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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2001
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 incorporation or organization) (IRS Employer Identification No.)
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:
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
---
As of March 1, 2002, 1,518,800 Class A Interests and 2,111,072 Class B Interest
were outstanding.
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, 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) $464,554, $1,434,135,
$1,215,203 respectively, for the fiscal year ended December 31, 2001, (ii)
$415,505, $1,336,478, $1,299,161 respectively, for the fiscal year ended
December 31, 2000; and (iii) $441,946, $1,299,922 and $1,228,007, respectively,
for the fiscal year ended December 31, 1999. There are no affiliated tenants.
See Item 2, "Properties", of this Report for additional information as to
the Properties, including a description of the competitive conditions affecting
them.
1
(D) EMPLOYEES
The Partnership employs six people at the Green Valley Property who provide
general administrative and maintenance services. Milestone Property Management,
Inc., an affiliate of the General Partner, provides all management services for
the Partnership and Milestone Properties, Inc., an affiliate of the General
Partner, provides administrative services to the Partnership. Aside from its
officers, the General Partner has no employees. See Item 11, "Compensation", of
this Report.
ITEM 2. PROPERTIES.
The Properties consist of three shopping centers: the Searcy Property, the
Valencia Property and the Green Valley Property. For the purposes of this
section, the following is a glossary of terms:
a. Occupancy rate - The rate of the actual leased area (square footage)
to gross leaseable area (square footage) as of the end of the fiscal
year (December 31).
b. Leasable area - The area (square footage) for which rent 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.
d. Total rent - Minimum annual base rent plus percentage rental revenue.
MORTGAGE LOANS
As of September 30, 1997, the Partnership closed on new mortgage loans (the
"Mortgage Loans") for the Properties in the amounts of $2,865,000, $8,445,000
and $5,400,000, respectively. All three Mortgage Loans are secured by first
mortgages. Prior to September 30, 1997, the Properties were encumbered by
mortgages granted by the Partnership to 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, 2001 for the
Properties are summarized as follows:
PRINCIPAL MONTHLY
BALANCE AT PAYMENTS OF
DECEMBER INTEREST PRINCIPAL
PROPERTY/LOCATION 31, 2001 RATE % AND INTEREST
----------------- ----------- ------ ------------
Searcy, AR $2,748,649 8.125 $21,640
Valencia, CA 7,977,640 8.125 65,881
Green Valley, AZ 5,186,421 8.250 41,252
----------- --------
Total $15,912,710 $128,773
=========== ========
2
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 for the major tenant space, with a
termination date of July 31, 2004 or later, and the satisfaction of certain
other conditions.
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 eleven units. The entire Town and Country
Plaza has parking for 970 cars of which approximately 570 parking spaces are
allocated to the Searcy Property. In the opinion of the General Partner, the
Searcy Property is adequately insured.
3
Taxes. The Partnership's adjusted federal income tax basis for the Searcy
Property is approximately $2,906,000, of which $430,000 is allocated to land and
$2,476,000 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 10 years using the straight-line method of cost recovery.
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 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. This Wal-Mart, relocated from the Town and Country Plaza in
1992. Hastings Book and Music, Big Lots, Hibetts Sports and TSC Tractor Supply
currently occupy Wal-Mart's former space in the Town and Country Plaza.
Operating and Tenant Information. As of March 1, 2002, there were ten
tenants, including two anchor tenants, at the Searcy Property. The anchor
tenants are J.C. Penney department store and Dunlap Co. The other eight tenants
provide a variety of goods and services. The occupancy rate was 98.7%, 78.8%,
and 95.5% as of December 31, 2001, 2000, and 1999, respectively.
The tables on pages 7 and 8 further describe and summarize certain
operating data and tenant information for the Property as of December 31, 2001.
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.
Description. 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. In the opinion of the General Partner, the Valencia
Property is adequately insured.
Taxes. The Partnership's adjusted federal income tax basis for the Valencia
Property is $10,513,000, of which $6,500,000 is allocated to land and $4,013,000
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.
Competition. 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 initially had an adverse
impact on tenant sales but it has not materially adversely affected the
occupancy rate at the Valencia Property.
4
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, 2002, there were 21
tenants, including two anchor tenants, at the Valencia Property. The two anchor
tenants are an Albertson's grocery store (Albertson's acquired Lucky Stores,
Inc.) and a Rite Aid pharmacy. The other 19 tenants provide a variety of goods
and services. The occupancy rate was 96.21%, 99.50%, and 96.9%, in 2001, 2000,
and 1999, respectively.
The tables on pages 7 and 8 further describe and summarize certain
operating data and tenant information for the Property as of December 31, 2001.
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. 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 with additional access from La Canada
Road.
Description. 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. In the opinion of the General
Partner, the Green Valley Property is adequately insured.
Taxes. The Partnership's adjusted federal income tax basis for the Green
Valley Property is $8,997,000, of which $5,100,000 is allocated to land and
$3,897,000 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.
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 located to the north of the Green Valley Property, closed during
1995 and was anchored by a 45,000 square foot Kmart and 10,000 square feet of
space for local tenants. In mid summer 2000, a six screen multiplex theater
opened adjacent to Kmart. Since the incorporation of this town, several large
areas have been rezoned for commercial development. One shopping area located
2.5 miles north of Green Valley, called "The Quorum", opened within the last two
years. Also in 2002 a Safeway Supermarket is planned to be built 2 miles north
of the Green Valley property.
Operating and Tenant Information. As of March 1, 2002, there were 66
tenants, including two anchor tenants, at the Green Valley Property. The two
anchor tenants include a Beall's outlet store and an Ace Hardware
5
store. The third anchor tenant space is currently unoccupied. The other 64
tenants provide a variety of goods and services. The occupancy rate was 67.33%,
70.73%, and 70.7%, in 2001, 2000, and 1999, respectively.
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 term on July 31, 1999. Abco vacated
its space in May, 1999. This space represents about 20% of the Green Valley
Property's leaseable area. The Partnership retained a large regional real estate
brokerage firm to help market the space. Such brokerage firm was replaced in
2000 by another large regional brokerage firm. Each of the brokerage firms have
shown the space to several qualified prospective tenants. No replacement tenant
has yet been identified. The plan to build a Safeway Supermarket in the year
2002 near the Green Valley Mall will also have an adverse effect on leasing the
Abco 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 vacancy of
the Abco space. To date the vacancy of the Abco space has not had 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. However, no assurances can be given that the
continued Abco space vacancy won't cause existing tenants to leave, or won't
cause tenant renewals to be at lower rental rates. 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 holder of the first mortgage on the Green Valley Property
pending the resolution of the vacancy in this unoccupied anchor tenant space.
The tables on pages 7 and 8 further describe and summarize certain
operating data and tenant information for the Property as of December 31, 2001.
6
TABLE 1. SUMMARY OF OPERATING AND TENANT INFORMATION as of December 31, 2001
TENANT OCCUPYING>10% SQUARE OCCUPANCY BASE RENT
LOCATION PROPERTY OF GLA/NATURE OF BUSINESS FEET RATE PER SQ.FT.
- ----------- ---------------------- ------------------------- ------ -------- -----------
Searcy, AR Town & Country Plaza 78,436 98.72% $6.03 (1)
J.C. Penney 39,396 $5.22
Department Store
Dunlap Co. 15,600 $6.00
Junior Department Store
Valencia, CA Old Orchard Shopping Ctr. 103,413 96.21% $11.18 (1)
Albertson's 31,842 $9.42
Full Service Grocer
Rite Aid 18,125 $2.48
Pharmacy
Green Valley, AZ Green Valley Mall None (3) 194,750 67.33% $8.28 (1)
LEASE ANNUAL
LOCATION PERCENTAGE RENT & OTHER EXPIRATION R/E TAXES
- ----------- ----------------------- ---------- ---------
Searcy, AR $27,915
1.5% of Sales in excess 8/31/2007
of $11,820,004. Pro-rata
reimbursement for real estate
taxes over the base year amount.
Common area maintenance
reimbursed at fixed intervals
over the lease term.
Common area maintenance 1/31/2006
and insurance reimbursement
capped at $7,800 annually and
$1,080 annually, respectively.
Real Estate taxes reimbursed
over the 2001 base year.
Valencia, CA $146,341
1.25% of Sales in excess 6/30/2006
of $38,000,000 less amounts
paid for property taxes,
assessments and insurance
premiums. (2)
Rent is payable in an amount 5/31/2005
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 Valley , AZ $264,584
(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) Pro-rata reimbursement for real estate taxes, common area maintenance and
insurance.
(3) The sole space greater than 10% of GLA is currently vacant. Abco vacated
this space in May, 1999.
7
TABLE 2. SUMMARY OF LEASE EXPIRATIONS as of December 31, 2001
YEAR OF NUMBER OF GROSS LEASABLE ANNUAL % OF TOTAL ANNAUL
LOCATION PROPERTY LEASE EXPIRATION LEASES EXPIRING AREA EXPIRING MINIMUM RENT MINIMUM RENT
- -------------- ------------------------- ---------------- --------------- ------------- ------------ ------------
Searcy, AR Town & Country Plaza M-T-M 1 1,200 $7,200 1.6%
2002 2 5,973 $32,560 7.4%
2003 2 3,160 $30,039 6.8%
2005 1 6,680 $18,000 4.1%
2006 1 15,600 $93,600 21.4%
2007 1 39,396 $205,600 47.0%
2011 2 5,422 $51,295 11.7%
Vacancies 1 1,005 - - %
-- ------ ------- ------
Total 11 78,436 $438,294 100.0%
===== == ====== ======= ======
Valencia, CA Old Orchard Shopping Center 2002 4 7,367 $120,432 10.8%
2003 7 21,420 $283,962 25.6%
2004 2 5,400 $84,300 7.5%
2005 5 30,609 $237,137 21.3%
2006 2 32,194 $309,665 27.8%
2007 1 2,500 $77,254 7.0%
Vacancies 2 3,923 - -
-- ------- --------- ------
Total 23 103,413 $1,112,750 100.0%
===== == ======= ========= ======
Green Valley, AZ Green Valley Mall 2002 27 37,294 $283,710 30.5%
2003 21 31,152 $301,079 32.3%
2004 7 16,362 $76,082 8.2%
2005 4 16,263 $134,545 14.4%
2006 6 18,695 $126,571 13.6%
2008 1 11,425 $9,600 1.0%
Vacancies 17 63,559 - -
-- ------- ------- ------
Total 83 194,750 $931,587 100.0%
===== == ======= ======= ======
8
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, even if the
problem was caused by another party or a tenant. 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
9
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 or 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, 2002, the 1,518,800 Class A Interests and 2,111,072
Class B Interests outstanding were held by approximately 1,140 and 1,216
holders, respectively.
(c) The Partnership is a limited partnership and, accordingly, does not pay
dividends. Quarterly distributions of cash are made to its partners, from time
to time, depending upon distributable cash flow and certain other conditions.
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 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.
The Partnership suspended making distributions with respect to Class A Interest
subsequent to the second quarter
10
of 1999 after determining that unrestricted working capital levels were
inadequate due to (1) Abco vacating its space at the Green Valley Property in
May, 1999 and (2) several capital outlays for work performed at the Properties.
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.
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 and with the information
presented in Item 7, Management's Discussion & Analysis of Financial Condition
and Results of Operations.
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. There
have been no distributions with respect to the Class A Interest in 2000 & 2001.
No distributions were paid with respect to Class B Interests.
(d) Return of Capital is defined as distributions in excess of cumulative
net income.
11
CONCORD MILESTONE PLUS, L.P.
(A LIMITED PARTNERSHIP)
SELECTED FINANCIAL DATA
FOR YEAR ENDED FOR YEAR ENDED FOR YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- ----------------- -----------------
Operating Statement Data:
Revenue $3,146,281 $3,079,207 $2,986,502
Net (loss) income (240,452) (134,495) (84,307)
Balance Sheet Data:
Total assets 20,631,508 21,081,573 21,423,375
Long term debt 15,912,710 16,130,734 16,327,881
Total liabilities 16,343,712 16,553,325 16,760,632
Statement of Partners' (Deficit) Capital:
General Partner (79,687) (77,282) (75,937)
Class A Interests 4,367,483 4,605,530 4,738,680
Class B Interests 0 0 0
Total 4,287,796 4,528,248 4,662,743
Per 100 Class A Interests (a):
Net (loss) income, basic & diluted (b): (15.83) (8.86) (5.55)
Distributions (c): 0 0 4.61
Return of Capital (d): 0 0 4.61
FOR YEAR ENDED FOR YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
Operating Statement Data:
Revenue $3,103,638 $3,046,796
Net (loss) income 31,270 (271,920)
Balance Sheet Data:
Total assets 21,841,605 22,051,864
Long term debt 16,513,054 16,683,574
Total liabilities 16,974,551 17,216,080
Statement of Partners' (Deficit) Capital:
General Partner (73,894) (74,207)
Class A Interests 4,940,948 4,909,991
Class B Interests 0 0
Total 4,867,054 4,835,784
Per 100 Class A Interests (a):
Net (loss) income, basic & diluted (b): 2.06 (17.90)
Distributions (c): 3.29 3.29
Return of Capital (d): 3.29 3.29
See Notes to Selected Financial Data
12
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. 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 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. During 2001, the Partnership paid or
accrued $201,062 to MPMI for management fees and other services.
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. Competition for tenants may result in the
Partnership being unable to quickly re-lease space resulting in a decline in
cash flows. 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. See Item 2 for further detail.
13
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO 2000.
Revenues of the Partnership increased $67,074, or 2.2%, to $3,146,281 in 2001
from $3,079,207 in 2000 primarily due to the net effect of the following:
(1) Rent - An increase in base rent of $94,704, or 3.7%, to $2,655,451 in
2001 from $2,560,747 in 2000 is due to a decrease in vacancies and an
increase in base rent at the Searcy and Valencia properties.
(2) Reimbursed Expenses - A decrease in reimbursed expenses of $31,956, or
6.5%, to $458,441 in 2001 from $490,397 in 2000 is primarily due to
the write off of tax recovery charges, that were subsequently
determined to be not collectable.
Management and property expenses increased $135,504, or 14.1%, to
$1,094,114 in 2001 from $958,610 in 2000 is primarily due to: (a) an increase in
real estate taxes at the Green Valley Property and the direct payment by the
Partnership of real estate taxes for a parcel formerly paid directly by Abco,
and (b) repairs and maintenance expenses were incurred for all three properties
in 2001 that were not incurred in 2000. The timing of these expenses varies from
year to year.
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO 1999.
Revenues of the Partnership increased $92,705, or 3.1%, to $3,079,207 in 2000
from $2,986,502 in 1999 primarily due to the net effect of the following:
(1) Rent - An increase in base rent of $51,411, or 2.0%, to $2,560,747 in
2000 from $2,509,336 in 1999 is due to a decrease in vacancies and an
increase in base rent at the Valencia and Green Valley properties.
(2) Reimbursed Expenses - An increase in reimbursed expenses of $29,858,
or 6.5%, to $490,397 in 2000 from $460,539 in 1999 primarily due to an
increase in the recovery on both common area expenses and real estate
taxes at the Green Valley Property.
Management and property expenses increased $102,609, or 12.0%, to $958,610
in 2000 from $856,001 in 1999 due to increases in real estate taxes, insurance
and common area expenses at the Properties.
Administrative and management fees to a related party increased by $44,264
or 28.8% to $198,169 in 2000 from $153,905 in 1999 due to an additional
professional fee payable to Milestone Property Management, Inc. ("MPMI").
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 and future
operating requirements. 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
14
deficiencies may occur.
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 term on July 31, 1999. Abco vacated
its space in May, 1999. This space represents about 20% of the Green Valley
Property's leaseable area. The Partnership retained a large regional real estate
brokerage firm to help market the space. Such brokerage firm was replaced in
2000 by another large regional brokerage firm. Each of the brokerage firms have
shown the space to several qualified prospective tenants. No replacement tenant
has yet been identified. The plan to build a Safeway Supermarket in the year
2002 near the Green Valley Mall will also have an adverse effect on leasing the
Abco 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 vacancy of
the Abco space. To date the vacancy of the Abco space has not had 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. However, no assurances can be given that the
continued Abco space vacancy won't cause existing tenants to leave, or won't
cause tenant renewals to be at lower rental rates. 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 holder of the first mortgage on the Green Valley Property
pending the resolution of the vacancy in this unoccupied anchor tenant space.
The Partnership periodically makes distributions to its owners. The
partnership did not pay any distribution in 2001 or 2000. A 1998 fourth quarter
distribution of $50,001 was paid during February 1999. Also, a first quarter
distribution of $50,001 was paid during May 1999 and a second quarter
distribution of $20,002 was paid during August 1999. Distributions were
suspended after the second quarter of 1999 following the departure of Abco from
the Green Valley Property, which created vacant anchor tenant space.
Additionally, several capital projects were undertaken and completed at the
Properties. Further a 15,600 square feet anchor tenant at the Searcy Property
filed for Chapter 11 bankruptcy protection and vacated its store space in 2000.
The Partnership will evaluate the amount of future distributions, if any, on a
quarter by quarter basis. No assurances can be given as to the timing or amount
of any future distributions by the Partnership. Management is not aware of any
other significant trends, events, commitments or uncertainties that will or are
likely to materially impact the Partnership's liquidity.
The cash on hand at December 31, 2001 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 and (b) other
general Partnership purposes.
Net cash provided by operating activities of $455,220 for the year ended
December 31, 2001 was comprised of (i) net loss of $240,452, (ii) adjustments of
$650,189 for depreciation and amortization and (iii) a net change in operating
assets and liabilities of $45,483.
Net cash provided by operating activities of $442,228 for the year ended
December 31, 2000 was comprised of (i) net loss of $134,495, (ii) adjustments of
$636,489 for depreciation and amortization and (iii) a net change in operating
assets and liabilities of $59,766.
Net cash provided by operating activities of $528,387 for the year ended
December 31, 1999 was comprised of (i) net loss of $84,307, (ii) adjustments of
$630,782 for depreciation and amortization and (iii) a net change in operating
assets and liabilities of $18,088.
Net cash used in investing activities of $156,740 for the year ended
December 31, 2001 was comprised of capital expenditures for building
improvements.
Net cash used in investing activities of $166,603 for the year ended
December 31, 2000 was comprised
15
of capital expenditures for building improvements.
Net cash used in investing activities of $114,259 for the year ended
December 31, 1999 was comprised of capital expenditures for building
improvements.
Net cash used in financing activities of $218,507 for the year ended
December 31, 2001 included (i) principal repayments on mortgage loans payable of
$218,024, (ii) funds held in escrow of $483.
Net cash used in financing activities of $211,936 for the year ended
December 31, 2000 included (i) principal repayments on mortgage loans payable of
$197,147, (ii) funds held in escrow of $14,789.
Net cash used in financing activities of $288,647 for the year ended
December 31, 1999 included (i) principal repayments on mortgage loans payable of
$185,173, (ii) funds held in escrow of $16,530 and (iii) cash distributions to
partners of $120,004.
CURRENT ACCOUNTING ISSUES
SFAS NO. 133 AND NO. 138
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities, an Amendment
of FASB 133" establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. Changes in the fair value
of those derivatives will be reported in earnings or other comprehensive income
depending on the use of the derivative and whether the derivative qualifies for
hedge accounting. SFAS No. 133 and SFAS No. 138 are effective all fiscal
quarters of all fiscal years beginning after June 30, 2000. The Partnership
adopted SFAS No. 133, as amended by SFAS No. 138, on January 1, 2001.
The Partnership has identified a minimal number of embedded derivative
instruments, and these were evaluated for recording on the Partnership's balance
sheet at January 1, 2001. Within certain of its leases with tenants in its
Properties, the Partnership has embedded derivatives resulting from possible
limitations on scheduled rent increases, based on changes in CPI. These types of
limitations are common in the Partnership's industry. These embedded derivatives
have been valued at an insignificant amount, so the affect of the recording of
this new accounting pronouncement is inconsequential at January 1, 2001.
The adoption of SFAS No. 133 resulted in the Partnership recording a net
transition adjustment of an insignificant amount. The Partnership expects that
the adoption of SFAS No. 133 will not increase the volatility of its reported
earnings, as the embedded derivatives have not resulted in any material change
in the Partnership's earnings or cash flows in the past. The Partnership
believes that the impact of its embedded derivatives are not likely to be
material in the future.
SFAS NO. 140
Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
- -- a replacement of FASB No. 125," was issued in September 2000. It revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral and requires certain disclosures but will carry over most
of SFAS No. 125's provisions without reconsideration. SFAS No. 140 is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after
16
March 31, 2001. This statement is effective for recognition and reclassification
of collateral and for disclosures related to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The adoption of the
provisions of SFAS No. 140 did not have any material impact on the Company.
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations. SFAS No. 141 addresses financial accounting and reporting for
business combinations and supersedes Accounting Principles Board Opinion ("APB")
No. 16, Business Combinations, and SFAS No. 38, Accounting for Preacquisition
Contingencies of Purchased Enterprises. All business combinations in the scope
of SFAS No. 141 are to be accounted for under the purchase method. The adoption
of SFAS No. 141 in July 2001 did not have an impact on our financial position,
results of operations or cash flows.
In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 addresses financial accounting and reporting
for intangible assets acquired individually or with a group of other assets upon
their acquisition. SFAS No. 142 also addresses financial accounting and
reporting for goodwill and other intangible assets subsequent to their
acquisition. With the adoption of SFAS No. 142, goodwill is no longer subject to
amortization. Rather, goodwill will be subject to at least an annual assessment
for impairment by applying a fair value-based test. The impairment loss is the
amount, if any, by which the implied fair value of goodwill is less than the
carrying or book value. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. Impairment loss for goodwill arising from the initial
application of SFAS No. 142 is to be reported as resulting from a change in
accounting principle. We do not believe that the adoption of SFAS No. 142 will
have a material impact on our financial position, results of operation or cash
flows.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of and APB No. 30, Reporting the Results of Operations - Reporting the
Effects of the Disposal of a Segment Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 144 establishes a
single accounting model for assets to be disposed of by sale whether previously
held and used or newly acquired. SFAS No. 144 retains the provisions of APB No.
30 for presentation of discontinued operations in the income statement, but
broadens the presentation to include a component of an entity. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001 and the interim
periods within. We do not believe that the adoption of SFAS No. 144 will have a
material impact on our financial position, results of operations or cash flow.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnership, in its normal course of business, is theoretically exposed
to interest rate changes as they relate to real estate mortgages and the effect
of such mortgage rate changes on the values of real estate. However, for the
Partnership, all of its mortgage debt is at fixed rates, is for extended terms,
and would be unaffected by any sudden change in interest rates. The
Partnership's possible risk is from increases in long-term real estate mortgage
rates that may occur over a number of years, as this may decrease the overall
value of real estate. Since the Partnership has the intent to hold its existing
mortgages to maturity (or until the sale of a Property), there is believed to be
no interest rate market risk on the Partnership's results of operations or its
working capital position. The Partnership estimates the fair value of its long
term fixed rate Mortgage Loans generally using discounted cash flow analysis
based on the Partnership's current borrowing rates for similar types of debt. At
December 31, 2001, the fair value of the Mortgage Loans was estimated to be
$18,708,847 compared to a carrying value amount of $15,912,710.
The Partnership's cash equivalents and short-term investments, if any,
generally bear variable interest rates. Changes in the market rates of interest
available will affect from time-to-time the interest earned by the
17
Partnership. Since the Partnership does not rely on its interest earnings to
fund working capital needs, changes in these interest rates will not have an
impact on the Partnership's results of operations or working capital position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data are included elsewhere in
this document, as listed on the accompanying index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the last two fiscal years, no changes of accountants and
disagreements with accountants on accounting and financial disclosure occurred.
18
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) 55 President Inception (2)
and Director
Robert A. Mandor (3) 49 Vice President Inception
and Director
Joseph P. Otto 48 Vice President October 3, 1997
and Secretary
Patrick Kirse 33 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. Mr. Mandor is
the President, Chief Financial Officer, and a Director of Milestone Properties,
Inc. Mr. Mandor has been associated with Concord since its inception in 1981.
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. 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. 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.
19
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 2001.
ITEM 11. COMPENSATION.
During 2001, the Partnership paid or accrued:
(i) $68,500 to Milestone Properties, Inc. ("MPI"), an affiliate of
the General Partner, for administrative services rendered to the
Partnership. Pursuant to an agreement between MPI and the
Partnership, the Partnership reimburses MPI for administrative
services provided to the Partnership, such as payroll, investor
services and supplies in an amount equal to $68,500 per year.
(ii) $132,561 to MPMI for property management fees for the fiscal year
ended December 31, 2001. 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 properties for which MPMI performs leasing
services, 3 percent for multiple tenant properties for which MPMI
does not perform leasing services and 1 percent for single tenant
properties. The management fees are 3 percent for the Searcy
Property, 4 percent for the Valencia Property and 5 percent for
the Green Valley Property. The management fee for any Property
may not exceed competitive fees for comparable services
reasonably available to the Partnership in the same geographic
area as the property in question. Gross revenues are defined in
the management agreement to mean, with respect to each Property,
all base, additional and percentage rents collected from the
Property but exclude all other receipts or income with respect to
that Property, such as, (i) receipts arising out of any sale of
assets or of all or part of the Property, condemnation proceeds
and other items of a similar nature; (ii) payments made by
tenants for over-standard finish out improvements or other
amortization; (iii) income derived from interest on investments,
security deposits utility deposits; (iv) proceeds of claims under
insurance policies; (v) abatements or reductions of taxes; (vi)
security deposits made by tenants; or (vii) any portions of
rentals which are specifically designated as amortization of, or
interest on, tenant moving expenses, takeover expenses or similar
items in the nature of advances by the Partnership.
No officer, or director of the General Partner received any direct
compensation from the Partnership during the fiscal year ended December 31,
2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The General Partner knows of only one beneficial owner of five percent
or more of the issued and outstanding Class A Interests. The General Partner
knows of only two beneficial owners 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, 2002:
20
AMOUNT AND
NATURE OF PERCENT
TITLE NAME AND ADDRESS OF BENEFICIAL OF
OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- --------- ----------------------- ---------- --------
Class A KM Investments, LLC 98,068* 6.46%
Interests 199 South Los Robles
Suite #440
Pasadena, CA 91101
Class B The Guardian Life 572,292* 27.11%
Interests Insurance Company
of America
203 Park Avenue South
New York, NY 10003
Class B KM Investments, LLC 98,284* 4.66%
Interests 199 South Los Robles
Suite #440
Pasadena, CA 91101
- -----------------------
* To the best of the Partnership's knowledge, both The Guardian Life
Insurance Company of America and KM Investments, LLC have 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 common 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, 2002 is set
forth in the following table:
AMOUNT 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.
21
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
elsewhere in this Report.
(b) 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.
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,
("1998 Form 10-K"), which is incorporated herein by reference.
22
4.1 Form of certificate evidencing Class A Interests included as Exhibit
4.3 to the 1987 Form 10-K, which is incorporated herein by reference.
4.2 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.
10.5 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").
10.6 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.
10.7 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.
23
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
24
10.17 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.
10.18 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.
25
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 15, 2002.
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 15, 2002
--------------------------------------
Leonard S. Mandor
President (Principal Executive Officer)
and Director of CM Plus Corporation
and CMP Beneficial Corp.
By: /s/ Robert A. Mandor March 15, 2002
--------------------------------------
Robert A. Mandor
Vice President and Director of CM Plus
Corporation and CMP Beneficial Corp.
By: /s/ Patrick Kirse March 15, 2002
--------------------------------------
Patrick Kirse
Treasurer and Controller (Principal
Accounting Officer) of CM Plus
Corporation and CMP Beneficial Corp.
26
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 15, 2002.
CONCORD MILESTONE PLUS, L.P.
By: CM PLUS CORPORATION,
General Partner
By:
--------------------------------
Leonard S. Mandor, President
CMP BENEFICIAL CORP.
(Registrant of Beneficial Interests)
By:
--------------------------------
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: March 15, 2002
---------------------------------------
Leonard S. Mandor
President (Principal Executive Officer)
and Director of CM Plus Corporation
and CMP Beneficial Corp.
By: March 15, 2002
---------------------------------------
Robert A. Mandor
Vice President and Director of CM Plus
Corporation and CMP Beneficial Corp.
By: March 15, 2002
---------------------------------------
Patrick Kirse
Treasurer and Controller (Principal
Accounting Officer) of CM Plus
Corporation and CMP Beneficial Corp.
27
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE
PAGE NO.
--------
1. Financial Statements:
a. Concord Milestone Plus, L.P.
1. Independent Auditors' Reports ...........................29
2. Balance Sheets, December 31, 2001 and December 31, 2000..30
3. Statements of Revenues and Expenses for the Years Ended
December 31, 2001, 2000 and 1999 ........................31
4. Statements of Changes in Partners' Capital for the Years
Ended December 31, 2001, 2000 and 1999 ..................32
5. Statements of Cash Flows for the Years Ended December
31, 2001, 2000 and 1999 .................................33
6. Notes to Financial Statements ...........................34
2. Financial Schedule:
a. Real Estate and Accumulated Depreciation (Schedule III) ........41
This financial statement schedule of the Partnership for each of the years
ended December 31, 2001, 2000 and 1999 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.
28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Concord Milestone Plus, L.P.
We have audited the accompanying balance sheets of Concord Milestone Plus, L.P.
(the "Partnership") as of December 31, 2001 and 2000, and the related statements
of revenues and expenses, changes in partners' capital, and cash flows for each
of the three years in the period ended December 31, 2001. Our audits also
included the information contained in the financial statement schedule of real
estate and accumulated depreciation. These financial statements and the
financial statement schedule of real estate and accumulated depreciation are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the financial statements and the financial statement schedule of
real estate and accumulated depreciation based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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. as
of December 31, 2001, and 2000, and the results of its operations, changes in
partners' capital and its cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the information
contained in 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 1, 2002
29
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2001 and 2000
December 31, December 31,
2001 2000
------------- -------------
Property:
Building and improvements, at cost $ 16,068,049 $ 15,911,310
Less: accumulated depreciation 7,814,386 7,201,754
----------- -----------
Building and improvements, net 8,253,663 8,709,556
Land, at cost 10,987,034 10,987,034
----------- ----------
Property, net 19,240,697 19,696,590
Cash and cash equivalents 705,399 625,426
Accounts receivable 206,749 251,756
Restricted cash 230,673 230,189
Debt financing costs, net 180,169 211,503
Prepaid expenses and other assets, net 67,821 66,109
----------- -----------
Total assets $20,631,508 $21,081,573
=========== ===========
Liabilities:
Mortgage loans payable $15,912,710 $16,130,734
Accrued interest 111,892 113,424
Deposits 82,498 87,266
Accrued expenses and other liabilities 194,032 159,147
Accrued expenses payable to affiliates 42,580 62,754
----------- -----------
Total liabilities 16,343,712 16,553,325
----------- -----------
Commitments and Contingencies
Partners' capital:
General partner (79,687) (77,282)
Limited partners:
Class A Interests, 1,518,800 4,367,483 4,605,530
Class B Interests, 2,111,072 - -
----------- -----------
Total partners' capital 4,287,796 4,528,248
----------- -----------
Total liabilities and partners' capital $20,631,508 $21,081,573
=========== ===========
See Accompanying Notes to Financial Statements
30
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
December 31, December 31, December 31,
2001 2000 1999
------------- ------------- -------------
Revenues:
Rent $2,655,451 $2,560,747 $2,509,336
Reimbursed expenses 458,441 490,397 460,539
Interest and other income 32,389 28,063 16,627
---------- ---------- ----------
Total revenues 3,146,281 3,079,207 2,986,502
---------- ---------- ----------
Expenses:
Interest expense 1,325,740 1,346,743 1,358,804
Depreciation and amortization 650,869 636,489 630,782
Management and property expenses 1,094,114 958,610 856,001
Administrative and management fees
to related party 201,061 198,169 153,905
Professional fees and other expenses 114,949 73,691 71,317
---------- ---------- ----------
Total expenses 3,386,733 3,213,702 3,070,809
---------- ---------- ----------
Net loss $ (240,452) $(134,495) $ (84,307)
========== ========== ==========
Net loss attributable to:
Limited partners $(238,047) $(133,150) $(83,464)
General partner (2,405) (1,345) (843)
---------- ---------- ----------
Net loss $(240,452) $(134,495) $(84,307)
========== ========== ==========
Loss per weighted average
Limited Partnership 100 Class A
Interests outstanding, basic and diluted $(15.83) $ (8.86) $ (5.55)
========== ========== ==========
Weighted average number of 100
Class A interests outstanding 15,188 15,188 15,188
========== ========== ==========
See Accompanying Notes to Financial Statements
31
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, and 1999
General Class A Class B
Total Partner Interests Interests
---------- --------- ---------- ---------
PARTNERS' CAPITAL (DEFICIT)
January 1, 1999 $4,867,054 $(73,894) $4,940,948 -
---------- --------- ---------- ---------
Distributions (120,004) (1,200) (118,804)
Net Loss (84,307) (843) (83,464) -
---------- --------- ---------- ---------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1999 4,662,743 (75,937) 4,738,680 -
---------- --------- ---------- ---------
Net Loss (134,495) (1,345) (133,150) -
---------- --------- ---------- ---------
PARTNERS' CAPITAL (DEFICIT)
December 31, 2000 4,528,248 (77,282) 4,605,530 -
---------- --------- ---------- ---------
Net Loss (240,452) (2,405) (238,047) -
---------- --------- ---------- ---------
PARTNERS' CAPITAL (DEFICIT)
December 31, 2001 $4,287,796 $(79,687) $4,367,483 -
========== ========= ========== ---------
See Accompanying Notes to Financial Statements
32
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 and 1999
December 31, December 31, December 31,
2001 2000 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(240,452) $(134,495) $(84,307)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 650,189 636,489 630,782
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 45,007 (41,857) 14,373
Increase in prepaid expenses and other assets, net (7,935) (7,749) (3,715)
Decrease in accrued interest (1,532) (1,385) (1,301)
Increase (decrease) in accrued expenses, deposits, and other 30,117 (19,530) (33,803)
Increase (decrease) in accrued expenses payable to affiliates (20,174) 10,755 6,358
--------- ---------- --------
Net cash provided by operating activities 455,220 442,228 528,387
--------- ---------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Property improvements (156,740) (166,603) (114,259)
--------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease (increase) in restricted cash (483) (14,789) 16,530
Principal repayments on mortgage loans payable (218,024) (197,147) (185,173)
Cash distributions to partners - - (120,004)
--------- ---------- --------
Net cash used in financing activities (218,507) (211,936) (288,647)
--------- ---------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 79,973 63,689 125,481
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 625,426 561,737 436,256
--------- ---------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 705,399 $ 625,426 $561,737
========== ========== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $1,327,272 $1,348,128 $1,360,105
---------- ========= =========
See Accompanying Notes to Financial Statements
33
CONCORD MILESTONE PLUS, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
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.
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 of the
space formerly leased to Abco at the Green Valley property and satisfaction of
certain other conditions related thereto.
REVENUE RECOGNITION
Rental income is accrued as earned except when doubt exists as to
collectibility, in which case the accrual is discontinued. When rental payments
due under leases vary from a straight-line basis because of free rent periods or
stepped increases, income is recognized on a straight-line basis in accordance
with generally accepted accounting
34
principles. Reimbursed expenses represent a portion of property operating
expense billed to the tenants, including common area maintenance, real estate
taxes and other recoverable costs. Expenses subject to reimbursement are
recognized in the period when the expenses are incurred. Rental income based on
a tenant's revenues ("percentage rent") is accrued when a tenant reports sales
that exceed a specified amount.
PROPERTY
Property is carried at cost, and depreciated on a straight-line basis over the
estimated useful life of 31.5 years. Building improvements and other depreciable
assets are carried at cost, and depreciated on a straight-line basis using an
estimated useful life of 3 to 10 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. Total depreciation expense was $612,632, $596,210,
$593,225, in 2001, 2000, and 1999, respectively.
The Partnership's individually reviews each of their properties for possible
impairment at least annually, and more frequently if circumstances warrant.
Impairment is determined to exist when estimated amounts recoverable through
future cash flows from operations on an un-discounted basis is less than the
property's carrying value. If a property is determined to be impaired, it is
written down to its estimated fair value to the extent that the carrying amount
exceeds the fair value of the property. No write downs for impairment of
property investments were recorded in 2001, 2000, and 1999.
The determination of impairment is based, not only upon future cash flows, which
rely upon estimates and assumptions including expense growth, occupancy and
rental rates, but also upon market capitalization and discount rates as well as
other market indicators. The Partnership believes that the estimates and
assumptions used are appropriate in evaluating the carrying amount of the
Partnership's properties. However, changes in market conditions and
circumstances may occur in the near term which would cause these estimates and
assumptions to change, which, in turn, could cause the amounts ultimately
realized upon the sale or other disposition of the properties to differ
materially from their carrying value. Such changes may also require future
write-downs.
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 $3,197,863 and $3,090,677 higher
than the amounts reported for financial statement purposes at December 31, 2001
and 2000, 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.
DEBT FINANCING COSTS
The costs to obtain the 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
The Partnership follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No.128, "Earnings per Share". SFAS No.128 requires 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 income (loss) allocable to the limited partners by the weighted
average number of 100 Class A Interests outstanding during the year.
35
STATEMENT OF COMPREHENSIVE INCOME (LOSS)
A statement of comprehensive income (loss) has not been included per SFAS No.
130, "Reporting Comprehensive Income", as the Partnership has no items of other
comprehensive income (loss)
STATEMENT OF DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services, geographic areas
and major customers. The Partnership's operations are within one reportable
segment.
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 1999 and 2000 financial
statements to conform with the 2001 presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain hedging Activities, an Amendment
of FASB No. 133" establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. Changes in the fair value
of those derivatives will be reported in earnings or other comprehensive income
depending on the use of the derivative and whether the derivative qualifies for
hedge accounting. These pronouncements are effective for all fiscal quarters of
fiscal years beginning after June 30, 2000. The Partnership adopted SFAS No.
133, as amended by SFAS No. 138, on January 1, 2001. Adoption of these SFAS did
not have any material impact on reported earnings, comprehensive income, or
financial position, as the Partnership's derivative instruments embedded in
certain leases are insignificant, and the Partnership does not use any hedging
activities.
In July 2001, the Financial Accounting Standards Board (FASB") issued
Statement of Financial Accounting Standards (SFAS") No. 141, Business
Combinations, SFAS No. 141 addresses financial accounting and reporting for
business combinations and supersedes Accounting Principles Board Opinion ("APB")
No. 16, Business Combinations, and SFAS No. 38, Accounting for Preacquisition
Contingencies of Purchased Enterprises. All business combination in the scope of
SFAS No. 141 are to be accounted for under the purchase method. The adoption of
SFAS No. 141 in July 2001 did not have an impact on our financial position,
results of operations or cash flows.
In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other
Intangible Asset s. SFAS No. 142 addresses financial accounting and reporting
for intangible assets acquired individually or with a group of other
36
assets upon their acquisition. SFAS No. 142 also addresses financial accounting
and reporting for goodwill and other intangible assets subsequent to their
acquisition. With the adoption of SFAS No. 142, goodwill is no longer subject to
amortization. Rather, goodwill will be subject to at least an annual assessment
for impairment by applying a fair value-based test. The impairment loss is the
amount, if any, by which the implied fair value of goodwill is less than the
carrying or book value. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. Impairment loss for goodwill arising from the initial
application of SFAS No. 142 is to be reported as resulting from a change in
accounting principle. We do not believe that the adoption of SFAS No. 142 will
have a material impact on our financial position, results of operations or cash
flows.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of and APB No. 30, Reporting the Results of Operations - Reporting the
Effects of the Disposal of a Segment Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS No. 144 establishes a
single accounting model for assets to be disposed of by sale whether previously
held and used or newly acquired. SFAS No. 144 retains the provisions of APB No.
30 for presentation of discontinued operations in the income statement, but
broadens the presentation to include a component of an entity. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001 and the interim
periods within. We do not believe that the adoption of SFAS No. 144 will have a
material impact on our financial position, results of operation or cash flows.
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
37
from Concord Milestone Plus of Arizona Limited Partnership, an affiliated
entity, for $9,687,000.
Minimum base rental income under non-cancelable tenant lease agreements, having
lease terms expiring from one to eight years, at December 31, 2001 are as
follows:
Year Ended
December 31 Amount
------------ ----------
2002 $2,273,318
2003 1,738,404
2004 1,307,090
2005 1,098,923
2006 588,220
Thereafter 383,398
---------
Total $7,389,353
=========
The above table does not include contingent rental amounts. The total contingent
rentals received in 2001, 2000, and 1999, were $181,002, $148,585, and $142,847,
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 2001, 2000, and 1999 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, 2001, 2000,
and 1999, were $132,561, $129,660, and $128,904, respectively. Management Fees
are payable to Milestone Property Management, Inc., a Delaware corporation and
affiliate of the General Partner ("MPMI").
The Partnership accrued and paid $68,500 to MPI for administrative services for
the years ended December 31, 2001. As of December 31, 2000 and 1999, the
Partnership accrued $62,754 and $51,991, respectively, payable to Milestone
Properties, Inc. ("MPI"), an affiliate of the General Partner for administrative
and management fees.
6. MORTGAGE LOANS PAYABLE
As of September 30, 1997, the Partnership closed three fixed rate first mortgage
loans (the "Mortgage Loans") in the amounts of $2,865,000, $8,445,000 and
$5,400,000. All three Mortgage Loans are secured by cross-collateralized first
mortgages on the Partnership's shopping centers.
The Mortgage Loans and related terms at December 31, 2001 are summarized as
follows:
PRINCIPAL MONTHLY
BALANCE AT PAYMENTS OF
DECEMBER INTEREST PRINCIPAL
PROPERTY/LOCATION 31, 2001 RATE % AND INTEREST
----------------- ----------- ------ ------------
Searcy, AR $2,748,649 8.125 $21,640
Valencia, CA 7,977,640 8.125 65,881
Green Valley, AZ 5,186,421 8.250 41,252
---------- ----- --------
38
Total $15,912,710 $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, 2001 are
as follows:
Year Ending
December 31 Amount
----------- -----------
2002 $236,758
2003 257,101
2004 275,482
2005 302,865
2006 328,891
Thereafter 14,511,613
-----------
Total $15,912,710
==========
In connection with the Green Valley Mortgage Loan, the Partnership has deposited
$150,000 into an escrow account with the Lender. The funds held in this escrow
account may be released upon the execution of a new lease for specified vacant
anchor tenant space, with a termination date of July 31, 2004 or later, and the
satisfaction of certain other conditions related thereto.
CM Plus Corporation, the general partner of the Partnership, guarantees certain
limited recourse obligations under the Mortgage Loans.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values were determined by the Partnership using
available market information and valuation methodologies considered appropriate
by management. However, considerable judgement is necessary to interpret and
apply market data to develop specific fair value estimates for given financial
instruments, and the use of different market assumptions and/or estimation
methodologies could have a material effect on reported fair value amounts.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that could be realized upon disposition of the Partnership's
financial instruments.
Cash and cash equivalents, accounts receivable and accrued expenses and other
liabilities are reflected in the balance sheets at cost, which is considered by
management to reasonably approximate fair value due to their short term nature.
The Partnership estimates the fair value of its long term fixed rate Mortgage
Loans generally using discounted cash flow analysis based on current rates for
similar types of debt. At December 31, 2001, the fair value of the Mortgage
Loans was estimated to be $18,708,846 compared to a carrying value amount of
$15,912,710. The fair value estimates presented herein are based on information
available as of December 31, 2001. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, a
comprehensive re-
39
evaluation of all of the Properties has not been performed for purposes of
these financial statement disclosures.
8. 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 term on July 31, 1999. Abco vacated its space in
May, 1999. This space represents about 20% of the Green Valley Property's
leaseable area. The Partnership retained a large regional real estate brokerage
firm to help market the space. Such brokerage firm was replaced in 2000 by
another large regional brokerage firm. Each of the brokerage firms have shown
the space to several qualified prospective tenants. No replacement tenant has
yet been identified. The plan to build a Safeway Supermarket in the year 2002
near the Green Valley Mall will also have an adverse effect on leasing the Abco
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 vacancy of the Abco
space. To date the vacancy of the Abco space has not had 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. However, no assurances can be given that the continued Abco
space vacancy won't cause existing tenants to leave, or won't cause tenant
renewals to be at lower rental rates. 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 holder of the first mortgage on the Green Valley Property
pending the resolution of the vacancy in this unoccupied anchor tenant space.
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, even if the
problem was caused by another party or a tenant. 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, 2001, management believes that any such outstanding
issues will be resolved without significantly impairing the financial condition
of the Partnership.
40
CONCORD MILESTONE PLUS, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
Costs
Capitalized
Subsequent
Initial Cost to Acquisition
------------------------- --------------------------
Building & Building &
Description and Location Encumbrances Land Improvements Improvements Land
- ------------------------------- ------------- --------- ------------ ------------ ----
Town & Country Plaza $2,748,649 $430,000 $3,620,000 $455,340 $430,000
Searcy, AR
Old Orchard Shopping Center 7,977,640 6,500,000 5,075,000 1,369,256 6,500,000
Valencia, CA
Green Valley Mall 5,186,421 5,100,000 4,587,000 1,566,818 4,057,034
--------- ----------- ---------- ---------- ----------
Green Valley, AZ
$15,912,710 $12,030,000 $13,282,000 $3,391,414 $10,987,034
========== ========== ========== ========= ==========
Gross Amount at
which Carried at Close of Period
-------------------------------------------------------
Building & Accumulated Dated Depreciation
Description and Location Improvements Total Depreciation Acquired Life
- ------------------------------- ------------ ---------- ------------ ---------- ------------
Town & Country Plaza $4,213,387 $4,643,387 $1,937,220 08/20/87 31.5 years
Searcy, AR
Old Orchard Shopping Center 6,593,062 13,093,062 3,078,830 01/22/88 31.5 years
Valencia, CA
Green Valley Mall 5,261,600 9,318,634 2,798,336 04/15/88 31.5 years
---------- ---------- ---------
Green Valley, AZ
$16,068,049 $27,055,083 $7,814,386
========== ========== =========
2001 2000 1999
(A) Reconciliation of investment properties owned:
Beginning balance $26,898,343 $26,731,741 $26,617,482
Property acquisitions/improvements 156,740 166,602 114,259
Write-down of property 0 0 0
---------------- ---------------- ----------------
Balance at end of period $27,055,083 $26,898,343 $26,731,741
========== ========== ==========
(B) Reconciliation of accumulated depreciation:
Beginning balance $7,201,754 $6,605,544 $6,017,284
Depreciation expense 612,632 596,210 588,260
----------- ----------- -----------
Balance at end of period $7,814,386 $7,201,754 $6,605,544
========= ========= =========
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