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, 1998 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) 150 EAST PALMETTO PARK ROAD 4TH FLOOR BOCA RATON, FLORIDA 33432 (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, 1998 (Unaudited) AND DECEMBER 31, 1997 ASSETS June 30, 1998 December 31, 1997 Property, at cost Building and improvements .............................................................. $ 15,491,964 $ 15,453,945 Less: accumulated depreciation ......................................................... 5,724,066 5,413,087 ------------ ------------ Building and improvements, net ......................................................... 9,767,898 10,040,858 Land ................................................................................... 10,987,034 10,987,034 ------------ ------------ Total property ......................................................................... 20,754,932 21,027,892 Cash and cash equivalents .................................................................. 262,733 257,905 Accounts receivable ........................................................................ 197,452 123,152 Restricted cash ............................................................................ 236,855 269,895 Prepaid expenses and other assets, net ..................................................... 65,172 67,516 Debt financing costs, net .................................................................. 289,837 305,504 ------------ ------------ Total assets ......................................................................... $ 21,806,981 $ 22,051,864 ============ ============ LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage loans payable ..................................................................... $ 16,597,551 $ 16,683,574 Accrued interest ........................................................................... 112,943 117,308 Accrued expenses and other liabilities ..................................................... 244,945 341,263 Accrued expenses payable to affiliates ..................................................... 22,208 73,935 ------------ ------------ Total liabilities ...................................................................... 16,977,647 17,216,080 ------------ ------------ Partners' capital: General partner ............................................................................ (74,272) (74,207) Limited partners: Class A Interests, 1,518,800 ........................................................... 4,903,606 4,909,991 ------------ ------------ Total partners' capital ................................................................ 4,829,334 4,835,784 ------------ ------------ Total liabilities and partners' capital ................................................ $ 21,806,981 $ 22,051,864 ============ ============ 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, 1998 AND 1997 June 30,1998 June 30, 1997 Revenues: Rent ................................................................................................. $ 673,588 $ 576,105 Reimbursed expenses .................................................................................. 95,726 123,990 Interest and other income ............................................................................ 3,477 9,332 --------- --------- Total revenues ................................................................................... 772,791 709,427 --------- --------- Expenses: Interest expense ..................................................................................... 342,865 411,300 Depreciation and amortization ........................................................................ 160,438 142,444 Management and property expenses ..................................................................... 213,386 185,233 Administrative and management fees to related party .................................................. 35,585 31,145 Professional fees and other expenses ................................................................. 28,516 103,707 --------- --------- Total expenses ................................................................................... 780,790 873,829 --------- --------- Net loss ............................................................................................. $ (7,999) $(164,402) ========= ========= Net loss attributable to: Limited partners ................................................................................. $ (7,919) $(162,758) General partner .................................................................................. (80) (1,644) --------- --------- Net loss ............................................................................................. $ (7,999) $(164,402) ========= ========= Loss per weighted average Limited Partnership 100 Class A Interests outstanding ................................................................................ $ (.52) $ (10.72) ========= ========= Weighted average number of 100 Class A interests outstanding ........................................................................ 15,188 15,188 ========= ========= See Accompanying Notes to Financial Statements -3- CONCORD MILESTONE PLUS, L.P. (a Limited Partnership) STATEMENTS OF REVENUES AND EXPENSES (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 June 30,1998 June 30, 1997 Revenues: Rent ................................................................................................. $ 1,302,393 $ 1,268,973 Reimbursed expenses .................................................................................. 205,421 239,231 Interest and other income ............................................................................ 6,139 15,472 ----------- ----------- Total revenues ................................................................................... 1,513,953 1,523,676 ----------- ----------- Expenses: Interest expense ..................................................................................... 682,252 822,600 Depreciation and amortization ........................................................................ 332,239 285,050 Management and property expenses ..................................................................... 390,525 376,991 Administrative and management fees to related party .................................................. 68,766 66,003 Professional fees and other expenses ................................................................. 46,621 128,102 ----------- ----------- Total expenses ................................................................................... 1,520,403 1,678,746 ----------- ----------- Net loss ............................................................................................. $ (6,450) $ (155,070) =========== =========== Net loss attributable to: Limited partners ................................................................................. $ (6,385) $ (153,519) General partner .................................................................................. (65) (1,551) ----------- ----------- Net loss ............................................................................................. $ (6,450) $ (155,070) =========== =========== Loss per weighted average Limited Partnership 100 Class A Interests outstanding ................................................................................ $ (.42) $ (10.11) =========== =========== Weighted average number of 100 Class A 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, 1998 General Class A Total Partner Interests PARTNERS' CAPITAL (DEFICIT) January 1, 1998 .......................................................... $ 4,835,784 $ (74,207) $ 4,909,991 Distributions .................................................................. -- -- -- Net loss ....................................................................... (6,450) (65) (6,385) ----------- ----------- ----------- PARTNERS' CAPITAL (DEFICIT) June 30, 1998 ............................................................ $ 4,829,334 $ (74,272) $ 4,903,606 =========== =========== =========== 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, 1998 AND 1997 June 30,1998 June 30, 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ............................................................................................. $ (6,450) $(155,070) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ................................................................ 332,239 285,050 Change in operating assets and liabilities: (Increase) decrease in accounts receivable ................................................... (74,300) 23,741 (Increase) decrease in prepaid expenses and other assets, net ....................................................................... (3,250) 11,550 Decrease in accrued interest ................................................................. (4,365) (43,881) (Decrease) increase in accrued expenses and other liabilities ....................................................................... (96,318) 19,928 Decrease in due to affiliate ................................................................. (51,727) (11,985) --------- --------- Net cash provided by operating activities ............................................................ 95,829 129,333 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property improvements ........................................................................ (38,018) (33,011) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in restricted cash .................................................................. 33,040 0 Principal repayments on mortgage loans payable ............................................... (86,023) 0 Cash distributions to partners ............................................................... 0 (102,066) --------- --------- Net cash used in financing activities ................................................................ (52,983) (102,066) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................................................................. 4,828 (5,744) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................................................................... 257,905 326,120 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................................................ $ 262,733 $ 320,376 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest ............................................................. $ 686,617 $ 822,600 ========= ========= 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, 1998 The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements as of and for the period ended June 30, 1998 and 1997 are unaudited. The results of operations for the interim periods are not necessarily indicative of the results of operations for the fiscal year. Certain information for 1997 has been reclassified to conform to the 1998 presentation. These financial statements should be read in conjunction with the financial statements and footnotes included thereto in the Concord Milestone Plus, L.P. (the "Partnership") financial statements filed on form 10-K for the year ended December 31, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Certain statements made in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements include statements regarding the intent, belief or current expectations of the Partnership and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the demand for retail space or retail goods, availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other retail commercial landlords; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. -7- Organization and Capitalization 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. 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 Three Months Ended June 30, 1998 to Three Months Ended June 30, 1997 The Partnership recognized a net loss of $7,999 for the three months ended June 30, 1998 as compared to a net loss of $164,402 for the same period in 1997 due to the following factors. Revenues increased by $63,364, or 8.9%, to $772,791 for the three months ended June 30, 1998 as compared to $709,427 for the three months ended June 30, 1997 primarily due to: (1) an increase in base rent revenue from two new tenants at the Green Valley Mall and (2) an increase in percentage rent revenue for one major tenant at the Green Valley Mall. Interest expense decreased by $68,435, or 16.6%, to $342,865 for the three months ended June 30, 1998 as compared to $411,300 for the three months ended June 30, 1997 due to a decrease of approximately 2% in the interest rate on the Partnership's mortgage loans in 1998 compared to the interest rate on the bonds payable in 1997. The Partnership consummated three new fixed rate first mortgage loans in September 1997, the proceeds of which were used to redeem all of the then outstanding bonds payable. Depreciation and amortization expense increased by $17,994, or 12.6%, to $160,438 for the three months ended June 30, 1998 as compared to $142,444 for the three months ended June 30, 1997 primarily due to: (1) an increase of $10,983 in depreciation expense caused by property improvement expenditures throughout 1997, and (2) an increase of $7,833 in amortization expense due to debt financing costs associated with the 1997 bond refinancing. -8- Management and property expenses increased by $28,153, or 15.2%, to $213,386 for the three months ended June 30, 1998 as compared to $185,233 for the three months ended June 30, 1997 primarily due to an increase in real estate tax expense resulting from a significant increase in the assessed value at the Green Valley Mall in Green Valley, Arizona. Professional fees and other expenses decreased by $75,191, or 72.5%, to $28,516 for the three months ended June 30, 1998 as compared to $103,707 for the three months ended June 30, 1997 due to: (1) environmental expenses incurred during the second quarter of 1997 for a risk-based closure at a site at the Old Orchard Shopping Center, in Valencia, California, and (2) the termination of trustee fees of approximately $7,500 relating to the bonds which were refinanced during September 1997. Results of Operations Comparison of Six Months Ended June 30, 1998 to Six Months Ended June 30, 1997 The Partnership recognized net loss of $6,450 for the six months ended June 30, 1998 as compared to a net loss of $155,070 for the same period in 1997 due to the following factors. Revenues decreased by $9,723, or 0.6%, to $1,513,953 for the six months ended June 30, 1998 as compared to $1,523,676 for the six months ended June 30, 1997 due to the net effect of the following: (1) an increase in base rent revenue from two new tenants, and an increase in percentage rent revenue for one major tenant, both at the Green Valley Mall and (2) a decrease in reimbursed expenses due to a decrease in billable in property expenses. Interest expense decreased by $140,348, or 17.1%, to $682,252 for the six months ended June 30, 1998 as compared to $822,600 for the six months ended June 30, 1997 due to a decrease of approximately 2% in the interest rate on the mortgage loans in 1998 compared to the interest rate on the bonds payable in 1997 which were retired with the proceeds of the mortgage loans. Depreciation and amortization expense increased by $47,189, or 16.6%, to $332,239 for the six months ended June 30, 1998 as compared to $285,050 for the six months ended June 30,1997 primarily due to: (1) an increase in depreciation expense resulting from property improvement expenditures throughout 1997, and (2) an increase in amortization expense due to debt financing costs associated with the 1997 bond refinancing. Management and property expenses increased by $13,534, or 3.6%, to $390,525 for the six months ended June 30, 1998 as compared to $376,991 for the six months ended June 30, 1997 resulting from an increase in real estate tax expense caused by a significant increase in the assessment at the Green Valley Mall. -9- Professional fees and other expenses decreased by $81,481, or 63.6%, to $46,621 for the six months ended June 30, 1998 as compared to $128,102 for the six months ended June 30, 1997 due to: (1) environmental expenses incurred during the second quarter of 1997 for a risk-based closure at a site at the Old Orchard Shopping Center and (2) the termination of trustee fees in 1998 relating to the bonds payable which were refinanced during September 1997. Liquidity and Capital Resources The General Partner believes that the Partnership's expected revenue and working capital is sufficient to meet the Partnership's current operating requirements for the next twelve months. Nevertheless, because the cash revenues and expenses of the Partnership will depend on future facts and circumstances relating to the Partnership's properties, as well as market and other conditions beyond the control of the Partnership, a possibility exists that cash flow deficiencies may occur. Currently, a significant amount (approximately $237,000) of the Partnership's working capital is still in the control of the holder of the first mortgage as funds held in escrow for real estate taxes, and pending resolution of certain circumstances. Additionally, the Partnership anticipates paying approximately $150,000 for various property and tenant improvements during the third and fourth quarter of 1998. The Partnership suspended making distributions subsequent to the first quarter of 1997 due to the cost of addressing an environmental issue identified at the Valencia Property and payment of certain expenses relative to the refinancing. The Partnership is anticipating resuming distributions as soon as the Partnership's unrestricted working capital levels are adequate. Management is not aware of any other trends, events, commitments or uncertainties that will or are likely to materially impact the Partnership's liquidity. Net cash provided by operating activities of $95,829 for the six months ended June 30, 1998 included (i) a net loss of $6,450 (ii) non-cash adjustments of $332,239 for depreciation and amortization expense and (iii) a net change in operating assets and liabilities of $229,960. Net cash provided by operating activities of $129,333 for the six months ended June 30, 1997 included (i) 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 used in investing activities of $38,018 for the six months ended June 30, 1998 was for capital expenditures for property improvements. -10- Net cash used in investing activities of $33,011 for the six months ended June 30, 1997 was for capital expenditures for property improvements. Net cash used in financing activities of $52,983 for the six months ended June 30, 1998 included (i) principal repayments on mortgage loans payable of $86,023 and (ii) a decrease in restricted cash of $33,040. Net cash used in financing activities of $102,066 for the six months ended June 30, 1997 was for cash distributions to partners. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibit is included herein: Exhibit 27 - Financial Data Schedule Article 5 included for Electronic Data Gathering, Analysis, and Retrieval (EDGAR) purposes only. This Schedule contains summary financial information extracted from the balance sheets and statements of revenues and expenses of the Partnership as of and for the six month period ended June 30, 1998, and is qualified in its entirety by reference to such financial statements. -11- 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 12, 1998 CONCORD MILESTONE PLUS, L.P. (Registrant) BY: CM PLUS CORPORATION General Partner By: /S/ Robert Mandor Robert Mandor Director and Vice President By: /S/ Patrick Kirse Patrick Kirse Treasurer and Controller -12-