Back to GetFilings.com
Exhibit Index p.23
Exhibits begin p. (n/a)
Total pages: 43
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, 1998
Commission file number 000-16757
CONCORD MILESTONE PLUS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1494615
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
150 EAST PALMETTO PARK ROAD, 4TH FLOOR
BOCA RATON, FLORIDA 33432
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 394-9260
---------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Class A Interests ("Class A Interests"), each such interest representing an
assignment of one Class A Limited Partnership Interest held by CMP Beneficial
Corp., a Delaware corporation (the "Assignor"), under the Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of Concord
Milestone Plus, L.P.
(Title of Class)
Class B Interests ("Class B Interests"), each such interest representing an
assignment of one Class B Limited
Partnership Interest held by the Assignor under the Partnership Agreement.
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The Class A and Class B Interests are not traded on any established public
trading market.
DOCUMENTS INCORPORATED BY REFERENCE NONE
PART I
This Form 10-K and any documents incorporated herein by
reference, if any, contain forward-looking statements that have been made within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements are based on current expectations, estimates and
projections about the Partnership's (as defined below) industry, management
beliefs, and certain assumptions made by the Partnership's management and
involve known and unknown risks, uncertainties and other factors. Such factors
include, among other things, the following: general economic and business
conditions, which will, among other things, affect the demand for retail space
or retail goods, availability and creditworthiness of prospective tenants, lease
rents and the terms and availability of financing; risks of real estate
development and acquisition; governmental actions and initiatives; and
environmental and safety requirements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict; therefore, actual results may differ
materially from those expressed or forecasted in any such forward-looking
statements. Unless required by law, the Partnership undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Item 1. Business.
(a) General Development of Business.
Concord Milestone Plus, L.P. (the "Partnership") was organized
as a Delaware limited partnership on December 12, 1986 with CM Plus Corporation,
a Delaware corporation (the "General Partner"), as its general partner. The
General Partner is wholly owned by Concord Assets Group, Inc. ("Concord"). The
Partnership is engaged in the business of owning and operating three shopping
centers. CMP Beneficial Corp., a wholly owned subsidiary of Concord, was
organized under Delaware law in December 1986 for the sole purpose of holding
limited partnership interests in the Partnership for the benefit of holders of
the Class A Interests and Class B Interests and has engaged in no business
activities other than fulfilling its obligations under the Amended and Restated
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement").
(b) Industry Segment Information.
The Partnership has only one industry segment, commercial real
estate. See Item 6, "Selected Financial Data", of this report for a summary of
the Partnership's operations for the last five 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) $438,026, $1,347,971
and $1,296,987, respectively, for the fiscal year ended December 31, 1998; (ii)
$457,514, $1,303,348 and $1,262,050, respectively, for the fiscal year ended
December 31, 1997; and (iii) $409,186, $1,354,547 and $1,196,679, respectively,
for the fiscal year ended December 31, 1996. There are no affiliated tenants.
1
See Item 2, "Properties", of this Report for additional
information as to the Properties, including a description of the competitive
conditions affecting them, and for certain environmental issues previously
affecting the Valencia Property.
Employees
The Partnership employs six people at the Green Valley Property
who provide general maintenance and security services. Milestone Property
Management, Inc., an affiliate of the General Partner, provides all management
services for the Partnership and is reimbursed for its cost of administrative
services provided to the Partnership, including the pro rata cost of personnel.
Aside from its officers, the General Partner has no employees.
See Item 11, "Compensation", of this Report.
Impact of Year 2000
Year 2000 compliance programs and information systems
modifications were initiated by the Partnership's affiliated management company,
Milestone Property Management, Inc. ("MPMI") in early 1998 in an attempt to
ensure that these systems and key processes will remain functional. This
objective is expected to be achieved either by modifying present systems using
existing internal and external programming resources or by installing new system
hardware and software, and by monitoring supplier, customer and other third
party readiness. Such modifications are expected to be completed by MPMI by
September 1999. There have been no costs charged to the Partnership for the Year
2000 program being completed by MPMI. The Partnership does not anticipate that
the costs of any required modifications by MPMI to its information technology or
embedded technology systems will have a material adverse effect on its financial
position, results of operations or liquidity, although there can be no
assurances that this will be the case.
MPMI has contacted many of the Partnership's major customers,
suppliers and vendors to inquire about their Year 2000 compliance programs. MPMI
has not received responses from all those contacted, but those who have
responded do not indicate any problems at this time. In the event that MPMI or
material third parties fail to complete their Year 2000 compliance programs
successfully and on time, the Partnership's ability to operate its business,
service tenants, bill or collect its revenue in a timely manner could be
adversely affected. Although there can be no assurance that the conversion of
the Partnership's systems will be successful or that the Partnership's key
third-party relationships will have successful conversion programs, the General
Partner does not expect that any such failure would have a material adverse
effect on the financial position, results of operations or liquidity of the
Partnership, although there can be no assurances that this will be the case. The
Partnership has day-to-day operational contingency plans, and the General
Partner is in the process of updating these plans for possible Year 2000
specific operational requirements.
Item 2. Properties.
The Properties consist of three shopping centers: the Searcy Property, the
Valencia Property and the Green Valley Property. For the purposes of this
section, the following is a glossary of terms:
a. Occupancy rate - The rate of the actual leased area (square
footage) to gross leaseable area (square footage) as of the
end of the fiscal year (December 31).
b. Leasable area - The area (square footage) for which rent is
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.
2
d. Total rent - Minimum annual base rent plus percentage rental
revenue.
Refinancing of Bonds Payable
As of September 30, 1997, the Partnership, with the assistance
of Tri-Stone Mortgage Company, an affiliate of the General Partner, closed three
new fixed rate first mortgage loans (the "Mortgage Loans") from Westco Real
Estate Finance Corp. (the "Lender") in the amounts of $2,865,000, $8,445,000 and
$5,400,000, respectively.
Tri-Stone Mortgage Company did not receive any compensation for its services.
All three Mortgage Loans are secured by first mortgages on all three of the
Properties. Prior to September 30, 1997, the Properties were encumbered by
mortgages granted by the Partnership to United States Trust Company of New York,
as trustee for the benefit of the holders of the Partnership's Escalating Rate
Collateralized Mortgage Bonds due November 30, 1997 (the "Bonds"). The
Partnership used the proceeds of the Mortgage Loans and available cash to redeem
all of the outstanding Bonds.
The Mortgage Loans and related terms at December 31, 1998 for the
Properties are summarized as follows:
Principal Monthly
Balance at Payments of
December Interest Principal
Property/Location 31, 1998 Rate % and Interest
- ----------------- -------------- ------ ------------
Searcy, AR $2,836,228 8.125 $21,640
Valencia, CA 8,329,540 8.125 65,881
Green Valley, AZ 5,347,286 8.250 41,252
--------- ------
Total $16,513,054 $128,773
========== =======
The Mortgage Loans require payments of principal and interest
through and including September 1, 2007. On October 1, 2007, the balance of
principal and interest is estimated to be $2,505,981, $7,003,227, and $4,738,096
for the Searcy, Valencia and Green Valley Properties, respectively, and will be
due and payable. Subsequent to October 31, 2003 and prior to May 31, 2007, each
Mortgage Loan may be prepaid in whole but not in part on any payment date with a
prepayment penalty equal to the greater of (i) 1% of the outstanding principal
balance at such time, or (ii) the excess, if any, of the present value of the
remaining scheduled principal and interest payments (including any balloon
payment), discounted at the Discount Rate (as defined below), over the amount of
principal being prepaid. The Mortgage Loans may be prepaid without penalty on
any payment date after May 31, 2007. The Discount Rate is a rate determined as
of the week ending prior to the prepayment date and is based on the published
rates of U.S. Government securities having maturities approximating the maturity
date of the Mortgage Loans. The Mortgage Loans are each secured by first
mortgages on all three of the Partnership's Properties and a default under any
of the Mortgage Loans constitutes a default on all of the Mortgage Loans. Each
mortgage may be released at the Partnership's option after the corresponding
Mortgage Loan is fully paid provided that no event of default exists under any
of the Mortgage Loans, the mortgagee has not given the Partnership notice of any
event which, with the passage of time, would constitute an event of default, and
certain other conditions are satisfied.
In connection with the Green Valley Mortgage Loan, the
Partnership has deposited $150,000 into an escrow account (the "Green Valley
Escrow Account") with the Lender. The funds held in the Green Valley Escrow
Account may be released upon the execution of a new lease or renewal lease, with
a termination date of July 31, 2004 or later, by Abco, a tenant of the Green
Valley Property and the satisfaction of certain other conditions.
3
In connection with the Valencia Mortgage Loan, the Partnership
deposited $45,000 into an escrow account (the "Valencia Escrow Account") with
the Lender. Such amount was released to the Partnership during February 1998
after a certain environmental condition existing at the Property was shown to
require no further action to the satisfaction of the State of California
Environmental Protection Agency Department of Toxic Substances Control
("DOTSC"). The cost of the various tests, studies, legal representation and
negotiations with the DOTSC relating to the resolution of this environmental
problem was approximately $71,000, all of which was accrued and expensed during
1997.
CM Plus Corporation, the general partner of the Partnership,
guarantees certain limited recourse obligations under the Mortgage Loans.
The Searcy Property
Searcy, Arkansas
Location. The Searcy Property is situated on an irregularly
shaped parcel of approximately 10.78 acres, which has frontages on Race Avenue
and Frontage Road 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 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.
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 which is now sub-divided into four
retail stores) and five adjacent out parcels totaling 3.86 acres.
Description. The Searcy Property, which was completed in July
1985, is a one-story masonry and steel building whose exterior is painted
concrete block with masonry, brick and glass fronts. The Searcy Property
contains 78,436 gross leasable square feet divided into nine units. The entire
Town and Country Plaza has parking for 970 cars of which approximately 570
parking spaces are allocated to the Searcy Property.
Taxes. The Partnership's adjusted federal income tax basis for
the Searcy Property is approximately $3,157,000 of which $430,000 is allocated
to land and $2,727,000 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.
Competition. There are three shopping centers within two miles
to the west of the Town and Country Plaza on Race Avenue. The first shopping
center consists of a Goody's department store and a vacant Heilig- Meyers
furniture store. The second shopping center consists of a Fred's discount store,
Warehouse Foods, a Sears catalog store and two satellite stores. The third
center consists of a Kroger food store and a Revco drugstore. Directly across
the highway from the Searcy Property is a Wal-Mart superstore. The Wal-Mart
which relocated from the Town and Country Plaza in 1992, has since vacated and
subdivided its superstore. Books-A-Million, Stage, Hibetts Sports and TSC
Tractor Supply currently occupy this space.
Operating and Tenant Information. As of March 1, 1999, there
were nine tenants including, two anchor tenants, at the Searcy Property. The two
anchor tenants are a J.C. Penney department store and a Stage apparel store
which has vacated the premises. Stage remains responsible under the terms of the
lease through July, 2001. The other seven tenants provide a variety of goods and
services. The occupancy rate was 95.5%, 95.5% and 92.9% in 1998, 1997 and 1996,
respectively.
4
The tables on pages 8 and 9 further describe and summarize
certain operating data and tenant information for the Property.
Old Orchard Shopping Center
Valencia, California
Location. The Valencia Property is situated on an approximately
9.94-acre parcel that has frontages on Lyons Avenue and Orchard Village Road in
the town of Valencia, California. Valencia is located in the Santa Clarita
Valley in Los Angeles County, approximately 35 miles north of Los Angeles. Old
Orchard Shopping Center is located on the northwest corner of Lyons Avenue and
Orchard Village Road in a heavily developed commercial area. Lyons Avenue is
improved with shopping centers, fast food restaurants, housing developments and
free standing convenience stores. The surrounding area is densely populated with
apartments, condominiums and single family residences.
In 1996, a 78,000 square foot shopping center opened on Old
Orchard Street across from the Valencia Property. This center includes a 46,000
square foot Ralph's Supermarket, a 16,000 square foot drugstore and 16,000
square feet of smaller stores. This shopping center has had an adverse impact on
tenant sales but it has not materially adversely affected the occupancy rate at
the Valencia Property.
Description of the Property. Old Orchard Shopping center is an
eight building, one-story masonry and steel shopping center complex that was
originally constructed in 1965. During 1985 and 1986 the shopping center was
renovated and enlarged to 103,413 square feet of gross leasable area. The
exterior construction is pre-cast concrete, fluted block and decorative tile.
The shopping center has over 500 parking spaces.
Taxes. The Partnership's adjusted federal income tax basis for
the Valencia Property is $10,946,000 of which $6,500,000 is allocated to land
and $4,446,000 is allocated to the buildings and improvements. For financial
statement purposes the Partnership depreciates the cost of the buildings over
31.5 years and improvements over 5 to 10 years using the straight-line method of
cost recovery. In the opinion of the General Partner, the Valencia Property is
adequately insured.
Competition. Within two miles of the Valencia Property there are
competing shopping facilities at Newhall Plaza with a Von's Food Store and 10
satellite stores, Granary Square with a Hughes Food Market, Long's Drugstore and
26 satellite stores, a Safeway Supermarket complimented by 14 satellite stores
and the Alpha Beta Center with Alpha Beta Food stores and 16 satellite stores.
In 1992, a strip center anchored by a Ralph's Foods opened within a mile of the
Valencia Property.
Operating and Tenant Information. As of March 1, 1999, there
were 21 tenants, including two anchor tenants, at the Valencia Property. The two
anchor tenants are a Lucky Store grocery and a Rite Aid pharmacy. The other 19
tenants provide a variety of goods and services. The occupancy rate was 96.6%,
93.9% and 97.1% in 1998, 1997 and 1996, respectively.
The tables on pages 8 and 9 further describe and summarize
certain operating data and tenant information for the Property.
5
Green Valley Mall
Green Valley, Arizona
Location. The Green Valley Property, a mall complex known as the
Green Valley Mall, is situated on an approximately 21.31-acre parcel in the Town
of Green Valley, Arizona. It has frontages on Interstate 19 and Esperenza
Boulevard, with additional access from La Canada Road. Green Valley is a planned
adult community located in Pima County in the Santa Cruz River Valley
approximately 25 miles south of Tucson. Green Valley has two hotels and a number
of office buildings, several community centers and six 18 hole golf courses. The
Green Valley Property is located at intersection 65 of Interstate 19 and
Esperenza Boulevard and serves Pima County, as well as Santa Cruz County to the
south.
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 194,750 gross
leasable square feet (adjusted by 1,800 square feet representing the mall
office). The exterior construction is a combination of adobe block, split face
block and painted concrete block. The mall has approximately 975 parking spaces.
Taxes. The Partnership's adjusted federal income tax basis for
the Green Valley Property is $9,391,000, of which $5,100,000 is allocated to
land and $4,291,000 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.
Other Information. In 1993 and 1994, the General Partner
determined, based on the current market conditions and projected future cash
flows that the Partnership's investment in the Green Valley Property was
impaired and recorded a $1,000,000 and $1,085,932, non-cash charge against
earnings to write-down the property, respectively. Since 1994, the General
Partner has determined that an additional write-down was not necessary based on
the projected future cash flows of the Property.
Competition. The Green Valley Property competes directly with
the 142,500 square foot Continental Shopping Plaza located at Continental Road
and Interstate 19 approximately one mile south of the Green Valley Property. The
Continental Shopping Plaza is anchored by a Safeway Supermarket. There is a
shopping center located 3 miles to the north of the Green Valley Property in the
newly incorporated town of Sahuarita. This shopping center includes a 65,000
square foot Wal-Mart Department Store and a 42,000 square foot Bashas' Food
Store as anchor tenants plus 25,000 square feet of space for local tenants.
Another center, which is located to the north of the Green Valley Property, was
anchored by a 45,000 square foot Kmart and 10,000 square feet of space for local
tenants, and closed during 1995. A quadruplex theater is planned to be built
adjacent to Kmart with a projected opening of April 2000. Since the
incorporation of this town, several large areas have been rezoned for commercial
development. One area located 2.5 miles north of Green Valley, called "The
Quorum", a small group of shops, was actively developed within the last 18
months.
Operating and Tenant Information. As of March 1, 1999, there
were 71 tenants, including three anchor tenants, at the Green Valley Property.
The three anchor tenants include an Abco grocery, a Beall's outlet store and an
Ace Hardware store. The other 68 tenants provide a variety of goods and
services. The occupancy rate was 86.5%, 89.3% and 90.2% in 1998, 1997 and 1996,
respectively.
6
During February 1999, the Partnership received notice from Abco,
the principal anchor tenant at the Green Valley Property, that Abco would not be
renewing its lease at the expiration of its current term on July 31, 1999. No
replacement tenant has yet been identified, however, the Partnership is in the
process of retaining a large regional real estate brokerage firm to help market
the space. Many of the tenants at the Green Valley Property have short term
leases. It is not possible to determine the long-term effects of the failure of
Abco to renew its lease. In the short term, however, the vacancy of the Abco
space could have a material adverse effect on the results of operations at the
Green Valley Property by impairing the Partnership's ability to retain other
tenants or to renew their leases on favorable terms, by reducing traffic at the
Property and negatively affecting percentage rents. In addition, the Partnership
will incur expenses in releasing the Abco space and cannot predict how soon such
space will be leased and the terms of such new lease. Currently, approximately
$150,000 of the Partnership's working capital is being held in escrow in
connection with the refinancing by the Lender pending the resolution of the
forthcoming Abco vacancy.
The tables on pages 8 and 9 further describe and summarize
certain operating data and tenant information for the Property.
7
Table 1. Summary of Operating and Tenant Information
Tenant Occupying Square Occupancy Base Rent Lease Annual
Location Property > 10%of GLA/Nature Feet Rate Per Sq.Ft. Percentage Rent & Other Expiration R/E Taxes
of Business
- ----------- -------------- ------------------ ------- -------- ------ ------------------------ ---------- --------
Searcy, AR Town & Country 78,436 95.46% $5.28 (1) $25,697
Plaza
J.C. Penney 39,396 $5.22 1.5% of Sales in excess 8/31/2007
Department Store of $11,820,004. Pro-rata
reimbursementfro real estate
taxes over the base year amount.
Common area maintenance
reimbursement at fixed intervals
over the lease term.
Stage 15,600 $5.25 Operation discontinued 7/30/2001
Clothing and Apparel 4/30/98 (2)
Valencia, Old Orchard Shopping Ctr. 103,413 96.59% $11.79 (1) $129,117
CA
Lucky Stores 31,842 $9.42 1.25% of Sales in excess 6/30/2006
Full Service Grocer of $38,000,000 less amounts
paid for property taxes,
assessments and insurance
premiums. (4)
Rite Aid 18,125 $2.48 Rent is payable in an amount 5/31/2005
Pharmacy equal to 3% of the tenant's
gross sales for the previous month,
but not less than $45,000 annually.
Pays no reimbursed expenses.
Green Green Valley Mall 194,750 86.53% $6.09 (1) $192,695
Valley,
AZ Abco 38,983 $1.74 1% of Sales in excess 7/31/1999
Full Service Grocer of $4,000,000. Pro-rata (3)
share reimbursement fro real
estate taxes, common area
maintenance and liability
insurance
(1) Represents the average rental rate including base and percentage rent per
square foot of leased space taking rental concessions and discounts into
consideration.
(2) Stage discontinued its operations effective April 30, 1998. Stage will still
be responsible for the basic minimum rental and the average of the amounts
actually received each lease year under the provisions for contingent additional
rentals including real estate taxes, common area maintenance and insurance.
(3)Abco has given notice that they will let their lease at the Green Valley Mall
expire on July 31, 1999.
(4) Pro-rata reimbursement for real estate taxes, common area maintenance and
insurance.
8
Table 1. Summary of Lease Expirations
Year of Number of Gross Leasable Annual % of Total Annual
Location Property Lease Expiration Leases Expiring Area Expiring Minimum Rent Minimum Rent
- ------------ ----------------------- ---------------- ------====---- --------------- ------------- ------------
Searcy, AR Town & Country Plaza 1999 3 6,360 $39,720 9.9%
2000 1 5,973 (1) -
2001 3 23,147 $154,300 38.6%
2007 1 39,396 $205,600 51.5%
Vacancies 1 3,560 - -
- ------ ---------- -------
Total 9 78,436 $399,620 100.0%
===== = ====== ======= ======
Valencia, CA Old Orchard Shopping Center 1999 3 6,700 $118,409 10.6%
2000 3 11,880 $112,846 10.2%
2002 5 9,867 $189,400 17.0%
2003 5 11,272 $186,723 16.8%
2005 3 27,429 $170,910 15.3%
2006 1 31,842 $300,000 26.9%
M-T-M 1 900 $36,072 3.2%
Vacancies 3 3,523 - -
--- -------- ---------- -------
Total 24 103,413 $1,114,360 100.0%
===== == ======= ========= ======
Green Valley, Green Valley Mall 1999 20 53,472 $172,089 17.50%
AZ 2000 17 36,870 $306,487 31.17%
2001 13 30,065 $212,358 21.60%
2002 8 15,617 $154,357 15.70%
2003 7 14,335 $97,496 9.92%
2004 2 2,400 $20,320 2.07%
2008 1 11,425 $9,600 .98%
M-T-M 3 1,034 $10,455 1.06%
Vacancies 11 29,532 - -
-- -------- ---------- -------
Total 82 194,750 $983,162 100.0%
===== == ======= ======= ======
(1) Tenant currently pays 4% of gross sales in lieu of all rental obligations.
9
Commitments and Contingencies
Investments in real property create a potential for
environmental liability on the part of the owner, operator or developer of such
real property. If hazardous substances are discovered on or emanating from any
of the Properties, the Partnership and/or others may be held strictly liable for
all costs and liabilities relating to the clean-up of such hazardous substances.
The Partnership is not aware of any existing environmental conditions that will
have a material effect on the financial statements.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
10
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 1, 1999, 1,518,800 Class A Interests and
2,111,072 Class B Interests were held by approximately 1,245 and 1,319 holders,
respectively.
(c) The Partnership is a limited partnership and, accordingly,
does not pay dividends. It does, however, make quarterly distributions of cash
to its partners depending upon distributable cash flow and certain other
conditions. The table on page 12 lists cash distributions.
Pursuant to the Partnership Agreement, distributable cash flow
(as defined), if any, 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 in the Partnership Agreement) (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 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.
11
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, 1998 (3) $0 $0
June 30, 1998 (3) $0 $0
September 30, 1998 (3) $0 $0
December 31, 1998 (4) $3.29 $3.29
March 31, 1997 $3.29 $3.29
June 30, 1997 (3) $0 $0
September 30, 1997 (3) $0 $0
December 31, 1997 (3) $0 $0
- ---------------------------------
(1) The amounts listed represent distributions of distributable
cash flow.
(2) That portion of the total "Amount of Distribution per 100
Class A Interests" which is a return of capital. Return of
capital is defined as distributions in excess of cumulative
net income.
(3) The Partnership suspended making distributions subsequent to
the first quarter of 1997 due to the cost of addressing an
environmental issue identified at the Valencia Property, and
payment of certain expenses relative to the refinancing.
(4) The Partnership resumed making distributions after
determining that unrestricted working capital levels were
adequate. The distribution was made during February 1999.
There have been no distributions with respect to the 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.
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.
12
Item 6. Selected Financial Data.
The following page sets forth a summary of the selected
financial information for the Partnership. The information below should be read
in conjunction with the audited financial statements.
Notes to Selected Financial Data Schedule:
(a) All income allocated with respect to Equity Units was
allocated with respect to the 100 Class A Interests in each such unit. No income
was allocated with respect to Class B Interests.
(b) The net (loss) income per 100 Class A Interests has been
calculated by dividing the net (loss) income for the period by the average
number of Class A Interests outstanding for the period and multiplying that
quotient by 100.
(c) Distributions have been allocated based upon the dates that
Class A Interests were issued. Distributions with respect to each fiscal quarter
of the Partnership are paid 60 days following the end of that fiscal quarter. No
distributions were paid with respect to Class B Interests.
(d) Return of Capital is defined as distributions in excess of
cumulative net income.
(e) The net loss for 1994 included a write-down of $1,085,932 for
impairment of the Green Valley Property.
13
CONCORD MILESTONE PLUS, L.P.
(A Limited Partnership)
Selected Financial Data
For Year Ended For Year Ended For Year Ended For Year Ended For Year Ended
December 31, 1998 December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
Operating Statement Data:
Revenue $3,103,638 $3,046,796 $3,009,663 $3,061,279 $3,156,657
Net income (loss) 31,270 (271,920) (238,119) (307,810) (1,317,075)(e)
Balance Sheet Data:
Total assets 21,841,605 22,051,864 22,086,775 22,537,617 23,005,298
Long term debt 16,513,045 16,683,574 16,473,060 16,425,967 16,334,737
Total liabilities 16,974,551 17,216,080 16,877,282 16,893,481 16,853,645
Statement of Partners'
(Deficit) Capital:
General Partner (73,894) (74,207) (70,470) (66,124) (61,049)
Class A Interests 4,940,948 4,909,991 5,279,963 5,710,260 6,212,702
Class B Interests 0 0 0 0 0
Total 4,867,054 4,835,784 5,209,493 5,644,136 6,151,653
Per 100 Class A Interests (a)
Net income (loss) (b): 2.06 (17.90) (15.68) (20.27) (86.72)
Distributions (c): 3.29 3.29 12.94 13.15 13.04
Return of Capital (d): 3.29 3.29 12.94 13.15 13.04
See Notes to Selected Financial Data
14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain statements made in this report may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. See Part I.
The following discussion and analysis should be read in
conjunction with the Financial Statements of the Partnership and the notes
thereto appearing in Item 14 of this report.
General
The Partnership commenced a public offering of Equity Units and
Bond Units (together, "Units") on April 8, 1987 in order to fund the
Partnership's real property acquisitions. The Partnership terminated the public
offering of Units on April 2, 1988. On April 14, 1988, the Partnership held its
final closing on the sale of Units. The Partnership was fully subscribed to with
a total of 16,452 Bond Units and 15,188 Equity Units from which the Partnership
received aggregate net proceeds (after deduction of sales commissions, discounts
and selling agent's expense otherwise required to be reimbursed to the General
Partner and its Affiliates) of $29,285,960. Of such total amounts, 15,954 Bond
Units and 15,188 Equity Units were sold by the Partnership during 1988 from
which the Partnership received net proceeds (after deduction of sales
commissions, discounts and selling agent's expense allowance and credit for
organization and offering expenses) of $19,599,176. The Partnership purchased
three shopping centers with the proceeds from this offering. No further
acquisitions are planned and the Partnership has no plans to raise additional
capital.
On September 30, 1997, the Partnership closed three new fixed
rate first mortgage loans in the amounts of $2,865,000, $8,445,000 and
$5,400,000, on the Searcy, Valencia and Green Valley Properties, respectively.
All three Mortgage Loans are secured by first mortgages on each of the
Properties. The Partnership used the proceeds of the Mortgage Loans and
available cash to redeem all of the outstanding Bonds. The Mortgage Loans are
described in further detail in Item 2. Properties Section.
The Partnership has an agreement with Milestone Property
Management, Inc. ("MPMI"), an affiliate of the General Partner, to provide
management services to the Properties. In addition, MPMI is responsible for
leasing space at the properties and actively monitors all vacancies to ensure
the highest occupancy rate possible. All leasing is performed by MPMI and the
terms of the leases are negotiated on a lease by lease basis.
Impact of Year 2000
Year 2000 compliance programs and information systems
modifications were initiated by the Partnership's affiliated management company,
Milestone Property Management, Inc. ("MPMI") in early 1998 in an attempt to
ensure that these systems and key processes will remain functional. This
objective is expected to be achieved either by modifying present systems using
existing internal and external programming resources or by installing new system
hardware and software, and by monitoring supplier, customer and other third
party readiness. Such modifications are expected to be completed by MPMI by
September 1999. There have been no costs charged to the Partnership for the Year
2000 program being completed by MPMI. The Partnership does not anticipate that
the costs of any required modifications by MPMI to its information technology or
embedded technology systems will have a material adverse effect on its financial
position, results of operations or liquidity, although there can be no
assurances that this will be the case.
15
MPMI has contacted many of the Partnership's major customers,
suppliers and vendors to inquire about their Year 2000 compliance programs. MPMI
has not received responses from all those contacted, but those who have
responded do not indicate any problems at this time. In the event that MPMI or
material third parties fail to complete their Year 2000 compliance programs
successfully and on time, the Partnership's ability to operate its business,
service tenants, bill or collect its revenue in a timely manner could be
adversely affected. Although there can be no assurance that the conversion of
the Partnership's systems will be successful or that the Partnership's key
third-party relationships will have successful conversion programs, the general
partner does not expect that any such failure would have a material adverse
effect on the financial position, results of operations or liquidity of the
Partnership, although there can be no assurances that this will be the case. The
Partnership has day-to-day operational contingency plans, and the general
partner is in the process of updating these plans for possible Year 2000
specific operational requirements.
Competition
Rental property owned by the Partnership will have substantial
competition from similar properties in the vicinity in which such property is
located. Such competition is generally for the retention of existing tenants and
for new tenants upon space becoming vacant. The Partnership believes that the
profitability of each of the Properties is based, in part, upon its geographic
location, the operations and identity of the property's tenants, the performance
of the property and leasing managers, the maintenance and appearance of the
property, the ease of access to the property and the adequacy of property
related facilities. The Partnership also believes that general economic
circumstances and trends as well as the character and quality of new and
existing properties which may be located in the vicinity of the Properties are
factors that may affect the operation and competitiveness of the property.
Results of Operations
Comparison of Year Ended December 31, 1998 to 1997.
Revenues of the Partnership increased $56,842, or 1.87%, to
$3,103,638 in 1998 from $3,046,796 in 1997 primarily due to the net effect of
the following:
(1) Rent - An increase in base rent of $44,728, or 1.76%,
to $2,588,112 in 1998 from $2,543,384 in 1997 caused
by an increase in base rent revenue at the Valencia
Property due to one new tenant and escalations in the
rental rates of several tenants.
(2) Reimbursed Expenses - An increase in reimbursed
expenses of $17,106 or 3.58%, to $494,418 in 1998
from $477,312 in 1997 primarily due to an increase in
the recovery from tenants on both real estate taxes
and insurance.
Management and property expenses decreased $20,862, or 2.55%, to
$795,955 in 1998 from $816,817 in 1997 due to concerted efforts by management to
contain operating costs at the Properties.
Professional fees and other expenses decreased $82,771, or
45.48%, to $99,227 in 1998 from $181,998 in 1997, primarily due to the costs
associated with the investigation and subsequent resolution of chemical
contamination in the soil at a site at the Valencia Property which costs were
expensed during 1997.
Administrative and management fees to a related party increased
by $24,184 or 18.2% to $156,909 in 1998 from $132,725 in 1997 due to management
fees being properly calculated in accordance with the management agreement based
on a percentage of gross revenues rather than a percentage of base rents and
percentage rents as had been calculated in prior years.
16
Interest expense decreased $229,203, or 14.3%, to $1,373,559 in
1998 from $1,602,762 in 1997 due to the interest rates of between 8.125% and
8.25% on mortgage loans payable throughout 1998 versus the 10% interest rate
paid during 1997 on the bonds payable until the September 30, 1997 refinancing.
Depreciation and amortization expense increased $62,304, or
10.66%, to $646,718 in 1998 from $584,414 in 1997, primarily due to a full year
of amortization on the debt financing costs and an increase in property
improvements during 1998.
Comparison of Year Ended December 31, 1997 to 1996.
Revenues of the Partnership increased $37,133, or 1.23%, to
$3,046,796 in 1997 from $3,009,663 in 1996 primarily due to the net effect of
the following:
(1) Rent - A decrease in base rent of $40,230, or 1.56%,
to $2,543,384 in 1997 from $2,583,614 in 1996
primarily due to a decrease in percentage rent
revenue at the Valencia Property due to decreased
tenant sales and a drop in the occupancy rate to
93.9% in 1997 from 97.1% in 1996.
(2) Reimbursed Expenses - An increase in reimbursed
expenses of $71,869, or 17.73%, to $477,312 in 1997
from $405,443 in 1996 primarily due to increased
recovery percentages on both common area expenses and
real estate taxes. Additionally, refunds given to
tenants in 1996, due to an incorrect billing in a
prior year, were charged to revenue in 1996.
(3) Other Income - An increase in other income of $5,494
primarily due to transfer fees paid by an investor
in 1997.
Management and property expenses remained consistent, increasing
only $13,846, or 1.72% to $816,817 from $802,971 in 1996, due to concerted
efforts by management to contain costs at the Properties.
Professional fees and other expenses increased $77,674, or
74.45%, to $181,998 in 1997 from $104,324 in 1996, primarily due to the costs
associated with the investigation and subsequent resolution of chemical
contamination in the soil at a site at the Valencia Property.
Administrative and management fees to a related party remained
consistent, increasing only $718, or .54%, to $132,725 in 1997 from $132,007 in
1996 as management fees were charged using a percentage of base rents and
percentage rents in both 1997 and 1996. Base rents and percentage rents remained
consistent during 1996 and 1997.
Interest expense increased $32,967, or 2.10%, to $1,602,762 in
1997 from $1,569,795 in 1996 primarily due to the scheduled increase in the
interest rate on the Bonds from 9.50% in 1996 to 10.0% in 1997.
Depreciation and amortization expense decreased $54,271, or
8.50%, to $584,414 in 1997 from $638,685 in 1996, primarily due to a decrease in
amortization of net bond premium and discount in 1997.
17
Liquidity and Capital Resources
The General Partner believes that the Partnership's expected
revenue and working capital is sufficient to meet the Partnership's current
operating requirements for the remainder of the year. Nevertheless, because the
cash revenues and expenses of the Partnership will depend on future facts and
circumstances relating to the Partnership's properties, as well as market and
other conditions beyond the control of the Partnership, a possibility exists
that cash flow deficiencies may occur. The Partnership completed various
property improvements during the fourth quarter of 1998 which cost approximately
$133,000 and were paid during the fourth quarter of 1998 and during January
1999. The property improvements consisted of tenant buildouts at all the
properties, HVAC upgrades at the Searcy Property and parking lot improvements at
the Green Valley Property.
The Partnership resumed making distributions commencing with the
fourth quarter of 1998. A distribution of $50,001 was paid during February 1999.
The Partnership had suspended making distributions subsequent to the first
quarter of 1997 due to the cost of addressing an environmental issue identified
at the Valencia Property and payment of certain expenses relative to the
refinancing. The Partnership did not resume distributions until unrestricted
working capital levels were deemed adequate.
During February 1999, the Partnership received notice from Abco,
the principal anchor tenant at the Green Valley Property, that Abco would not be
renewing its lease at the expiration of its current term on July 31, 1999. No
replacement tenant has yet been identified, however, the Partnership is in the
process of retaining a large regional real estate brokerage firm to help market
the space. Many of the tenants at the Green Valley Property have short term
leases. It is not possible to determine the long-term effects of the failure of
Abco to renew its lease. In the short term, however, the vacancy of the Abco
space could have a material adverse effect on the results of operations at the
Green Valley Property by impairing the Partnership's ability to retain other
tenants or to renew their leases on favorable terms, by reducing traffic at the
Property and negatively affecting percentage rents. In addition, the Partnership
will incur expenses in releasing the Abco space and cannot predict how soon such
space will be leased and the terms of such new lease. Currently, approximately
$150,000 of the Partnership's working capital is being held in escrow in
connection with the refinancing by the Lender pending the resolution of the
forthcoming Abco vacancy.
The cash on hand at December 31, 1998 may be used to fund (a)
costs associated with releasing the Abco space should the costs of releasing
exceed the $150,000 already held in escrow by the Lender for this purpose (b)
quarterly distributions to the partners depending on distributable cash flows
and certain other conditions, and (c) other general Partnership purposes.
Management is not aware of any other trends, events, commitments
or uncertainties that will or are likely to materially impact the Partnership's
liquidity.
Net cash provided by operating activities of $487,409 for the
year ended December 31, 1998 was comprised of (i) net income of $31,270, (ii)
adjustments of $646,719 for depreciation and amortization and (iii) a net change
in operating assets and liabilities of $190,580.
Net cash provided by operating activities of $479,718 for the
year ended December 31, 1997 was comprised of (i) net loss of $271,920, (ii)
adjustment of $584,414 for depreciation and amortization, and (iii) a net change
in operating assets and liability of $167,224.
Net cash used in investing activities of $176,503 for the year
ended December 31, 1998 was comprised of capital expenditures for building
improvements.
Net cash used in investing activities of $94,486 for the year
ended December 31, 1997 was comprised of capital expenditures for building
improvements.
18
Net cash used in financing activities of $132,555 for the year
ended December 31, 1998 included (i) principal repayments on mortgages loans
payable of $170,520 and (ii) funds held in escrow of $37,965.
Net cash used in financing activities of $453,447 for the year
ended December 31, 1997 included (i) redemption of Bonds payable of $16,452,000,
(ii) funds held in escrow of $269,895, (iii) debt financing costs of $313,337,
(iv) proceeds from mortgages loans payable of $16,710,000, (v) principal
repayments on mortgages loans payable of $26,426 and (vi) cash distributions to
partners of $101,789.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership is not subject to any material market risk.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data, shown by
index on page 30, begin on page 31 of this
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On October 28, 1998, the Partnership dismissed the accounting
firm of Deloitte & Touche LLP as the Partnership's independent auditor. The
dismissal of Deloitte & Touche LLP was not the result of any disagreements
between the Partnership and Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. On November 2, 1998, the Partnership retained the accounting firm of
Ahearn, Jasco + Company, P.A. as its new independent auditor for the fiscal year
ending December 31, 1998. The decision to change accounting firms as the
Partnership's independent auditor was approved by the Audit Committee of CM Plus
Corporation, General Partner of Concord Milestone Plus, L.P., on October 28,
1998.
19
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) 52 President Inception (2)
and Director
Robert A. Mandor (3) 46 Vice President Inception
and Director
Harvey Shore 53 Vice President December 24, 1987
Joseph P. Otto 45 Vice President October 3, 1997
and Secretary
Patrick Kirse 30 Treasurer and October 3, 1997
Controller
- ----------------------------------
(1) Each director and officer of the General Partner and
CMP Beneficial Corp. will hold office until the next
annual meeting of the General Partner and CMP
Beneficial Corp. and until his successor is elected
and qualified.
(2) The General Partner was incorporated on December 12,
1986 and CMP Beneficial Corp. was
incorporated on December 18,1986.
(3) Robert A. Mandor and Leonard S. Mandor are brothers.
LEONARD S. MANDOR is the Chief Executive Officer and a Director of Concord.
Mr. Mandor is the Chairman of the Board, Chief Executive Officer and a Director
of Milestone Properties, Inc. Mr. Mandor has been associated with Concord since
its inception in 1981.
ROBERT A. MANDOR is the President and a Director of Concord. For at least
the past five years he has served as the President, Chief Financial Officer, and
a Director of Milestone Properties, Inc. Mr. Mandor has been associated with
Concord since its inception.
HARVEY SHORE joined Concord in 1983 and is a Senior Vice President. He also
serves as a Senior Vice President and Secretary of Milestone Properties, Inc.
Before joining Concord he worked at Chase Manhattan Bank as a Vice President.
20
JOSEPH P. OTTO was appointed Vice President and Secretary of CM Plus
Corporation, the General Partner of Concord Milestone Plus, L.P. in October 1997
to fill a vacancy. Mr. Otto is also a Vice President of Concord and has been
associated with Concord since 1984. Mr. Otto is also a Vice President and
Director of Milestone Properties, Inc.
PATRICK KIRSE was appointed Treasurer and Controller of CM Plus
Corporation, the General Partner of Concord Milestone Plus, L.P. in October 1997
to fill a vacancy. Mr. Kirse also serves as a Vice President of Milestone
Properties, Inc. He is a CPA licensed in the state of Missouri. Before joining
Milestone in 1995 he worked as a senior auditor with Deloitte & Touche LLP since
1991.
On February 2, 1995, the Securities and Exchange Commission
filed a civil complaint against Concord in the United States District Court for
the District of Columbia in connection with the proxy solicitation conducted
with respect to the merger of Concord Milestone Income Fund, L.P. and Concord
Milestone Income Fund II, L.P. into a publicly held corporation, Milestone
Properties, Inc., in 1990. The complaint alleged that Concord violated the
anti-fraud provisions of the Securities Exchange Act of 1934 through the forgery
of investors' signatures on proxy cards and further alleged that Concord failed
to provide certain investors in the affected partnerships with lists of
partners, as required under the proxy rules. In April, 1995, Concord consented,
without admitting or denying the Commission's allegations, to the entry of a
final judgment ordering it to pay a civil penalty of $500,000 and enjoining it
from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b)
and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-7
thereafter.
Compliance with Section 16(a) of the Exchange Act.
Based on the General Partner's review of Forms 3, 4 and 5
furnished to the Partnership, there were no late reports filed during 1998.
Item 11. Compensation.
During 1998, the Partnership paid or accrued:
(i) $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, investor services and supplies
in an amount equal to $25,000 per year.
(ii)$131,909 to MPMI for property management fees for the fiscal
year ended December 31, 1998. Pursuant to the management
agreement between the Partnership and MPMI, property
management fees are equal to a percentage of gross revenues
not to exceed 5 percent for multiple tenant property for
which MPMI performs leasing services, 3 percent for multiple
tenant property for which MPMI does not perform leasing
services and 1 percent for single tenant property. The
management fees are 3 percent for the Searcy Property, 4
percent for the Valencia Property and 5 percent for the
Green Valley Property. The management fee for any Property
may not exceed competitive fees for comparable services
reasonably available to the Partnership in the same
geographic area as the property in question. Gross revenues
are defined in the management agreement to mean, with
respect to each Property, all base, additional and
percentage rents collected from the Property but exclude all
other receipts or income with respect to that Property, such
as, (i) receipts arising out of any sale of assets or of all
or part of the Property, condemnation proceeds and other
items of a similar nature; (ii) payments made by tenants for
over-standard finish out improvements or other amortization;
(iii) income derived from interest on investments, security
deposits utility deposits; (iv) proceeds of claims under
insurance policies; (v) abatements or reductions of taxes;
(vi) security deposits made by tenants; or (vii) any
portions of rentals which
21
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, 1998.
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 1, 1999:
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.
(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 1, 1999 is set
forth in the following table:
Amount and
Nature of Percent
Name of Beneficial of
Beneficial Owner Ownership Class
Leonard S. Mandor 267 67%
Robert A. Mandor 133 33%
Item 13. Certain Relationships and Related Transactions.
See Item 1, "Business," Item 5, "Market for Registrant's Units
and Related Security Holders Matters," Item 10, "Directors and Officers of the
Registrant," and Item 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.
22
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 30 of this Report.
(b) Reports on Form 8K. On November 4, 1998, a Form 8-K was
filed with the Commission reporting changes in the
Partnership's certifying accountant.
(c) Exhibits:
Exhibit
Number Description of Document
3.1 Amended and Restated Agreement of Limited Partnership
of Concord Milestone Plus, L.P. Incorporated herein by
reference to Exhibit A to the Registrant's Prospectus
included as Part I of the Registrant's Post-Effective
Amendment No. 3 to the Registrant's Registration Statement
on Form S-11 (the "Registration Statement") which was
declared effective on April 3, 1987.
3.2 Amendment No. 1 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.,
included as Exhibit 3.2 to Registrant's Form 10-K for
the fiscal year ended December 31, 1987 ("1987 Form
10-K"), which is incorporated herein by reference.
3.3 Amendment No. 2 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.3 to the 1987 Form 10-K,
which is incorporated herein by reference.
3.4 Amendment No. 3 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.4 to the 1987 Form 10-K,
which is incorporated herein by reference.
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.
23
3.6 Amendment No. 5 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.6 to Registrant's Form 10-K
for the fiscal year ended December 31, 1988, which is
incorporated herein by reference.
4. Form of Indenture relating to Escalating Rate Collateralized
Mortgage Bonds due November 30, 1997 between Concord Milestone
Plus, L.P. and United States Trust Company of New York, as
Trustee. Incorporated herein by reference to Exhibit 4 to the
Registration Statement.
4.1 Form of Supplemental Indenture. Incorporated herein
by reference to Exhibit 4.7 to the Registrant's
Post-Effective Amendment No. 1 ("Post-Effective
Amendment No. 1") to the Registration Statement.
4.2 Form of Escalating Rate Collateralized Mortgage Bond
due November 30, 1997 included as Exhibit 4.2 to the
1987 Form 10-K, which is incorporated herein by
reference.
4.3 Form of certificate evidencing Class A Interests
included as Exhibit 4.3 to the 1987 Form 10-K,
which is incorporated herein by reference.
4.4 Form of certificate evidencing Class B Interests
included as Exhibit 4.4 to the 1987 Form 10-K,
which is incorporated herein by reference.
10.1 Property purchase agreements. Incorporated herein by
reference to Exhibit 10.1 to the Registration
Statement.
10.2 Form of property management agreement. Incorporated
herein by reference to Exhibit 10.2 of the
Registration Statement.
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.
24
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.
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.
25
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.
10.15 Fixed Rate Note, dated September 23, 1997, executed
by the Partnership in favor of Lender, relating to the
property located in Green Valley, Arizona. Incorporated
herein by reference to Exhibit 10.1 of the Partnership's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 (the "September 1997 10-Q").
10.16 Mortgage, Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, dated September
23, 1997, executed by the Partnership for the benefit of
Lender, relating to the property located in Green Valley,
Arizona. Incorporated herein by reference to Exhibit
10.2 of the September 1997 10-Q.
10.17 Assignment of Leases and Rents, dated September 23, 1997,
executed by the Partnership for the benefit of Lender,
relating to the property located in Green Valley, Arizona.
Incorporated herein by reference to Exhibit 10.3 of the
September 1997 10-Q.
26
10.18 Environmental Liabilities Agreement, dated September 23,
1997, executed by the Partnership and CM Plus Corporation
for the benefit of Lender, relating to the property located in
Green Valley, Arizona. Incorporated herein by reference to
Exhibit 10.4 of the September 1997 10-Q.
10.19 Tenant Occupancy Escrow and Security Agreement, dated
September 23, 1997, by and between the Partnership and
the Lender, relating to the property located in Green Valley,
Arizona. Incorporated herein by reference to Exhibit
10.5 of the September 1997 10-Q.
10.20 Fixed Rate Note, dated September 23, 1997, executed by the
Partnership in favor of Lender, relating to the property located
in Searcy, Arkansas. Incorporated herein by reference to Exhibit
10.6 of the September 1997 10-Q.
10.21 Mortgage, Deed of Trust and Security Agreement, dated
September 23, 1997, executed by the Partnership for the benefit
of Lender, relating to the property located in Searcy, Arkansas.
Incorporated herein by reference to Exhibit 10.7 of the September
1997 10-Q.
10.22 Assignment of Leases and Rents, dated September 23, 1997,
executed by the Partnership for the benefit of Lender, relating
to the property located in Searcy, Arkansas. Incorporated
herein by reference to Exhibit 10.8 of the September 1997 10-Q.
10.23 Environmental Liabilities Agreement, dated September 23, 1997,
executed by the Partnership and CM Plus Corporation for the
benefit of Lender, relating to the property located in Searcy,
Arkansas. Incorporated herein by reference to Exhibit 10.9 of
the September 1997 10-Q.
10.24 Fixed Rate Note, dated September 23, 1997, executed by the
Partnership in favor of Lender, relating to the property located
in Valencia, California. Incorporated herein by reference to Exhibit
10.10 of the September 1997 10-Q.
10.25 Deed of Trust, Assignment of leases, and Rents, Security Agreement
and Fixture Filing, dated September 23, 1997, executed by the
Partnership for the benefit of Lender, relating to the property
located in Valencia, California. Incorporated herein by reference to
Exhibit 10.11 of the September 1997 10-Q.
10.26 Assignment of Leases and Rents, dated September 23, 1997,
executed by the Partnership for the benefit of Lender, relating to
the property located in Valencia, California. Incorporated herein by
reference to Exhibit 10.12 of the September 1997 10-Q.
27
10.27 Environmental Liabilities Agreement, dated September 23, 1997,
executed by the Partnership and CM Plus Corporation for the
benefit of Lender, relating to the property located in Valencia,
California. Incorporated herein by reference to Exhibit 10.13
of the September 1997 10-Q.
10.28 Environmental Escrow and Security Agreement, dated September
23, 1997, by and between the Partnership and the Lender, relating to
the property located in Valencia, California. Incorporated herein by
reference to Exhibit 10.14 of the September 1997 10-Q.
27. Financial Data Schedule Article 5 included for Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) purposes only. This
Schedule contains summary financial information extracted from
the consolidated balance sheets and consolidated statements of
revenues and expenses of the Company as of and for the fiscal year
ended December 31, 1998, and is qualified in its entirety by
reference to such financial statements.
28
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 12, 1999.
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 12, 1999
-----------------------------------------------
Leonard S. Mandor
President (Principal Executive Officer)
and Director of CM Plus Corporation
and CMP Beneficial Corp.
By: /s/ Robert A. Mandor March 12, 1999
-----------------------------------------------
Robert A. Mandor
Vice President and Director of CM Plus
Corporation and CMP Beneficial Corp.
By: /s/ Patrick Kirse March 12, 1999
-----------------------------------------------
Patrick Kirse
Treasurer and Controller (Principal
Accounting Officer) of CM Plus
Corporation and CMP Beneficial Corp.
29
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE
Page No.
1.Financial Statements:
a. Concord Milestone Plus, L.P.
1. Independent Auditors' Reports .......................... 31
2. Balance Sheets, December 31, 1998 and December 31, 1997. 33
3. Statements of Revenues and Expenses for the Years Ended
December 31, 1998, 1997 and 1996 ....................... 34
4. Statements of Changes in Partners' Capital for the Years
Ended December 31, 1998, 1997 and 1996 ................. 35
5. Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996 ............................... 36
6. Notes to Financial Statements .......................... 37
2.Financial Schedule:
a. Real Estate and Accumulated Depreciation (Schedule III) ....... 43
This financial statement schedule of the Partnership for each of the
years ended December 31, 1998, 1997 and 1996 is filed as part of this Form 10-K
and should be read in conjunction with the Financial Statements, and related
notes thereto, of the Partnership. All other financial statement schedules have
been omitted because the required information is not present or not present in
amounts sufficient to require submission of the schedule or because the
information required is included in the financial statements or notes thereto.
30
INDEPENDENT AUDITORS' REPORT
Concord Milestone Plus, L.P.
We have audited the accompanying balance sheet of Concord Milestone Plus, L.P.
(the "Partnership") as of December 31, 1998, and the related statements of
revenues and expenses, changes in partners' capital, and cash flows for the year
then ended. Our audit also included the financial statement schedule of real
estate and accumulated depreciation. These financial statements and the
financial statement schedule of real estate and accumulated depreciation are the
responsibility of the Partnership's management. Our responsibility is to express
in opinion on the financial statements and the financial statement schedule of
real estate and accumulated depreciation based on our audit.
We conducted our audit in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Concord Milestone Plus, L.P. as
of December 31, 1998, and the results of its operations, charges in partners'
capital and its cash flows for the year ended December 31, 1998, in conformity
with general accepted accounting principles. Also, in our opinion, the financial
statement schedule of real estate and accumulated depreciation, when considered
in relation to the basic financial statements, presents fairly, in all material
respects, the information set forth therein.
/s/ Ahearn, Jasco + Company, P.A.
Pompano Beach, Florida
March 12, 1999
31
INDEPENDENT AUDITORS' REPORT
Concord Milestone Plus, L.P.
We have audited the accompanying balance sheet of Concord Milestone Plus, L.P.
(the "Partnership") as of December 31, 1997 and the related statements of
revenues and expenses, changes in partners' capital and cash flows for each of
the two years in the period ended December 31, 1997 and 1996. Our audits also
included the information pertaining to 1997 and 1996 contained in the financial
statement schedule of real estate and accumulated depreciaion. These financial
statements and the financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express in opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Concord Milestone Plus, L.P. at
December 31, 1997 and the results of its operations, changes in partners'
capital and cash flows for each of the two years in the period ended December
31, 1997 and 1996 in conformity with general accepted accounting principles.
Also, in our opinion, the information pertaining to 1997 and 1996 contained in
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Deloitte & Touche
New York, New York
March 20, 1998
32
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1998 and 1997
December 31, December 31,
1998 1997
Property, at cost
Building and improvements $ 15,630,448 $15,453,945
Less: accumulated depreciation 6,017,284 5,413,087
----------- ---------
Building and improvements, net 9,613,164 10,040,858
Land 10,987,034 10,987,034
---------- ----------
Total property 20,600,198 21,027,892
Cash and cash equivalents 436,256 257,905
Accounts receivable 224,272 123,152
Restricted cash 231,930 269,895
Debt financing costs, net 274,170 305,504
Prepaid expenses and other assets, net 74,779 67,516
------------- -------------
Total assets $21,841,605 $22,051,864
========== ==========
Liabilities:
Mortgage loans payable $ 16,513,054 $16,683,574
Accrued interest 116,110 117,308
Accrued expenses and other liabilities 299,746 341,263
Accrued expenses payable to affiliates 45,641 73,935
------------- -------------
Total liabilities 16,974,551 17,216,080
---------- ----------
Commitments and Contingencies
Partners' capital
General partner (73,894) (74,207)
Limited partners:
Class A Interests, 1,518,800 4,940,948 4,909,991
Class B Interests, 2,111,072 - -
------------- ------------------
Total partners' capital 4,867,054 4,835,784
----------- -----------
Total liabilities and partners' capital $21,841,605 $22,051,864
========== ==========
See Accompanying Notes to Financial Statements
33
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
December 31, December 31, December 31,
1998 1997 1996
Revenues:
Rent $2,588,112 $2,543,384 $2,583,614
Reimbursed expenses 494,418 477,312 405,443
Interest and other income 21,108 26,100 20,606
----------- --------- -----------
Total revenues 3,103,638 3,046,796 3,009,663
--------- --------- ---------
Expenses:
Interest expense 1,373,559 1,602,762 1,569,795
Depreciation and amortization 646,719 584,414 638,685
Management and property expenses 795,954 816,817 802,971
Administrative and management fees
to related party 156,909 132,725 132,007
Professional fees and other expenses 99,227 181,998 104,324
----------- ---------- -----------
Total expenses 3,072,368 3,318,716 3,247,782
--------- ---------- ----------
Net income (loss) $ 31,270 $(271,920) $(238,119)
========== ======== ========
Net income (loss) attributable to:
Limited partners $30,957 $(269,201) $(235,738)
General partner 313 (2,719) (2,381)
----------- ----------- -----------
Net income (loss) $31,270 $(271,920) $(238,119)
====== ======== ========
Income (loss) per weighted average
Limited Partnership 100 Class A
Interests outstanding $2.06 $(17.90) $(15.68)
==== ====== ======
Weighted average number of 100
Class A interests outstanding 15,188 15,188 15,188
====== ====== ======
See Accompanying Notes to Financial Statements
34
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, and 1996
General Class A Class B
Total Partner Interests Interests
PARTNERS' CAPITAL (DEFICIT)
January 1, 1996 $5,644,136 $(66,124) $5,710,260 -
Distributions (196,524) (1,965) (194,559) -
Net Loss (238,119) (2,381) (235,738) -
---------- -------- ---------- --------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1996 5,209,493 (70,470) 5,279,963 -
---------- -------- ---------- --------------
Distributions (101,789) (1,018) (100,771) -
Net Loss (271,920) (2,719) (269,201) -
--------- ------- --------- --------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1997 4,835,784 (74,207) 4,909,991 -
--------- ------- --------- -------------
Net Income 31,270 313 30,957 -
----------- --------- ----------- --------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1998 $4,867,054 $(73,894) $4,940,948 -
========= ======= ========= ==============
See Accompanying Notes to Financial Statements
35
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
December 31, December 31, December 31,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $31,270 $(271,920) $(238,119)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 646,719 584,414 638,685
Change in operating assets and liabilities - net:
(Increase) decrease in accounts receivable (101,120) 23,576 (32,631)
(Increase) decrease in prepaid expenses
and other assets, net (18,451) 15,364 61,846
Decrease in due from affiliate, net - - 47,879
(Decrease) increase in accrued interest (1,198) (19,792) 6,854
(Decrease) increase in accrued expenses and other liabilities (41,517) 86,126 (82,131)
(Decrease) increase in accrued expenses payable to affiliates (28,294) 61,950 11,985
------------ ------------- ----------
Net cash provided by operating activities 487,409 479,718 414,368
----------- ------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property improvements (176,503) (94,486) (96,984)
Purchase of other asset - - (13,612)
------------ ------------- ---------
Net cash used in investing activities (176,503) (94,486) (110,596)
---------- ------------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of bonds payable - (16,452,000) -
Restricted cash 37,965 (269,895) -
Debt financing costs - (313,337) -
Proceeds from mortgage loans payable - 16,710,000 -
Principal repayments on mortgage loans payable (170,520) (26,426) -
Cash distributions to partners - (101,789) (196,524)
---------- ----------- --------
Net cash used in financing activities (132,555) (453,447) (196,524)
---------- ----------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 178,351 (68,215) 107,248
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 257,905 326,120 218,872
---------- ----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 436,256 $ 257,905 $ 326,120
========= =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $1,374,757 $1,622,554 $1,562,941
========= ========== ==========
See Accompanying Notes to Financial Statements
36
CONCORD MILESTONE PLUS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
1. Organization and Capitalization
Concord Milestone Plus, L.P., a Delaware limited partnership (the
"Partnership"), was formed on December 12, 1986, to invest in existing
income-producing commercial and industrial real estate, such as shopping
centers, office buildings, free-standing commercial warehouses and distribution
centers. Currently, the Partnership owns and operates three shopping centers
(the "Properties"), one located in Searcy, Arkansas (the "Searcy Property"), one
located in Valencia, California (the "Valencia Property") and one located in
Green Valley, Arizona (the "Green Valley Property").
The Partnership commenced a public offering on April 8, 1987 in order to fund
the Partnership's real property acquisitions. The Partnership terminated its
public offering on April 2, 1988 and was fully subscribed to with a total of
16,452 Bond Units and 15,188 Equity Units issued. Each Bond Unit consisted of
$1,000 principal amount of the Partnership's Escalating Rate Collateralized
Mortgage Bonds (the "Bonds") due November 30, 1997 and 36 Class B Interests
("Class B Interests"), each such interest representing an assignment of one
Class B Limited Partnership Interest held by CMP Benefit Corp., a Delaware
corporation (the "Assignor"), under the Amended and Restated Agreement of
Limited Partnership of the Partnership Agreement (the "Partnership Agreement").
Each Equity Unit consisted of 100 Class A Interests ("Class A Interests"), each
interest representing an assignment of one Class A Limited Partnership Interest
held by the Assignor under the Partnership Agreement, and 100 Class B Interests.
Capital contributions to the Partnership consisted of $15,187,840 from the sale
of the Equity Units and $592,272 from the sale of the Class B Interests that
comprised the Bond Units.
2. Summary of Significant Accounting Policies
Basis of Accounting, Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for
both financial and tax purposes. Its fiscal year is the calendar year.
Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Partnership
occasionally maintains cash balances in financial institutions in excess of the
federally insured limits.
Restricted Cash
Restricted cash consists of escrow deposits held by the lender for payment of
property taxes and an amount held pending the execution of a new lease or
renewal lease of the space presently leased to Abco at the Green Valley property
and satisfaction of certain other conditions related thereto.
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.
37
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 to
12 years. Leasehold improvements are amortized on a straight-line basis over the
lesser of the estimated useful life or the remaining term of the lease.
Depreciation expense was $609,161, $588,520, $582,212 in 1998, 1997 and 1996,
respectively.
The Partnership's policy is to quarterly assess any impairment in value by
making a comparison of the current and projected operating cash flows of each of
its properties over its remaining useful life, on an undiscounted basis, to the
carrying amount of such property. Such carrying amount would be adjusted, if
necessary, to the estimated fair value to reflect an impairment in the value of
the asset. The Partnership determined that an adjustment to the carrying amount
of its properties was not necessary in 1998, 1997, and 1996.
Income Taxes
The Partnership makes no provision for income taxes because all income and
losses are allocated to the partners and holders of Class A Interests and Class
B Interests for inclusion in their respective tax returns. The tax bases of the
Partnership's net assets and liabilities are $2,904,634 and $2,792,337 higher
than the amounts reported for financial statement purposes at December 31, 1998
and 1997, respectively, due to the utilization of different estimated useful
lives for the depreciation of property for tax and financial reporting purposes
and the write-down of property during 1993 and 1994 for financial reporting
purposes.
Discount on Bonds Payable and Debt Financing Costs
The Partnership amortized the original issue discount on bonds payable using the
effective interest method over the term of the Bonds. The costs to obtain the
new Mortgage Loans (see Note 6) were capitalized and are being amortized over
the term of such mortgages using the effective interest method.
Income (loss) Per Class A Interest
In February 1997, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 128, "Earnings per Share" which establishes standards for computing and
presenting earnings per share. The new standard replaces the presentation of
primary earnings per share prescribed by Accounting Principles Board Opinion No.
15 ("APB 15"), "Earnings per Share" with a presentation of basic earnings per
share and also requires dual presentation of basic and diluted earnings per
share on the face of the statement of operations for all entities with complex
capital structures. The Partnership has no dilutive interests. Income (loss) per
Class A interest amounts are computed by dividing net loss allocable to the
limited partners by the weighted average number of 100 Class A Interests
outstanding during the year. The adoption of SFAS No. 128 will not have any
effect on current or prior period financial statement displays presented by the
Partnership.
Statement of Comprehensive Income
A statement of comprehensive income has not been included per SFAS 130,
"Reporting Comprehensive Income", as the Partnership has no items of other
comprehensive income.
38
Capital Structure
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information About
Capital Structure." SFAS No. 129 establishes certain standards for disclosing
information about an entity's capital structure. SFAS No. 129 is effective for
financial statement periods ending after December 15, 1997. SFAS No. 129 will
not have any material effect on current or prior period financial statement
displays presented by the Partnership.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications were made to the accompanying 1996 and 1997 financial
statements to conform with the 1998 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.
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.
39
Minimum base rental income under non-cancelable tenant lease agreements, having
lease terms expiring from one to nine years, at December 31, 1998 are as
follows:
Year Ended
December 31 Amount
------------- --------
1999 $2,359,660
2000 1,861,748
2001 1,469,499
2002 1,118,899
2003 876,097
Thereafter 1,872,215
-------------
Total $9,585,118
The above table does not include contingent rental amounts. The total contingent
rentals received in 1998, 1997, and 1996, were $148,490, $163,307, and $185,117,
respectively. A majority of the leases contain provisions for additional rent
calculated as a specified percentage of the tenant's gross receipts above fixed
minimum amounts and for reimbursement of all or a portion of the tenant's pro
rata share of real estate taxes, insurance and common area maintenance expenses.
There was no tenant in 1998, 1997 and 1996 whose rents exceed 10% of the
Partnership's total revenue.
5. Related Party Transactions
The Partnership pays fees for customary property management services
("Management Fees") equal to a percentage of gross revenues from the Properties,
not to exceed 5 percent. The Management Fees are 3 percent for the Searcy
Property, 4 percent for the Valencia Property and 5 percent for the Green Valley
Property. Management Fees incurred for the years ended December 31, 1998, 1997,
and 1996, were $131,909, $107,725, and $107,007, respectively. Management Fees
are payable to Milestone Property Management, Inc., a Delaware corporation and
affiliate of the General Partner ("MPMI").
The Partnership also paid $25,000 to MPMI for administrative services for the
years ended December 31, 1998, 1997, and 1996.
As of December 31, 1998 and 1997, the Partnership accrued $45,641 and $33,542,
respectively, payable to Milestone Properties, Inc. ("MPI"), an affiliate of the
General Partner for administrative and management fees and insurance.
Tri-Stone Mortgage Company, an affiliate of the General Partner, assisted the
Partnership in obtaining three new fixed rate Mortgage Loans. No fee was paid to
Tri-Stone for its assistance.
6. Mortgage Loans Payable
As of September 30, 1997, the Partnership, with the assistance of Tri-Stone
Mortgage Company, an affiliate of the General Partner, closed three new fixed
rate first mortgage loans (the "Mortgage Loans") from Westco Real Estate Finance
Corp. (the "Lender") in the amounts of $2,865,000, $8,445,000 and $5,400,000,
respectively. All three Mortgage Loans are secured by cross-collateralized first
mortgages on the Partnership's shopping centers. Prior to September 30, 1997,
the shopping centers were encumbered by mortgages granted by the Partnership for
the benefit of the holders of the Partnership's Bonds. The Partnership used the
proceeds of the Mortgage Loans and available cash to redeem all of the
outstanding Bonds. An aggregate of $17,015,650 was paid to the holders of the
Bonds in connection with such redemption, of which $16,452,000 was applied to
prepay the principal of the Bonds and $563,650 was applied to pay interest
accrued on the Bonds through the redemption date.
40
In conjunction with the refinancing of the Bonds, the lender engaged an
independent environmental and geotechnical consulting firm to perform
environmental due diligence on the properties at the Partnership's expense.
After various tests, the consultant identified chemical contamination in the
soil at a site at the Old Orchard Shopping Center in Valencia, California which
it believed was attributable to improper handling of dry cleaning solvent by a
tenant and its predecessors. During February 1998, the CALEPA issued a No
Further Action letter with respect to the investigation and remediation at the
Valencia Property. The cost to satisfactorily remedy this environmental problem
was approximately $71,000, which was expensed during 1997.
The Mortgage Loans and related terms at December 31, 1998 are summarized as
follows:
Principal Monthly
Balance at Payments of
December Interest Principal
Property/Location 31, 1998 Rate % and Interest
----------------- -------------- ------ ------------
Searcy, AR $2,836,228 8.125 $21,640
Valencia, CA 8,329,540 8.125 65,881
Green Valley, AZ 5,347,286 8.250 41,252
--------- ------
Total $16,513,054 $128,773
========== =======
The Mortgage Loans require payments of principal and interest through and
including September 1, 2007. On October 1, 2007, the balance of principal and
interest estimated to be $2,505,981, $7,003,227, and $4,738,096 for the Searcy,
Valencia and Green Valley Properties, respectively, will be due and payable.
Subsequent to October 31, 2003 and prior to May 31, 2007 each Mortgage Loan may
be prepaid in whole but not in part on any payment date with a prepayment
penalty equal to the greater of (i) 1% of the outstanding principal balance at
such time, or (ii) the excess, if any, of the present value of the remaining
scheduled principal and interest payments (including any balloon payment) over
the amount of principal being prepaid. The Mortgage Loans may be prepaid without
penalty on any payment date after May 31, 2007.
The scheduled principal payments of the Mortgage Loans at December 31, 1998 are
as follows:
Year Ending
December 31
1999 $185,171
2000 197,149
2001 218,023
2002 236,758
2003 257,101
Thereafter 15,418,852
-------------
Total $16,513,054
The recorded amount of the Mortgage Loans approximates fair value because the
terms and interest rates approximate current market conditions.
In connection with the Green Valley Mortgage Loan, the Partnership has deposited
$150,000 into an escrow account with the Lender. The funds held in this escrow
account may be released upon the execution of a renewal lease, with a
termination date of July 31, 2004 or later, by a specified tenant of the Green
Valley shopping center or the execution of a new lease of such store space and
the satisfaction of certain other conditions related thereto.
41
In connection with the Valencia Mortgage Loan, the Partnership deposited $45,000
into an escrow account with the lender. The funds held were released during
February 1998 following the issuance of a No Further Action letter by the
Department of Toxic Substance Control, a branch of the State of California
Environmental Protection Agency (CALEPA).
CM Plus Corporation, the general partner of the Partnership, guarantees certain
limited recourse obligations under the Mortgage Loans.
7. Commitments and Contingencies
During February 1999, the Partnership received notice from Abco, the principal
anchor tenant at the Green Valley Property, that Abco would not be renewing its
lease at the expiration of its current term on July 31, 1999. No replacement
tenant has yet been identified, however, the Partnership is in the process of
retaining a large regional real estate brokerage firm to help market the space.
Many of the tenants at the Green Valley Property have short term leases. It is
not possible to determine the long-term effects of the failure of Abco to renew
its lease. In the short term, however, the vacancy of the Abco space could have
a material adverse effect on the results of operations at the Green Valley
Property by impairing the Partnership's ability to retain other tenants or to
renew their leases on favorable terms, by reducing traffic at the Property and
negatively affecting percentage rents. In addition, the Partnership will incur
expenses in releasing the Abco space and cannot predict how soon such space will
be leased and the terms of such new lease. Currently, approximately $150,000 of
the Partnership's working capital is being held in escrow in connection with the
refinancing by the Lender pending the resolution of the forthcoming Abco
vacancy.
Investments in real property create a potential for environmental liability on
the part of the owner, operator or developer of such real property. If hazardous
substances are discovered on or emanating from any of the Properties, the
Partnership and/or others may be held strictly liable for all costs and
liabilities relating to the clean-up of such hazardous substances. The
Partnership is not aware of any existing environmental conditions that will have
a material effect on the financial statements.
From time to time, the Partnership is exposed to claims, regulatory, and legal
actions in the normal course of business, some of which are initiated by the
Partnership. At December 31, 1998, management believes that any such outstanding
issues will be resolved without significantly impairing the financial condition
of the Partnership.
Subsequent to December 31, 1998, a distribution of $50,001 was paid to Class A
Interests during February 1999.
42
CONCORD MILESTONE PLUS, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
Costs
Capitalized
Subsequent Gross Amount at
Initial Cost to Acquisition which Carried at Close of Period (A)
------------------------ --------------- ----------------------------------------
Land
Building & Building & Building &
Description and Location Encumbrances Land Improvements Improvements Land Improvements Total
- ------------------------------ ------------ ------------ ------------ ------------ ----------- ----------- -----------
Town & Country Plaza $2,836,228 $430,000 $3,620,000 $455,340 $430,000 $4,075,340 $4,505,340
Searcy, AR
Old Orchard Shopping Center 8,329,540 6,500,000 5,075,000 1,369,256 6,500,000 6,449,756 12,949,756
Valencia, CA
Green Valley Mall 5,347,286 5,100,000 4,587,000 1,566,818 4,057,034 5,105,352 9,162,386
--------- --------- --------- --------- --------- --------- ---------
Green Valley, AZ
$16,513,054 $12,030,000 $13,282,000 $3,391,414 $10,987,034 $15,630,448 $26,617,482
========== ========== ========== ========= ========== ========== ==========
Accumulated Date Depreciation
Description and Location Depreciation(B) Acquired Life
- ------------------------------ ---------------- -------- ----------------
Town & Country Plaza $1,459,016 08/20/87 31.5 years
Searcy, AR
Old Orchard Shopping Center 2,310,345 01/22/88 31.5 years
Valencia, CA
Green Valley Mall 2,247,923 04/15/88 31.5 years
---------
Green Valley, AZ
$6,017,284
=========
1998 1997 1996
(A) Reconciliation of investment properties owned:
Beginning balance $26,440,979 $26,346,493 $26,249,509
Property acquisitions/improvements 176,503 94,486 96,984
Write-down of property 0 0 0
------------ ----------- -----------
Balance at end of period $26,617,482 $26,440,979 $26,346,493
========== ========== ==========
(B) Reconciliation of accumulated depreciation:
Beginning balance $5,413,087 $4,829,534 $4,253,132
Depreciation expense 604,197 583,553 576,402
----------- ----------- -----------
Balance at end of period $6,017,284 $5,413,087 $4,829,534
========= ========= =========
43