UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 1-12002
MARK CENTERS TRUST
(Exact name of registrant in its charter)
MARYLAND 23-2715194
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 THIRD AVENUE, KINGSTON, PENNSYLVANIA 18704
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(717) 288-4581
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
As of May 12, 1998, there were 8,554,177 common
shares of beneficial interest, par value $.001
per share, outstanding.
MARK CENTERS TRUST
FORM 10-Q
INDEX
Part I: Financial Information Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 1
Consolidated Statements of Operations for
the three months ended March 31, 1998
and 1997 2
Consolidated Statements of Cash Flows for
the three months ended March 31, 1998
and 1997 3
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II:Other Information
Exhibits and Reports on Form 8-K 17
Signatures 18
Part I. Financial Information
Item 1. Financial Statements
MARK CENTERS TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Rental property - at cost:
Land $ 31,560 $ 30,855
Buildings and improvements 271,331 274,165
Property under development 8,650 6,668
-------- --------
311,541 311,688
Less: accumulated depreciation 83,104 83,326
-------- --------
Net rental property 228,437 228,362
Cash and cash equivalents 757 1,287
Cash in escrow 8,612 7,906
Rents receivable 4,105 4,802
Prepaid expenses 1,122 1,241
Due from related parties 206 177
Deferred charges, net 11,625 9,710
Other assets 923 1,015
-------- --------
$255,787 $254,500
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $185,240 $183,943
Accounts payable and accrued expenses 8,457 7,553
Note payable to Principal Shareholder 3,050 3,050
Other liabilities 1,629 1,910
-------- --------
Total Liabilities 198,376 196,456
-------- --------
Minority Interest 9,144 9,244
-------- --------
Shareholders' Equity:
Common shares, $.001 par value,
authorized 50,000,000 shares, issued
and outstanding 8,554,177 shares,
respectively 9 9
Additional paid-in capital 51,073 51,073
Deficit (2,815) (2,282)
-------- --------
Total Shareholders' Equity 48,267 48,800
-------- --------
$255,787 $254,500
======== ========
See accompanying notes
1
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(in thousands, except per share amounts)
March 31, March 31,
1998 1997
(unaudited)
Revenue:
Minimum rents $8,464 $ 8,444
Percentage rents 565 684
Expense reimbursements 1,753 1,777
Other 169 219
------- -------
Total revenue 10,951 11,124
------- -------
Operating Expenses:
Property operating 2,292 2,563
Real estate taxes 1,428 1,439
Depreciation and amortization 3,473 3,324
General and administrative 456 537
------- -------
Total operating expenses 7,649 7,863
------- -------
Operating income 3,302 3,261
Loss on sale of property -- 12
Interest expense 3,923 3,736
------- -------
Loss before minority interest (621) (487)
Minority interest 88 71
------- -------
Net loss $ (533) $ (416)
======= =======
Basic and diluted net loss
per common share $ (.06) $ (.05)
======= =======
See accompanying notes
2
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(in thousands)
March 31, March 31,
1998 1997
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (533) $ (416)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization
of leasing costs 3,328 3,175
Amortization of deferred financing costs 145 149
Minority interest (88) (71)
Provision for bad debts 310 88
Loss on sale of property -- 12
------- -------
3,162 2,937
Changes in assets and liabilities:
Rents receivable 387 1,025
Prepaid expenses 119 140
Due from related parties (29) 43
Other assets 20 (191)
Accounts payable and accrued expenses (164) (37)
Other liabilities (281) (32)
------- -------
Net cash provided by operating activities 3,214 3,885
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and
improvements, inclusive of payables
related to construction activity (3,810) (5,340)
Net proceeds from sale of property -- 1,288
Payment of deferred leasing charges (451) (64)
------- -------
Net cash used in investing activities (4,261) (4,116)
------- -------
3
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages (702) (10,849)
Proceeds received on mortgage notes 1,999 23,000
Net funding of escrows (681) (3,159)
Payment of deferred financing costs (87) (884)
Dividends paid -- (3,078)
Distributions paid to Principal Shareholder (12) (602)
------- -------
Net cash provided by financing activities 517 4,428
------- -------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (530) 4,197
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,287 3,912
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 757 $ 8,109
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest, net
of amounts capitalized of $168 and $112,
respectively $ 3,509 $ 3,791
======= =======
See accompanying notes
4
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. THE COMPANY
Mark Centers Trust (the "Company") currently owns and operates
thirty-nine properties consisting of thirty-four neighborhood and
community shopping centers, three enclosed malls and two mixed
use (retail/office) properties. All of the Company's assets are
held by, and all of its operations are conducted through Mark
Centers Limited Partnership, (the "Operating Partnership") and
its majority owned partnerships. As of March 31, 1998, the
Company controlled 84% of the Operating Partnership as the sole
general partner. The Company will at all times be the sole
general partner of, and owner of a 51% or greater interest in,
the Operating Partnership. Marvin L. Slomowitz (the "Principal
Shareholder"), who is the principal limited partner of the
Operating Partnership, owns in excess of 99% of the minority
interest in the Operating Partnership. The Company is operating
as a real estate investment trust ("REIT") for federal income tax
purposes. On April 15, 1998 the Company entered into a
Contribution and Share Purchase Agreement which will provide
additional properties and capital to the Company (Note 8).
2. BASIS OF PRESENTATION
The consolidated financial statements include the consolidated
accounts of the Company and its majority owned partnerships,
including the Operating Partnership, and have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with instruction to Form 10-Q
and Article 10 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. The information furnished in the accompanying
consolidated financial statements reflects all adjustments which
are, in the opinion of management, necessary for a fair
presentation of the aforementioned consolidated financial
statements for the interim periods. Operating results for the
three month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the fiscal
year ending December 31, 1998. For further information, refer to
the consolidated financial statements and accompanying footnotes
included in the Company's Annual Report on Forms 10-K and 10-K/A
for the year ended December 31, 1997.
5
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
3. SHAREHOLDERS' EQUITY AND MINORITY INTEREST
The following table summarizes the change in the shareholders'
equity and minority interest since December 31, 1997:
Shareholders' Minority
Equity Interest
Balance at December 31, 1997 $48,800 $ 9,244
Net loss for the period January 1
through March 31, 1998 (533) (88)
Distributions to Principal Shareholder -- (12)
------- -------
Balance at March 31, 1998 $48,267 $ 9,144
======= =======
4. RELATED PARTY TRANSACTIONS
As of March 31, 1998 amounts due from related parties consisted
of the following:
Accrued ground rent due from Blackman Plaza
Partners (a limited partnership in which the
Principal Shareholder is a 1% general partner) $ 205
Other amounts (net) due from Principal Shareholder 1
-------
$ 206
=======
On January 7, 1998, the Company exercised its option to purchase
Blackman Plaza Partners' interests in the Blackman Plaza with a
closing date anticipated to occur during fiscal 1998.
On March 16, 1998, the Company and the Principal Shareholder
agreed to terminate the option to purchase certain land owned by
the Principal Shareholder in Lewisburg, Pennsylvania.
5. MORTGAGE LOANS
On January 28, 1998, the Company completed a closing on a
construction loan with Royal Bank of Pennsylvania in the maximum
amount of $3,500. The loan, which is secured by one of the
Company's properties, requires monthly payments of interest only
at the lender's prime rate plus 150 basis points and matures in
February 1999 with additional extension periods through February
2000.
6
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
MORTGAGE LOANS, continued
On March 24, 1998, the Company completed an amendment and
extension of its existing agreement with Mellon Bank, N.A. which
extended the maturity date to July 2, 1998 and established
minimum monthly payments of the greater of (a) actual net
operating income from the collateral property or (b) $50 plus
interest at the current rate of LIBOR plus 200 basis points.
6. PER SHARE DATA
Basic earnings per share was determined by dividing net loss
applicable to common shareholders by the weighted average number
of common shares of beneficial interest ("Common Shares")
outstanding during each period consistent with the guidelines of
the Financial Accounting Standards Board Statement No. 128. The
weighted average number of Common Shares for the three months
ended March 31, 1998 and 1997 totalled 8,544,177 and 8,548,817,
respectively. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue Common Shares were exercised or converted into Common
Shares or resulted in the issuance of Common Shares that then
shared in the earnings of the Company. For the three months
ended March 31, 1998 and 1997, no additional Common Shares were
reflected as the impact would be anti-dilutive due to the net
loss in each period.
7. TENANT LEASES
On January 31, 1998, the Company entered into an agreement with
Pharmhouse Corp. (the "Tenant") to settle certain litigation.
During 1997, the Tenant had obtained an injunction against the
installation of Walmart in the Ledgewood Mall based on certain
exclusive use provisions within the Tenant's lease. The Company
paid $200 to the Tenant on May 1, 1998 and has further agreed,
pursuant to the agreement as modified May 1, 1998, to pay the
Tenant $1,525 on or before May 31, 1998, amend certain terms of
the Tenant's lease including rent and the lease expiration date,
and withdraw its appeal of this case in return for the Tenant's
withdrawal of all legal actions against the installation of
Walmart at the mall. The total of $1,725 is reflected in
deferred charges as of March 31, 1998 in the accompanying
financial statements.
7
8. SUBSEQUENT EVENTS
On April 15, 1998 the Company entered into a Contribution and
Share Purchase Agreement (the "Agreement") which will provide
additional properties and capital to the Company. Subject to the
satisfaction of all conditions to the transaction, including
approval by the Company's shareholders at a meeting expected to
be held during the third quarter of 1998, the Company, through
Mark Centers Limited Partnership, a Delaware limited partnership
through which the Company conducts substantially all of its
activities, and in exchange for approximately 11.3 million
Operating Partnership Units, will acquire substantially all of
the ownership interests in twelve retail shopping centers, five
multi-family apartment complexes, certain third party management
contracts and promissory notes owned by real estate investment
partnerships and related entities in which RD Capital, Inc., a
Delaware corporation ("RD Capital"), or its affiliates serves as
the general partner or in another similar management capacity.
In addition, the Company will also receive a cash investment of
$100 million from affiliates of RD Capital in exchange for
approximately 13.3 million newly issued common shares of
beneficial interest valued at a price of $7.50 per share. The
Agreement also provides that Ross Dworman and Kenneth Bernstein
of RD Capital will become Chairman of the Board and Chief
Executive Officer and President of the Company, respectively.
Mr. Marvin Slomowitz, the current Chairman of the Board and Chief
Executive Officer, will remain as a board member and as a
consultant to the Company. The two new executives will serve on
the board together with two independent designees of RD Capital
and two independent designees (in addition to Mr. Slomowitz) of
the existing board. The Company will change its name to Acadia
Realty Trust effective upon the closing of the transaction. The
transaction is subject to evidence of the receipt by RD Capital
of the necessary funds to make the cash investment and the
completion of closing. The transaction is a complex one
involving many parties and there can be no assurance that the
closing on this transaction will be completed. The Company has
incurred costs totalling $530 related to this transaction as of
March 31, 1998 which are reflected in deferred charges in the
accompanying financial statements.
On April 1, 1998, the Company completed an amendment with Fleet
National Bank which extended to June 15, 1998 the maturity of a
standby letter of credit in the amount of $1.7 million.
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion is based on the consolidated financial
statements of Mark Centers Trust (the "Company") as of March 31,
1998 and 1997 and for the three months then ended. This
information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Certain statements made in this report may constitute "forward-
looking statements" within the meaning of federal securities
laws. Such statements are inherently subject to risk and
uncertainties which may cause the actual results to differ
materially from the future results implied by such forward-
looking statements. Factors which might cause such differences
include general economic conditions, adverse changes in the real
estate markets in general and in the geographic regions in which
the Company's properties are located, changes in interest rates,
potential bankruptcy of tenants and environmental requirements.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1998 ("1998") to Three
Months Ended March 31, 1997 ("1997")
Total revenue decreased $173,000, or 2%, to $11.0 million for
1998 compared to $11.1 million for 1997.
In total, minimum rents were essentially constant at $8.5 million
for 1998 and 1997. Minimum rents increased at certain centers in
1998 following the re-tenanting of various space at increased
market rates as well as the effect of Stern's at the Ledgewood
Mall reverting to paying minimum rent of $138,000 in 1998. During
1997, Stern's was paying percentage rent in lieu of minimum rent
pursuant to anchor cotenancy requirements with Jamesway which
vacated the Ledgewood Mall in 1996. These increases were offset
by the $141,000 effect of the State of Alabama Department of
Public Health vacating its leased space at the Normandale Mall
following the expiration of its leases in April 1997, the $32,000
effect of the sale of the Newberry Plaza in March 1997 and the
$48,000 effect of Bruno's vacating its 48,000 square feet at the
Martintown Plaza following its Chapter 11 bankruptcy filing on
January 2, 1998. On March 31, 1998, the Company signed a lease
with Office Depot, Inc. for 30,000 square feet of this space at a
higher per square foot rent and is engaged in re-leasing efforts
for the balance of the space.
9
RESULTS OF OPERATIONS, continued
Percentage rents decreased $119,000, or 17%, to $565,000 for 1998
compared to $684,000 for 1997. The decrease was primarily the
result of Stern's at the Ledgewood Mall paying minimum rent
rather then percentage rent in 1998 as discussed above.
Other income decreased $50,000 for 1998 primarily as a result of
a decrease in interest earning assets.
Total operating expenses of $7.6 million for 1998 decreased
$214,000, or 3%, from $7.9 million for 1997.
Property operating expenses decreased $271,000 for 1998 compared
to 1997 primarily due to a $287,000 decrease in winter related
expenses following the comparatively mild weather experienced in
the Northeast in 1998.
Depreciation and amortization increased $149,000 for 1998
primarily due to the Company's property development and expansion
activities.
General and administrative expenses decreased $81,000 for 1998
primarily as a result of lower salaries expense and certain
professional fees.
Interest expense of $3.9 million for 1998 increased $187,000, or
5%, from $3.7 million for 1997 primarily as a result of higher
average outstanding borrowings related to increased property
development and expansion activities.
As a result of the foregoing, the net loss for 1998 increased
$117,000 to a loss of $533,000 from a loss of $416,000 for 1997.
Funds from Operations
The Company, along with most industry analysts, consider funds
from operations("FFO") as defined by the National Association of
Real Estate Investment Trusts ("NAREIT")as an appropriate
supplemental measure of operating performance. However, FFO does
not represent cash generated from operations as defined by
generally accepted accounting principles and is not indicative of
cash available to fund cash needs. It should not be considered as
an alternative to net income for the purpose of evaluating the
Company's performance or to cash flows as a measure of liquidity.
Generally, NAREIT defines FFO as net income (loss) before gains
(losses) on sales of property, non-recurring charges and
extraordinary items, adjusted for certain non-cash charges,
primarily depreciation and amortization of capitalized leasing
costs.
10
FUNDS FROM OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(in thousands, except per share data)
March 31, March 31,
1998 1997
Revenue
Minimum rents (a) $ 8,407 $ 8,349
Percentage rents 565 684
Expense reimbursements 1,753 1,777
Other 169 219
------- -------
Total revenue 10,894 11,029
------- -------
Expenses
Property operating (b) 2,262 2,553
Real estate taxes 1,428 1,439
General and administrative 447 531
------- -------
Total operating expenses 4,137 4,523
------- -------
Operating income 6,757 6,506
Interest expense 3,923 3,736
Amortization of deferred
financing costs 145 149
Depreciation of non-real
estate assets 47 52
------- -------
Funds from operations $ 2,642 $ 2,569
======= =======
Funds from operations per share (c) $ 0.26 $ 0.25
======= =======
11
March 31, March 31,
1998 1997
Funds from operations above $ 2,642 $ 2,569
Depreciation of real estate
and amortization of leasing costs (3,281) (3,123)
Straight-line rents and
related write-offs, (net) 29 94
Minority interest 88 71
Loss on sale of property -- (12)
Other non-cash adjustments (11) (15)
------- -------
Net loss $ (533) $ (416)
======= =======
Net loss per share (d) $ (0.06) $ (0.05)
======= =======
(a) Excludes income from straight-lining of rents.
(b) Represents all expenses other than depreciation, amortization,
write-off of unbilled rent receivables recognized on a straight-
line basis and the non-cash charge for compensation expense
related to the Company's restricted share plan.
(c) Assumes full conversion of 1,623,000 OP Units into common shares
of the Company for the three months ended March 31, 1998 and
1997, respectively, for a total of 10,177,177 and 10,171,817
shares, respectively.
(d) Net loss per share (basic and diluted)is computed based on the
weighted average number of shares outstanding for the three
months ended March 31, 1998 and 1997 of 8,554,177 and 8,548,817,
respectively.
12
LIQUIDITY AND CAPITAL RESOURCES
As previously disclosed in a current report on Form 8-K filed on
April 20, 1998, and as discussed in Note 8 in the accompanying
financial statements, the Company has entered into a Contribution
and Share Purchase Agreement with certain real estate investment
partnerships and related entities in which R.D. Capital, ("RDC")
or certain of its affiliates serves as the general partner or in
another similar management capacity, which will provide
additional properties and capital to the Company. Consummation of
the transaction is subject to the satisfaction of a number of
conditions, including, but not limited to approval by the
Company's shareholders. If the transaction is completed as
anticipated, the Company's liquidity and capital resources would
be significantly impacted.
Pursuant to the terms of the Agreement, the Company has agreed,
among other things, not to declare or pay a dividend until the
closing of the RDC transaction. After closing, the newly
reconstituted Board of Trustees will reassess the Company's
dividend policy in light of the new Company's REIT distribution
requirements, cash flow and prospects.
On January 28, 1998, the Company completed a closing on a
construction loan with Royal Bank of Pennsylvania in the maximum
amount of $3.5 million. The loan, which is secured by one of the
Company's properties, requires monthly payment of interest only
at the lender's prime rate plus 150 basis points and matures in
February 1999 with additional extension periods through February
2000.
On March 24, 1998, the Company completed an amendment to and
extension of its existing agreement with Mellon Bank, N.A. which
extended the maturity date to July 2, 1998 and established
minimum monthly payments equal to the greater of (a) actual net
operating income from the collateral property or (b) $50,000 plus
interest at the current rate of LIBOR plus 200 basis points.
On April 1, 1998, the Company completed an amendment with Fleet
National Bank which extended to June 15, 1998 the maturity of a
Standby Letter of Credit in the amount of $1.7 million.
At March 31, 1998, the Company's capitalization consisted of
$185.2 million of debt and $91.0 million of market equity.
As of March 31, 1998 interest on the Company's mortgage
indebtedness ranged from 7.7% to 10.0% with maturities that
ranged from July 1998 to November 2021. Of the total outstanding
13
Liquidity and Capital Resources, continued
debt, $173.8 million, or 94%, was carried at fixed interest rates
and the remaining $11.4 million, or 6%, carried at variable
rates. Of the total outstanding debt, $99.5 million will become
due by 2000, with scheduled maturities of $2.5 million in 1998,
$2.1 million in 1999 and $94.9 million in 2000. As the Company
does not anticipate having sufficient cash on hand to repay such
indebtedness, it will need to refinance this indebtedness or
select other alternatives based on market conditions at that
time. The Company believes that the current loan-to-value ratios
on the collateral properties are at levels which would allow it
to fully refinance these loans on commercially competitive terms.
Historically, the principal sources for funding operations,
renovations, expansion, development and acquisitions have been
funds from operations, construction and permanent secured debt
financings, as well as short term construction and line of credit
borrowings from various lenders. The Company anticipates that
cash flow from operating activities will continue to provide
adequate capital for all debt service payments, recurring capital
expenditures and REIT distribution requirements. Consistent with
past practice, the Company anticipates that it will obtain
construction financing related to its capital outlays for certain
property development, property expansion and tenant improvements.
However, the Company may experience a cash shortfall in 1998, in
the absence of consummating the proposed RDC transaction, if
there are delays in obtaining construction financing to fund its
anticipated capital outlays. Any delays in construction
financing will increase the Company's short term reliance on cash
from operations to meet these commitments.
The Company currently estimates that capital outlays of
approximately $9.2 million will be required for tenant
improvements, related renovations and other property improvements
primarily as a result of executed leases under which the Company
expects tenants to commence occupancy during the next 12 months.
Of this amount, approximately $3.1 million will be provided
through existing construction financing. In addition, the Company
has entered into an agreement whereby it has agreed to pay a
tenant $1.5 million by May 31, 1998 to settle certain litigation
as discussed in Note 7 to the accompanying financial statements.
Although it has not yet received final commitment, the Company
has signed a term sheet to obtain $20.7 million in short-term
financing which will be secured by four of the Company's
properties, of which approximately $10.9 million will be used to
refinance existing debt and pay for transaction costs,
14
Liquidity and Capital Resources, continued
approximately $7.8 million will be used for working capital and
$2.0 million will be held in escrow relating to certain reserves.
The Company intends on repaying this loan with the cash to be
invested by affiliates of RD Capital following the closing of the
RDC transaction. Final commitment from the lender is contingent
upon the satisfaction of various conditions including completion
of confirmatory due diligence on the collateral properties. While
there can be no assurance that this transaction will be
completed, the Company believes it will be concluded in an
orderly fashion to meet the Company's capital needs. The
Company's inability to complete this financing or obtain
alternative sources of capital would have an adverse effect on
the Company's ability to fund current tenant installation
activity.
HISTORICAL CASH FLOW
The following discussion of historical cash flow compares the
Company's cash flow for the three months ended March 31, 1998
("1998") with the Company's cash flow for the three months ended
March 31, 1997 ("1997").
Net cash provided by operating activities decreased from $3.9
million for 1997 to $3.2 million for 1998. This variance was
primarily attributable to a $896,000 decrease in cash provided
from changes in operating assets and liabilities (primarily
accounts receivable) for 1998.
Investing activities used $4.3 million during 1998, a $145,000
increase in cash used compared to $4.1 million used during 1997.
$1.5 million in additional cash was used in 1997 for property
development, expansion and retenanting activities (including the
payment of accounts payable related thereto). The Company
received $1.3 million in sales proceeds in 1997 related to the
sale of the Newberry Plaza. Cash used for deferred leasing costs
associated with the Company's leasing activities increased by
$387,000 for 1998.
Net cash provided by financing activities was $517,000 for 1998
representing a $3.9 million decrease compared to $4.4 million
provided during 1997. A $8.4 million net decrease in funds
provided by mortgage financing activities in 1998 was partially
offset by a $3.7 million reduction in dividends and distributions
paid in 1998.
15
INFLATION
The Company's long-term leases contain provisions designed to
mitigate the adverse impact of inflation on the Company's net
income. Such provisions include clauses enabling the Company to
receive percentage rents based on tenants' gross sales, which
generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates during
the terms of the leases. Such escalation clauses are often
related to increases in the consumer price index or similar
inflation indexes. In addition, many of the Company's leases are
for terms of less than ten years, which permits the Company to
seek to increase rents upon re-rental at market rates if rents
are below the then existing market rates. Most of the Company's
leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes,
insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from
inflation.
16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.3(f) Second Amended and Restated Assumption Extension and
Loan Agreement between the Company and Fleet National
Bank
27 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
A Form 8-K filed on April 20, 1998. Under Item 5 -
Other Events, the Company reported that it had entered
into a Contribution and Share Purchase Agreement
with RD Capital, Inc. and certain of its affiliates.
In addition, under Item 7 - Financial Statements and
Exhibits, the Company included a copy of the
Contribution and Share Purchase Agreement and a press
release announcing the agreement.
17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has fully caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
MARK CENTERS TRUST
By: /s/ Marvin L. Slomowitz
Marvin L. Slomowitz
Chief Executive Officer and
Trustee (Principal Executive
Officer)
/s/ Joshua Kane
Joshua Kane
Senior Vice President
Chief Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
Date: May 15, 1998
18
INDEX OF EXHIBITS
10.3(f) Second Amended and Restated Assumption Extension and
Loan Agreement between the Company and Fleet National
Bank
27 Financial Data Schedule (EDGAR filing only)
19