------- ------------ ---------- Leonard S. Mandor 332 83% Robert A. Mandor 68 17% 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. 28 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, 1996. (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 ("Post-Effective Amendment No. 3") to the Registrant's Registration Statement on Form S-11 which was declared effective on April 3, 1987 (the "Registration Statement"). 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. 29 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 ("1988 Form 10-K) 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. 30 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. 31 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. 32 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 24, 1997. 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 24, 1997 ----------------------------------------------- Leonard S. Mandor President (principal executive Officer) and Director of CM Plus Corporation and CMP Beneficial Corp. By: /s/ Robert A. Mandor March 24, 1997 ----------------------------------------------- Robert A. Mandor Vice President and Director of CM Plus Corporation and CMP Beneficial Corp. By: /s/ Joan LeVine March 24, 1997 ----------------------------------------------- Joan LeVine Secretary and Treasurer (principal financial and accounting officer) of CM Plus Corporation and CMP Beneficial Corp. 33 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE
Page No. -------- 1. Financial Statements: a. Concord Milestone Plus, L.P. 1. Independent Auditors' Report.................................................................. 35 2. Balance Sheets, December 31, 1996 and December 31, 1995....................................... 36 3. Statements of Revenues and Expenses for the Years Ended December 31, 1996, 1995 and 1994.............................................................. 37 4. Statements of Changes in Partners' Capital for the Years Ended December 31, 1996, 1995, 1994........................................................... 38 5. Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994...................................................................... 39 6. Notes to Financial Statements................................................................. 40 2. Financial Schedule: a. Real Estate and Accumulated Depreciation (Schedule III)........................................... 48 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.
34 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, 1996 and 1995 and the related statements of revenues and expenses, changes in partners' capital and cash flows for the years ended December 31, 1996, 1995, and 1994. Our audits also included the financial statement schedule of real estate and accumulated depreciation. These financial statements and 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 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 misstatements. 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 the Partnership at December 31, 1996 and 1995, and the results of its operations, changes in its partners' capital and its cash flows for the years ended December 31, 1996, 1995 and 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such 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, L.L.P. March 19, 1997 New York, New York 35 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) BALANCE SHEETS DECEMBER 31, 1996 and 1995
December 31, December 31, 1996 1995 ----------- ------------ Property, at cost (Notes 2,4 and 6) Building and improvements $15,359,462 $15,262,476 Less: accumulated depreciation 4,829,534 4,253,132 ----------- ----------- Building and improvements, net 10,529,928 11,009,344 Land 10,987,034 10,987,034 ---------- ---------- Total property 21,516,962 21,996,378 Cash and cash equivalents (Note 2) 326,120 218,872 Accounts receivable 200,975 168,344 Prepaid expenses 22,864 32,690 Due from affiliates, net (Note 5) 0 47,879 Other assets, net 19,854 73,454 ----------- ----------- Total assets $22,086,775 $22,537,617 ========== ========== Liabilities: Bonds payable, net (Notes 2 and 6) 16,473,060 16,425,967 Accrued interest 137,100 130,246 Accrued expenses and other liabilities (Note 7) 255,137 337,268 Accrued expenses payable to affiliates, net (Note 5) 11,985 0 ---------- ---------- Total liabilities 16,877,282 16,893,481 ---------- ---------- Commitments and Contingencies (Note 11) Partners' capital (Notes 1 and 3) General partner (70,470) (66,124) Limited partners: Class A Interests, 1,518,800 5,279,963 5,710,260 Class B Interests, 2,111,072 0 0 ----------- ------------ Total partners' capital 5,209,493 5,644,136 ----------- ------------ Total liabilities and partners' capital $22,086,775 $22,537,617 ========== ==========
See Accompanying Notes to Financial Statements 36 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF REVENUES AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
December 31, December 31, December 31, 1996 1995 1994 ----------- ----------- ----------- Revenues: Rent (Note 4) $2,583,614 $2,573,507 $2,556,754 Reimbursed expenses 405,443 455,546 581,112 Interest and other income 20,606 32,226 18,791 ---------- ---------- ---------- Total revenues 3,009,663 3,061,279 3,156,657 --------- --------- --------- Expenses: Interest expense (Note 6) 1,569,795 1,525,238 1,484,108 Depreciation and amortization (Note 2) 638,685 657,210 693,985 Management and property expenses 802,971 903,686 950,091 Administrative and management fees to related party (Note 5) 132,007 141,359 159,274 Professional fees and other expenses 104,324 141,596 100,342 Write-down of property (Notes 2 and 4) 0 0 1,085,932 ---------- ---------- ---------- Total expenses 3,247,782 3,369,089 4,473,732 ---------- ---------- ---------- Net loss $(238,119) $(307,810) $(1,317,075) ======== ======== ========== Loss per weighted average Limited partnership 100 Class A Interests outstanding $ (15.68) $ (20.27) $ (86.72) ========= ========= =========== Number of limited partnership 100 Class A Interests outstanding 15,188 15,188 15,188 ========= ========= ==========
See Accompanying Notes to Financial Statements 37 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
General Class A Class B Total Partner Interests Interests ---------- ------- ---------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1993 $7,668,734 $(45,878) $7,714,612 $0 Distributions (200,006) (2,000) (198,006) 0 Net Loss (1,317,075) (13,171) (1,303,904) 0 ---------- ------- ---------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1994 6,151,653 (61,049) 6,212,702 0 Distributions (199,707) (1,997) (197,710) 0 Net Loss (307,810) (3,078) (304,732) 0 ---------- -------- ---------- ------------- PARTNERS' CAPITAL (DEFICIT) December 31, 1995 5,644,136 (66,124) 5,710,260 0 Distributions (196,524) (1,965) (194,559) 0 Net Loss (238,119) (2,381) (235,738) 0 ---------- -------- ---------- ------------ PARTNERS' CAPITAL (DEFICIT) December 31, 1996 $5,209,493 $(70,470) $5,279,963 $ 0 ========= ======= ========= ============
See Accompanying Notes to Financial Statements 38 CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
December 31, December 31, December 31, 1996 1995 1994 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(238,119) $(307,810) $(1,317,075) Adjustments to reconcile net loss to net cash provided by operating activities: Write-down of property 0 0 1,085,932 Depreciation and amortization 638,685 657,210 693,985 Insurance proceeds - net 0 0 88,585 Change in operating assets and liabilities - net: (Increase) decrease in accounts receivable (32,631) 55,714 (59,221) Decrease in prepaid expenses 9,826 39,145 60,946 Decrease (increase) in due from affiliate, net 47,879 (47,879) 0 Decrease (increase) in other assets, net 38,408 (60,375) (1,804) Increase in accrued interest 6,854 3,428 3,428 Decrease in accrued expenses and other liabilities (82,131) (15,995) (95,302) Increase (decrease) in accrued expenses payable to affiliates 11,985 (38,827) 22,231 ---------- ---------- ---------- Net cash provided by operating activities 400,756 284,611 481,705 -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITY: Property improvements (96,984) (210,052) (74,959) ------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITY: Cash distributions to partners (196,524) (199,707) (200,006) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 107,248 (125,148) 206,740 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 218,872 344,020 137,280 --------- --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 326,120 $ 218,872 $ 344,020 ========= ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $1,562,941 $1,521,810 $1,480,680 ========= ========= =========
See Accompanying Notes to Financial Statements 39 CONCORD MILESTONE PLUS, L.P. NOTES TO FINANCIAL STATEMENTS December 31, 1996, 1995 and 1994 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 began operations on August 20, 1987. 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 (see Note 6) and 15,188 Equity Units issued. Each Bond Unit consisted of $1,000 principal amount of the Partnership's Escalating Rate Collateralized Mortgage Bonds due November 30, 1997 (the "Bonds") 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. 40 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. 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 method over the remaining term of the lease. For Federal income tax purposes, the Partnership depreciates a portion (30 percent attributable to tax-exempt investors) of property and improvements using the straight-line basis over 40 years; the balance is depreciated over 31.5 years. The Partnership's policy, which is in accordance with SFAS No. 121, "Accounting for Impairment for Long-Lived Assets" (issued March 1995), is to annually assess any impairment in value by making a comparison of the current and projected operating cash flows of each of its properties, on an undiscounted basis, to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to reflect an impairment in the value of the asset. The Partnership adopted SFAS No. 121 in 1995 and determined that an adjustment to the carrying amount of its long lived assets was not necessary in 1996 and 1995. Income Taxes The Partnership makes no provision for income taxes since 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 assets are $2,699,056 higher than the amounts reported for financial statement purposes at December 31, 1996, which is 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. There is no difference between the tax and book bases of the Partnership's liabilities. (see Note 4). 41 Discount on Bonds Payable The Partnership is amortizing the original issue discount on bonds payable using the effective interest method over the term of the Bonds. 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. Financial Statements Presentation Certain reclassifications were made to the accompanying 1994 and 1995 financial statements to conform with the 1996 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. 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. 42 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. During 1994, management determined, based on the current market conditions and projected future cash flows of the Green Valley Property, that the Property had experienced a decline in the market value that was other than temporary and recorded a $1,085,932 non-cash charge against earnings, to write-down the Property. Each Property was acquired using the proceeds from the sale of Equity Units and Bond Units. The Partnership issued Bonds to the purchasers of the Bond Units for approximately 65 percent of the respective Property's purchase price. Concurrently under the Indenture governing the Bonds, the Partnership granted United States Trust Company of New York, as trustee (the "Trustee") (or, in the case of a deed of trust, to a deed of trust for the benefit of the Trustee), a note together with a related first mortgage or deed of trust on each Property (each, a "Bond Mortgage") in the principal amount up to 65% of the Partnership's purchase price on that Property, for the benefit of the holders of the Bonds (See Note 6). Additionally, as part of the acquisitions of the Properties, the underlying tenant leases were assigned and assumed by the Partnership. Minimum base rental income under non-cancelable tenant lease agreements, having lease terms expiring from one to nine years, at December 31, 1996 are as follows: Year Ended December Amount - ---------- ------ 1997 $2,475,503 1998 2,105,756 1999 1,637,280 2000 1,297,406 2001 1,092,707 Thereafter 3,362,740 ---------- Total $11,971,392 ========== 43 The above table does not include contingent rental amounts. The total contingent rentals received in 1996, 1995, and 1994 was $188,716, $185,117, and $166,917, 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 1996 whose rents exceed 10% of the Partnership's total revenues. 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. J.C. Penney's annual minimum rent is $206,500 ($5.21 per square foot) and the lease provides for annual percentage rent equal to 1.5% of gross receipts in excess of $11,820,004. In addition, J.C. Penney is required to reimburse the Partnership for real estate taxes, insurance and common area maintenance expenses. Lucky Stores, Inc., a full service grocery store, occupies 31,842 square feet or 30.8% of the gross leasable area of the Valencia Property. Lucky Stores annual minimum rent is $300,000 per year ($9.42 per square foot) and the lease provides for percentage rent equal to 1.25% of gross receipts in excess of $38,000,000, less amounts paid by Lucky Stores for property taxes and insurance premiums. Lucky Stores is required to reimburse the Partnership for its pro rata share of real estate taxes, insurance and common area maintenance expenses. 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, 1996, 1995 and 1994 were $107,007, $116,359 and $134,274, respectively. Management Fees are payable to Milestone Property Management, Inc., a Delaware corporation and affiliate of the General Partner ("MPMI"). The Partnership also pays fees to MPMI for administrative services provided to the Partnership. These fees amounted to $25,000 each for the years ended December 31, 1996, 1995 and 1994. In 1996, the Partnership accrued $12,346 payable to Milestone Properties ("MPI"), an affiliate of the General Partner, as reimbursement for property insurance expense for 1997. In 1995, the Partnership accrued a $42,678 receivable from Concord Assets Group, Inc. ("CAG"), an affiliate of the General Partner, due to an overpayment made to CAG for insurance expense. 44 In 1994 the Partnership accrued $20,953, payable to CAG, as reimbursement for the actual cost of employee health insurance for the years ended December 31, 1992 and 1993. 6. Bonds Payable Bonds payable consists of Bonds outstanding in the principal amount of $16,452,000. The Bonds bear interest, payable semi-annually, from the date of issuance at annual rates increasing from 8.15 percent to 10 percent (10 percent, 9.50 percent and 9.25 percent at December 31, 1996, 1995 and 1994, respectively) and mature on November 30, 1997. The Bonds have an effective interest rate of 9.66 percent. The Bonds are cross collateralized by all three properties. Pursuant to the Indenture, the Bonds are subject to early redemption (at 101 percent of the principal amount through May 31, 1997, and thereafter without any premium) under certain circumstances. The holders of the Bonds have a first lien on the Properties through the Bond Mortgages held by the Trustee (see Note 4). The Bonds mature on November 30, 1997, at which time the outstanding principal balance of $16,452,000 will be due. The Partnership has not yet obtained any commitments for a refinancing and has not entered into any agreements to sell any of the properties. The Partnership is currently seeking to refinance the Properties and Tristone Mortgage Company ("Tristone"), an affiliate of the General Partner, is assisting the Partnership without compensation, in obtaining suitable refinancing. In the event that a refinancing sufficient to satisfy the Bonds appears unlikely, the General Partner will attempt to sell one or more of the Properties. The General Partner believes that the Partnership will be able to obtain adequate proceeds from a refinancing or sale of the Properties, or a combination of the two, to enable the Partnership to satisfy the Bonds on or prior to their maturity. Nevertheless, there can be no assurance that the Partnership will be able to raise sufficient proceeds through a refinancing or sale prior to the Bond maturity date, or that the terms of any such refinancing or sale will be attractive to the partnership. In the event that the Partnership is unable to raise adequate funds to satisfy the Bonds at maturity, there is a risk of foreclosure under the Bond Mortgages. 45 7. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities are comprised of the following:
1996 1995 -------- --------- Accounts payable - trade $10,134 $90,769 Accrued real estate tax 72,236 71,344 Accrued leasing fees 0 20,000 Deposits - tenant security 77,582 79,196 Deferred income 78,666 71,348 Other 16,519 4,611 -------- -------- Total $255,137 $337,268 ======== ========
8. Fair Value of Financial Instruments The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate amounts reflected in the balance sheet based on their short term nature. The carrying value and the fair value of the bonds payable was not considered to be significantly different due to the maturity date of the Bonds. The fair value estimates are based on information available as of December 31, 1996. Although management is not aware of any factors that would significantly affect the estimate of fair value amounts, a comprehensive reevaluation has not been performed for purposes of this financial statement disclosure and current estimate of fair value may differ significantly from these amounts reflected in the balance sheet. 9. Commitments and Contingencies Under various Federal, State and local laws and ordinances and regulations, an owner, operator or developer of real property may be held liable for the costs of removal or remediation of certain hazardous or toxic substances (including asbestos containing materials) on or in such property. Such laws, ordinances and regulations often impose liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The cost of any required remediation of any property and the owner's, operator's or developer's liability therefor is generally not limited under such laws, ordinances and regulations, and could exceed the value of the property and/or the aggregate assets of the owner, operator or developer. While none of the Properties is presently subject to any environmental actions, the presence of such substances, or the failure to properly remediate such substances, may adversely affect the ability to sell or rent the Properties or to borrow using any of the Properties as collateral. 46 10. Subsequent Event On February 15, 1997 the Partnership made a cash distribution of $3.42 per 100 Class A Interests which represented distributable cash for the quarter ended December 31, 1996. 47 CONCORD MILESTONE PLUS, L.P. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
Costs Capitalized Subsequent Gross Amount at Initial Cost to Partnership 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 $ 2,632,500 430,000 3,620,000 371,194 430,000 3,991,194 4,421,194 Searcy, AR Old Orchard Shopping Center 7,523,500 6,500,000 5,075,000 1,287,632 6,500,000 6,362,632 12,862,632 Valencia, CA Green Valley Mall 6,296,000 5,100,000 4,587,000 1,461,602 4,057,034 5,005,636 9,062,670 ------------ --------- ---------- --------- ---------- ---------- ---------- Green Valley, AZ $ 16,452,000 12,030,000 13,282,000 3,120,428 10,987,034 15,359,462 26,346,496 ========== ========== ========== ========= ========== ========== ========== Accumulated Date of Date Depreciation Description and Location Depreciation(B) Construction Acquired Life - --------------------------- --------------- ------------ -------- -------------- Town & Country Plaza 1,193,446 1985 08/20/87 31.5 years Searcy, AR Old Orchard Shopping Center 1,826,434 1965 01/22/88 31.5 years Valencia, CA Green Valley Mall 1,809,654 1960 04/15/88 31.5 years ---------- Green Valley, AZ 4,829,534 =========
1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (A) Reconciliation of investment properties owned: Beginning balance $ 26,249,510 26,039,458 27,050,431 27,787,658 27,761,885 Property acquisitions/improvements 96,986 210,052 74,959 262,773 25,773 Write-down of property 0 0 (1,085,932) (1,000,000) 0 ---------- ---------- ---------- ---------- ---------- Balance at end of period $ 26,346,496 26,249,510 26,039,458 27,050,431 27,787,658 ============ ============ ============ ========== ========== (B) Reconciliation of accumulated depreciation: Beginning balance $ 4,253,132 3,695,110 3,122,666 2,570,521 2,020,654 Depreciation expense 576,402 558,022 572,444 552,145 549,867 ------------ ------------ ---------- ---------- ---------- Balance at end of period $ 4,829,534 4,253,132 3,695,110 3,122,666 2,570,521 ============ ============ ========== ========== ==========
48 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 326,120 0 200,975 0 0 0 26,346,496 4,829,534 22,086,775 0 16,473,060 0 0 0 5,209,493 22,086,775 0 3,009,663 0 1,677,987 0 0 1,569,795 (238,119) 0 0 0 0 0 (238,119) (15.68) 0 Loss per weighted average limited Partnership 100 Class A interests outstanding
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