UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q (mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-16757 CONCORD MILESTONE PLUS, L.P. (Exact Name of Registrant as Specified in its Charter) Delaware 52-1494615 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 5200 TOWN CENTER CIRCLE 4TH FLOOR BOCA RATON, FLORIDA 33486 - --------------------------------------- --------- (Address of Principal Executive Offices) (Zip Code) (561) 394-9260 Registrant's Telephone Number, Including Area Code Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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 for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) BALANCE SHEETS JUNE 30, 1997 (Unaudited) AND DECEMBER 31, 1996 ASSETS June 30, 1997 December 31, 1996 Property, at cost Building and improvements ............................................... $ 15,392,473 $ 15,359,462 Less: accumulated depreciation .......................................... 5,120,022 4,829,534 ------------ ------------ Building and improvements, net .......................................... 10,272,451 10,529,928 Land .................................................................... 10,987,034 10,987,034 ------------ ------------ Total property .......................................................... 21,259,485 21,516,962 Cash and cash equivalents ................................................... 320,376 326,120 Accounts receivable ......................................................... 177,234 200,975 Prepaid expenses ............................................................ 11,314 22,864 Other assets, net ........................................................... 56,691 19,854 ------------ ------------ Total assets .......................................................... $ 21,825,100 $ 22,086,775 ============ ============ LIABILITIES AND PARTNERS' CAPITAL Liabilities: Bonds payable, net .......................................................... $ 16,460,578 $ 16,473,060 Accrued interest ............................................................ 137,100 137,100 Accrued expenses and other liabilities ...................................... 275,065 255,137 Due to affiliates ........................................................... 0 11,985 ------------ ------------ Total liabilities ....................................................... 16,872,743 16,877,282 ------------ ------------ Commitments and Contingencies Partners' capital: General partner ......................................................... (73,042) (70,470) Limited partners: Class A Interests, 1,518,800 ........................................ 5,025,399 5,279,963 ------------ ------------ Total partners' capital ................................................. 4,952,357 5,209,493 ------------ ------------ Total liabilities and partners' capital ................................. $ 21,825,100 $ 22,086,775 ============ ============ See Accompanying Notes to Financial Statements -2- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF REVENUES AND EXPENSES (Unaudited) FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 June 30,1997 June 30, 1996 Revenues: Rent .............................................. $ 576,105 $ 683,408 Reimbursed expenses ............................... 123,990 109,896 Interest and other income ......................... 9,332 5,007 --------- --------- Total revenues ................................ 709,427 798,311 --------- --------- Expenses: Interest expense .................................. 411,300 390,735 Depreciation and amortization ..................... 142,444 159,680 Management and property expenses .................. 185,233 218,324 Administrative and management fees to related party 24,895 41,146 Professional fees and other expenses .............. 109,957 42,551 --------- --------- Total expenses ................................ 873,829 852,436 --------- --------- Net loss .......................................... $(164,402) $ (54,125) ========= ========= Net loss attributable to: Limited partners .............................. $(162,758) $ (53,584) General partners .............................. (1,644) (541) --------- --------- Net loss .......................................... $(164,402) $ (54,125) ========= ========= Loss per weighted average Limited Partnership 100 Class A Interests outstanding ............................. $ (10.72) $ (3.52) ========= ========= Weighted average number of interests outstanding ............................. 15,188 15,188 ========= ========= See Accompanying Notes to Financial Statements -3- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF REVENUE AND EXPENSES (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 June 30,1997 June 30, 1996 Revenues: Rent .............................................. $ 1,268,973 $ 1,319,652 Reimbursed expenses ............................... 239,231 195,448 Interest and other income ......................... 15,472 8,371 ----------- ----------- Total revenues ................................ 1,523,676 1,523,471 ----------- ----------- Expenses: Interest expense .................................. 822,600 781,470 Depreciation and amortization ..................... 285,050 318,902 Management and property expenses .................. 376,991 407,696 Administrative and management fees to related party 53,503 54,559 Professional fees and other expenses .............. 140,602 71,315 ----------- ----------- Total expenses ................................ 1,678,746 1,633,942 ----------- ----------- Net loss .......................................... $ (155,070) $ (110,471) =========== =========== Net loss attributable to: Limited partners .............................. $ (153,519) $ (109,366) General partners .............................. (1,551) (1,105) ----------- ----------- Net loss .......................................... $ (155,070) $ (110,471) =========== =========== Loss per weighted average Limited Partnership 100 Class A Interests outstanding ............................. $ (10.11) $ (7.20) =========== =========== Weighted average number of interests outstanding ............................. 15,188 15,188 =========== =========== See Accompanying Notes to Financial Statements -4- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1997 General Class A Total Partner Interests ----------- ----------- ----------- PARTNERS' CAPITAL (DEFICIT) January 1, 1997 ................................................ $ 5,209,493 $ (70,470) $ 5,279,963 Distributions ........................................................ (102,066) (1,021) (101,045) Net Loss ............................................................. (155,070) (1,551) (153,519) ----------- ----------- ----------- PARTNERS' CAPITAL (DEFICIT) June 30, 1997 .................................................. $ 4,952,357 $ (73,042) $ 5,025,399 =========== =========== =========== See Accompanying Notes to Financial Statements -5- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF CASH FLOWS (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 June 30,1997 June 30, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss .......................................... $(155,070) $(110,471) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ............. 285,050 318,902 Change in operating assets and liabilities: Decrease (increase) in accounts receivable 23,741 (13,290) Decrease in prepaid expenses .............. 11,550 30,675 Increase in other assets, net ............. (43,881) (1,397) Decrease in due from affiliates, net ...... 0 562 Increase (decrease) in accrued expenses and other liabilities .................... 19,928 (61,042) Decrease in due to affiliate .............. (11,985) 0 --------- --------- Net cash provided by operating activities ......... 129,333 163,939 --------- --------- CASH FLOWS FROM INVESTING ACTIVITY: Property improvements ..................... (33,011) (11,455) --------- --------- CASH FLOWS FROM FINANCING ACTIVITY: Cash distributions to partners ............ (102,066) (99,852) --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...................... (5,744) 52,632 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ... 326,120 218,872 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD ......... $ 320,376 $ 271,504 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest .......... $ 822,600 $ 781,470 ========= ========= See Accompanying Notes to Financial Statements -6- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) NOTES TO FINANCIAL STATEMENTS (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1997 The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the provisions of Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications were made to the accompanying 1996 financial statements to conform to the 1997 presentation. 1. Bonds Payable The Bonds mature on November 30, 1997, at which time the outstanding principal balance of $16,452,000 will be due. The Partnership has not yet obtained any commitments for refinancing and has not entered into any agreements to sell any of the Properties. [See footnote 3. Commitments and Contingencies. for further discussion.] The Partnership is currently seeking to refinance the Properties and Tri-Stone Mortgage Company ("Tri-Stone"), an affiliate of the General Partner, is assisting the Partnership, without compensation, in obtaining suitable refinancing. In the event that a refinancing sufficient to satisfy the Bonds appears unlikely, the General Partner will attempt to sell one or more of the Properties. The General Partner believes that the Partnership will be able to obtain adequate proceeds from a refinancing or sale of the Properties, or a combination of the two, to enable the Partnership to satisfy the Bonds on or prior to their maturity. Nevertheless, there can be no assurance the Partnership will be able to raise sufficient proceeds through a refinancing or sale prior to the Bond maturity date, or that the terms of any such refinancing or sale will be attractive to the Partnership. In the event that the Partnership is unable to raise adequate funds to satisfy the Bonds at maturity, there is a risk of foreclosure under the Bond Mortgages. -7- 2. Commitments and Contingencies A prospective lender from whom the Partnership has sought a refinancing commitment engaged an independent environmental and geotechnical consulting firm to perform environmental due diligence on the Properties. After various tests, that consultant identified chemical contamination in the soil at a site at the Old Orchard Shopping Center in Valencia, California which it believes is attributable to improper handling of dry cleaning solvent by a tenant. Based on the results of soil sampling and testing and the condition of the site, the environmental consultant has concluded that the contaminated area is an excellent candidate for receipt of regulatory closure of environmental issues through the use of a health-risk assessment process which, if accepted by the California Environmental Protection Agency, would obviate the need for active remediation by the Partnership. The consultant has estimated that pursuing a "risk- based closure" for the site would require a minimum of three to four months and will cost between $28,000 and $100,000 assuming that the Partnership applies for and receives regulatory agency acceptance of the risk-based closure for the site without active remediation. The Partnership currently intends to pursue the course of action recommended by the environmental consultant. There can be no assurance, however, that the Partnership will be granted a health-risk-basis-closure and will not be responsible for active remediation of the affected site, the cost of which could be substantial. 3. Recently Issued Accounting Pronouncement The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" in February, 1997. This pronouncement establishes standards for computing and presenting earnings per share, and is effective for the Partnership's 1997 year-end financial statements. The General Partner has determined that this standard will not have a significant impact on the Partnership's computation or presentation of net income per limited partner interest. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Organization and Capitalization Concord Milestone Plus, L.P., a Delaware limited partnership (the "Partnership"), was formed on December 12, 1986, for the purpose of investing in existing income-producing commercial and industrial real estate. The Partnership began operations on August 20, 1987, and currently owns and operates three shopping centers located in Searcy, Arkansas; Valencia, California; and Green Valley, Arizona. -8- 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 consists of $1,000 principal amount of Bonds and 36 Class B Interests. Each Equity Unit consists of 100 Class A Interests and 100 Class B Interests. Capital contributions to the Partnership consisted of $15,187,840 from the sale of the Equity Units and $592,272 which represent the Class B Interests from the sale of the Bond Units. Results of Operations Comparison of Quarter Ended June 30, 1997 to Quarter Ended June 30, 1996 The Partnership recognized a net loss of $164,402 for the quarter ended June 30, 1997 as compared to a loss of $54,125 for the same period in 1996 due to the following factors: A decrease in revenues of $88,884, or 11.1% to $709,427 for the quarter ended June 30, 1997 as compared to $798,311 for the quarter ended June 30, 1996 is primarily due to the net effect of the following: (1) rents received in advance totalling $42,000 during the first quarter of 1997 which related to the second quarter were recorded as revenue in the three months ended March 31, 1997; (2) percentage rent collections decreased in the quarter ended June 30, 1997 primarily due to Thrifty Drugs at Old Orchard Shopping Center located in Valencia, California which recorded a decrease of $15,000 in percentage rent revenues due to adjustments of prior quarter accruals through current quarter revenue; (3) rent abatements for two tenants at Green Valley Mall of approximately $4,000 occurred during the quarter ended June 30, 1997; and (4) a decrease in minor tenant occupancy at the Old Orchard Shopping Center also contributed to the decrease in revenues. Management and property expenses decreased $33,091, or 15.2%, to $185,233 for the quarter ended June 30, 1997 as compared to $218,324 for the quarter ended June 30, 1996 primarily due to a decrease in common area expenses and insurance expense. Common area expenses decreased as a result of cost savings efforts by management and insurance expense decreased due to a lower premium in 1997. Real estate tax expense also decreased due to successful appeals of the tax assessments. An increase in interest expense of $20,565, or 5.3%, to $411,300 for the quarter ended June 30, 1997 as compared to $390,735 for the quarter ended June 30, 1996 due to the scheduled increase in the interest rate on the Partnership's Bonds from 9.50% in 1996 to 10.0% in 1997. -9- A decrease in depreciation and amortization expense of $17,236, or 10.8%, to $142,444 for the quarter ended June 30, 1997 as compared to $159,680 for the quarter ended June 30, 1996 primarily due to a decrease in amortization of the net bond premium and discount in 1997. An increase in professional fees and other expenses of $67,406, or 158.4%, to $109,957 for the quarter ended June 30, 1997 as compared to $42,551 for the quarter ended June 30, 1996 due to payment of application fees in an attempt to refinance the properties and an estimate of environmental and geotechnical fees of $28,000 for a risk-based closure at the Old Orchard Shopping Center, in Valencia, California. Comparison of the Six Months Ended June 30, 1997 to the Six Months Ended June 30, 1996 Revenues of the Partnership remained consistent increasing only $205, to $1,523,676 for the six months ended June 30, 1997 as compared to $1,523,471 for the six months ended June 30, 1996 primarily due to the net effect of an increase in reimbursed expenses of $43,783 and a decrease in rent revenue of $50,679. Reimbursed expenses increased due to increased recovery percentages on both common area expenses and real estate taxes. Additionally, refunds given to tenants in 1996 due to an incorrect billing in a prior year was charged to revenue in 1996. Rents decreased primarily due to decreased occupancy of minor tenants at Old Orchard Shopping Center located in Valencia, California. Rent abatements also occurred at Green Valley Mall during the six months ended June 30, 1997. Management and property expenses decreased $30,705, or 7.5%, to $376,991 for the six months ended June 30, 1997 as compared to $407,696 for the six months ended June 30, 1996 primarily due to a decrease in common area expenses and insurance expense. Common area expenses decreased as a result of cost savings efforts by management and insurance expense decreased due to a lower premium in 1997. Real estate tax expense also decreased due to successful appeals of the tax assessments. Interest expense increased $41,130, or 5.3%, to $822,600 for the six months ended June 30, 1997 as compared to $781,470 for the six months ended June 30, 1996 due to the scheduled increase in the interest rate on the Partnership's Bonds from 9.50% in 1996 to 10% in 1997. Depreciation and amortization expense decreased $33,852, or 10.6%, to $285,050 for the six months ended June 30, 1997 as compared to $318,902 for the six months ended June 30, 1996 due to a decrease in the amortization of the net bond premium and discount in 1997. -10- Professional fees and other expenses increased $69,287, or 97.2% to $140,602 for the six months ended June 30, 1997 as compared to $71,315 for the six months ended June 30, 1996 due to payment of application fees in an attempt to refinance the properties and an estimate of environmental and geotechnical fees of $28,000 for risk-based closure at the Old Orchard Shopping Center, in Valencia, California. Liquidity and Capital Resources The Bonds mature on November 30, 1997, at which time the outstanding principal balance of $16,452,000 will be due. The Partnership has not yet obtained any commitments for refinancing and has not entered into any written agreements to sell any of the Properties. A prospective lender from whom the Partnership has sought a refinancing commitment engaged an independent environmental and geotechnical consulting firm to perform environmental due diligence on the Properties. After various tests, that consultant identified chemical contamination in the soil at a site at the Old Orchard Shopping Center in Valencia, California which it believes is attributable to improper handling of dry cleaning solvent by a tenant. Based on the results of soil sampling and testing and the condition of the site, the environmental consultant has concluded that the contaminated area is an excellent candidate for receipt of regulatory closure of environmental issues through the use of a health-risk assessment process which, if accepted by the California Environmental Protection Agency, would obviate the need for active remediation by the Partnership. The consultant has estimated that pursuing a "risk- based closure" for the site would require a minimum of three to four months and will cost between $28,000 and $100,000 assuming that the Partnership applies for and receives regulatory agency acceptance of the risk-based closure for the site without active remediation. The Partnership currently intends to pursue the course of action recommended by the environmental consultant. There can be no assurance, however, that the Partnership will be granted a health-risk-based-closure and will not be responsible for active remediation of the affected site, the cost of which could be substantial. In addition, there is no assurance that the Partnership will receive the necessary regulatory clearance in time to complete a refinancing prior to the maturity of the Bonds. -11- In the event that a refinancing sufficient to satisfy the Bonds appears unlikely, the General Partner will attempt to sell one or more of the Properties. The General Partner believes that the Partnership should be able to obtain adequate proceeds from a refinancing or sale of the Properties, or a combination of the two, to enable the Partnership to satisfy the Bonds on or prior to their maturity; however, if the Partnership must engage in active remediation of the contaminated soil at the Valencia property, the value and marketability of such property could be significantly impaired. There can be no assurance the Partnership will be able to raise sufficient proceeds through a refinancing or sale prior to the Bond maturity date, or that the terms of any such refinancing or sale will be attractive to the Partnership. In the event that the Partnership is unable to raise adequate funds to satisfy the Bonds at maturity, there is a risk of foreclosure under the Bond Mortgages. In order to fund the cost of addressing the environmental issues identified at the Old Orchard Shopping Center, the Partnership has determined to suspend making distributions until the Partnership's cash needs can be determined with greater certainty. Assuming that the Partnership is able to raise sufficient funds to satisfy the Bonds on or before November 30, 1997, the General Partner believes that the Partnership will have sufficient working capital to meet its operating requirements through the next 12 months provided that the costs of the addressing environmental issues at the Old Orchard Shopping Center are not significantly greater than the current $28,000 to $100,000 estimate. Nevertheless, because the cash revenues and expenses of the Partnership will depend on future facts and circumstances relating to the Properties, as well as market and other conditions beyond the control of the Partnership, the possibility exists that cash flow deficiencies may occur. There are currently no material commitments for capital expenditures. Management is not aware of any other trends, events, commitments or uncertainties, that will or are likely to materially impact the Partnership's liquidity. Cash Flows Net cash provided by operating activities of $129,333 for the six months ended June 30, 1997 included (i) a net loss of $155,070, (ii) non-cash adjustments of $285,050 for depreciation and amortization expense and (iii) a net change in operating assets and liabilities of $647. Net cash provided by operating activities of $163,939 for the six months ended June 30, 1996 included (i) a net loss of $110,471, (ii) non-cash adjustments of $318,902 for depreciation and amortization expense and (iii) a net change in operating assets and liabilities of $44,492. -12- Net cash used in investing activities of $33,011 and $11,455 for the six months ended June 30, 1997 and June 30, 1996 respectively, was for capital expenditures for property improvements. Net cash used in financing activities of $102,066 and $99,852 for the six months ended June 30, 1997 and June 30, 1996 respectively, was for cash distributions to partners. PART II - OTHER INFORMATION Item 6. Reports on Form 8-K (b) No reports on form 8-K were filed during the quarter covered by this Report. -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: August 11,1997 CONCORD MILESTONE PLUS, L.P. (Registrant) BY: CM PLUS CORPORATION General Partner By: /S/ Robert Mandor -------------------------- Robert Mandor Director and Vice President By: /S/ Joan LeVine -------------------------- Joan LeVine Secretary and Treasurer -14-