UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 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 June 30, 1999
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: 333-42441
MID-AMERICA CAPITAL PARTNERS, L.P.
(Exact Name of Registrant as Specified in Charter)
TENNESSEE 62-1717980
(State of Incorporation) (I.R.S. Employer Identification Number)
6584 POPLAR AVENUE, SUITE 340
MEMPHIS, TENNESSEE 38138
(Address of principal executive offices)
(901) 682-6600
Registrant's telephone number, including area code
N/A (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
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class July 31, 1999
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none
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets of Mid-America Capital Partners, L.P. (the
"Partnership") as of June 30, 1999 and December 31, 1998
Statement of Operations of the Partnership for the three and
six months ended June 30, 1999 and 1998
Statement of Cash Flows of the Partnership for the six
months ended June 30, 1999 and 1998
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. Financial Information
ITEM 1.
Mid-America Capital Partners, L.P.
(a limited partnership)
Balance Sheets
June 30, 1999 (Unaudited) and December 31, 1998
(Dollars in thousands)
1999 1998
---- ----
Assets:
Real estate assets:
Land .......................................... $ 21,305 $ 21,305
Buildings and improvements .................... 207,606 204,886
Furniture, fixtures and equipment ............. 5,061 4,603
Construction in progress ...................... 1,808 2,370
- --------------------------------------------------------------------------------
235,780 233,164
Less accumulated depreciation ................. (26,687) (22,309)
- --------------------------------------------------------------------------------
Real estate assets, net .................. 209,093 210,855
Cash .......................................... 1,572 --
Restricted cash ............................... 33 406
Deferred financing costs, net ................. 3,753 4,248
Due from limited partner ...................... 11,731 8,613
Due from affiliate ............................ 36 --
Other assets .................................. 98 202
- --------------------------------------------------------------------------------
Total assets ............................... $ 226,316 $ 224,324
================================================================================
Liabilities and Partners' Capital
Liabilities:
Bonds payable ................................. $ 142,000 $ 142,000
Bank overdraft ................................ -- 667
Accounts payable .............................. 117 438
Accrued expenses and other liabilities ........ 2,921 1,828
Due to affiliate .............................. -- 474
Security deposits ............................. 760 706
- --------------------------------------------------------------------------------
Total liabilities .......................... 145,798 146,113
Partners' Capital:
General Partner ............................... 2,430 2,407
Limited Partner ............................... 78,088 75,804
- --------------------------------------------------------------------------------
Total partners' capital .................... 80,518 78,211
- --------------------------------------------------------------------------------
Total liabilities and partners' capital .... $ 226,316 $ 224,324
================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Operations
Three and six months ended June 30, 1999 and 1998
(Dollars in thousands)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Rental ............................................. $ 9,770 $ 9,441 $19,337 $19,042
Other .............................................. 104 126 192 231
- ---------------------------------------------------------------------------------------------------
Total revenues ..................................... 9,874 9,567 19,529 19,273
- ---------------------------------------------------------------------------------------------------
Expenses:
Personnel .......................................... 1,056 1,089 2,101 2,138
Building repairs and maintenance ................... 495 509 918 911
Real estate taxes and insurance .................... 954 918 1,919 1,867
Utilities .......................................... 353 362 737 752
Landscaping ........................................ 261 248 518 489
Other operating .................................... 412 338 838 736
Depreciation and amortization real estate assets ... 2,206 2,043 4,363 4,099
Depreciation and amortization non-real estate assets 7 7 15 15
General and administrative ......................... 395 368 781 738
Interest ........................................... 2,268 2,281 4,537 4,626
Amortization of deferred financing costs ........... 247 247 495 532
- ---------------------------------------------------------------------------------------------------
Total expenses ..................................... 8,654 8,410 17,222 16,903
- ---------------------------------------------------------------------------------------------------
Income before extraordinary item .......................... 1,220 1,157 2,307 2,370
- ---------------------------------------------------------------------------------------------------
Extraordinary item:
Loss on debt extinguishment ........................ -- -- -- 86
- ---------------------------------------------------------------------------------------------------
Net income ................................................ $ 1,220 $ 1,157 $ 2,307 $ 2,284
===================================================================================================
See accompanying notes to financial statements.
Mid-America Capital Partners, L.P.
(a limited partnership)
Statements of Cash Flows
Six months ended June 30, 1999 and 1998
(Dollars in thousands)
1999 1998
---- ----
Cash flows from operating activities:
Net income ........................................$ 2,307 $ 2,284
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ............ 4,873 4,646
Extraordinary item ....................... -- 86
Changes in assets and liabilities:
Restricted cash ...................... 373 (214)
Due to/from affiliate ................ (510) (1,737)
Other assets ......................... 104 (32)
Accounts payable ..................... (321) 91
Accrued expenses and other
liabilities ........................ 1,093 283
Security deposits .................... 54 14
- --------------------------------------------------------------------------------
Net cash provided by operating activities 7,973 5,421
Cash flows from investing activities:
Improvements to properties ............... (2,616) (1,648)
- --------------------------------------------------------------------------------
Net cash used in investing activities .... (2,616) (1,648)
Cash flows from financing activities:
Repayment of bank overdraft .............. (667) --
Proceeds from notes payable .............. -- 142,000
Principal payments on bridge notes payable -- (140,000)
Deferred financing costs ................. -- (3,606)
Due from limited partner ................. (3,118) (1,540)
- --------------------------------------------------------------------------------
Net cash used in financing activities .... (3,785) (3,146)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,572 627
- --------------------------------------------------------------------------------
Cash, beginning of period ................................ -- 1,570
- --------------------------------------------------------------------------------
Cash, end of period ......................................$ 1,572 $ 2,197
================================================================================
Supplemental disclosure of cash flow information:
Interest paid .........................................$ 4,537 $ 4,710
================================================================================
See accompanying notes to financial statements.
MID-AMERICA CAPITAL PARTNERS, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the accounting policies in effect as of December 31, 1998, as set forth in
the annual financial statements of Mid-America Capital Partners, L.P. (the
"Partnership"), as of such date. In the opinion of management, all adjustments
necessary for a fair presentation of the financial statements have been included
and all such adjustments were of a normal recurring nature. The results of
operations for the three and six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
The Partnership is a special purpose Delaware limited partnership. The
Partnership was formed on November 24, 1997 for the sole purpose to own and
operate 26 apartment communities (the Mortgaged Properties) and manage,
renovate, improve, lease, sell, transfer, exchange, mortgage and otherwise deal
with the Mortgaged Properties. The sole limited partner of the Partnership is
Mid-America Apartments, L.P., a Tennessee limited partnership (MAALP), which is
a majority owned subsidiary of Mid-America Apartment Communities, Inc. (MAAC).
MAAC owns, directly or through its subsidiaries, all of the outstanding units of
partnership interest. MAAC is a self-administered and self-managed umbrella
partnership real estate investment trust (REIT). MAAC conducts a substantial
portion of its operation through MAALP and subsidiaries of MAALP. The sole
general partner of the Partnership is MAACP, Inc., a Tennessee corporation
(MAACP), a wholly-owned subsidiary of MAAC. The term of the Partnership shall be
to December 31, 2020, unless terminated earlier as provided in the Partnership
Agreement or as otherwise provided by law.
2. Segment Information
The Partnership adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", in 1998. At June 30, 1999, the Partnership
owned and operated 26 apartment communities from which it derives all
significant sources of earnings and operating cash flows. The Partnership's
operational structure is organized on a decentralized basis, with individual
property managers having overall responsibility and authority regarding the
operations of their respective properties. Each property manager individually
monitors local and area trends in rental rates, occupancy percentages, and
operating costs. Property managers are given the on-site responsibility and
discretion to react to such trends in the best interest of the Partnership.
Management evaluates the performance of each individual property based on its
contribution of revenues and net operating income ("NOI"), which is composed of
property revenues less all operating costs including insurance and real estate
taxes. The Partnership's reportable segments are its individual properties
because each is managed separately and requires different operating strategy and
expertise based on the geographic location, community structure and quality,
population mix and numerous other factors unique to each community.
The revenues and profits for the aggregated communities are summarized as
follows for the three and six months ended June 30:
Three months ended Six months ended
June 30, June 30,
------------------- ---------------------
1999 1998 1999 1998
------------------- ---------------------
Rental revenues $9,770 $9,441 $19,337 $19,042
Other property revenues 104 126 192 231
------------------- ---------------------
Total Revenues 9,874 9,567 19,529 19,273
------------------- ---------------------
Property net operating income 6,343 6,103 12,498 12,380
Interest expense 2,268 2,281 4,537 4,626
General and administrative expenses 395 368 781 738
Amortization of deferred
financing costs 247 247 495 532
Depreciation and amortization 2,213 2,050 4,378 4,114
------------------- ---------------------
Net income before extraordinary item $1,220 $1,157 $2,307 $2,370
=================== =====================
PART I. Financial Information
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The following is a discussion of the financial condition and results of
operations of the Partnership for the three and six months ended June 30, 1999
and 1998. This discussion should be read in conjunction with the financial
statements included in this report. These financial statements include all
adjustments, which are, in the opinion of management, necessary to reflect a
fair statement of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature.
The total number of apartment units owned at June 30, 1999 was 5,949 in 26
apartment communities, compared to 5,947 in the same communities at June 30,
1998. The increase is due to the conversion of model units to rental units.
Average monthly rental per apartment unit increased to $578 at June 30, 1999
from $561 at June 30, 1998. Overall occupancy was 95.1% and 94.9% at June 30,
1999 and 1998, respectively.
RESULTS OF OPERATIONS (Dollars in 000's)
COMPARISON OF THE PARTNERSHIP'S THREE MONTHS ENDED JUNE 30, 1999 TO THE THREE
MONTHS ENDED JUNE 30, 1998
Total revenues for the three months ended June 30, 1999 increased by $307 from
the three months ended June 30, 1998. This increase is primarily due to the 3%
increase in the average rental rate and to a slight increase in occupancy as
compared to the same period a year ago.
Property operating expenses for the three months ended June 30, 1999 increased
slightly to $3,531 from $3,464 for the three months ended June 30, 1998.
Reductions in personnel, repairs and maintenance and utilities costs, were more
than offset by increases in real estate taxes and insurance, landscaping and
other operating costs.
Depreciation and amortization expense also increased slightly from $2,050 to
$2,213 primarily due to additional depreciation related to normal capital
additions to maintain the properties within the increasingly competitive
markets.
COMPARISON OF THE PARTNERSHIP'S SIX MONTHS ENDED JUNE 30, 1999 TO THE SIX MONTHS
ENDED JUNE 30, 1998
Total revenues for the six months ended June 30, 1999 increased by $256 due
primarily to the 3% increase in the average rental rate and a slight increase in
occupancy percentage as compared to the same period a year ago.
Property operating expenses for the six months ended June 30, 1999 increased
slightly to $7,031 from $6,893 for the six months ended June 30, 1998.
Reductions in personnel and utilities costs were more than offset by increases
in real estate taxes and insurance, landscaping and other operating costs.
Depreciation and amortization expense also increased slightly from $4,114 to
$4,378 primarily due to additional depreciation related to normal capital
additions to maintain the properties within the increasingly competitive
markets.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities increased to $7,973 for the six
months ended June 30, 1999 from $5,421 for the six months ended June 30, 1998,
mainly related to additional cash flows from operating assets and liabilities.
Net cash flow used in investing activities increased by approximately $968 for
the six months ended June 30, 1999 as compared to the same period a year
earlier, mainly due to increased capital expenditures to increase the
marketability of these properties in the increasingly competitive markets.
The Partnership believes that cash provided by operations is adequate and
anticipates that it will continue to be adequate in both the short and long-term
to meet operating requirements (including recurring capital expenditures at the
Communities).
INSURANCE
In the opinion of management, property and casualty insurance is in place which
provides adequate coverage to provide financial protection against normal
insurable risks such that it believes that any loss experienced would not have a
significant impact on the Partnership's liquidity, financial position, or
results of operations.
INFLATION
Substantially all of the resident leases at the Communities allow, at the time
of renewal, for adjustments in the rent payable thereunder, and thus may enable
the Partnership to seek rent increases. The substantial majority of these leases
are for one year or less. The short-term nature of these leases generally serves
to reduce the risk to the Partnership of the adverse effects of inflation.
YEAR 2000
In older computer programs, to conserve storage space, only two digits were used
to identify the year. This set up has created a date sequence problem. The
computer may not know that 00 comes after 99, moreover it may not know if 00 is
1900 or 2000("Y2K"). The business risk of this problem is that calculations or
processes that are date dependent may not yield the correct answer or work at
all.
Software vendors have certified all of the mission critical applications; these
vendors provide the software used for financial, network, property management
and telephone systems used by the Partnership. The Partnership does not own any
in-house development programs that require replacing or re-writing of code. The
Partnership has performed a thorough assessment of its personal computers and
desktop software. All mission critical desktop hardware and software are
believed to be compliant. Remediation of non-compliant hardware and software
(none of which is mission-critical) is expected to be completed by the end of
the third quarter 1999.
The Partnership estimates that the total Y2K project cost is nominal, as systems
have been upgraded and become Y2K compliant as part of its normal course of
business. The Partnership believes that its Y2K initiatives are adequate to
address reasonably likely Y2K issues.
Management believes that hardware and software upgrades made over the last few
years will reduce the possibility of interruptions to the operation. However,
the Partnership is dependent on the utilities infrastructure within the United
States. The most likely worst case scenario would be that the Partnership might
experience disruption in its operations if any of the third-party suppliers
reported a system failure.
The Y2K contingency plan is the final phase of the project. The Partnership
maintains contingency plans in the normal course of business designed to be
deployed in the event of various potential business interruptions. Although the
Partnership believes that its contingency plans and Y2K project will reduce the
risk of significant operations disruption, due to general uncertainty over Y2K
readiness of the Partnership's third-party suppliers, the Partnership is unable
to determine at this time whether the consequences of the Y2K system failures
will have a material impact.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements 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, which are intended to be covered by
the safe harbors created thereby. These statements include the plans and
objectives of management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the apartment
communities. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties which are discussed
in "Risk Factors" in this report. Although the Partnership believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Partnership or any other
person that the objectives and plans of the Partnership will be achieved.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
This information has been omitted as there have been no material changes in the
Partnership's market risk as disclosed in the 1998 Annual Report on Form 10-K.
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 or Reports on Form 8-K
(a) Exhibits
(27.1) Financial Data Schedule for the period ended 6/30/99.
(b) Reports on Form 8-K
None.
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 thereunto duly authorized.
MID-AMERICA CAPITAL PARTNERS, L.P.
Date: 8/16/99 /s/ Simon R.C. Wadsworth
------- ------------------------
Simon R.C. Wadsworth
President and Director
(Principal Executive Officer)
Date: 8/16/99 /s/ Mark S. Martini
------- -------------------
Mark S. Martini
Director
(Principal Financial and
Accounting Officer)