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 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 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 August 8, 1997, 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
June 30, 1997 and as of December 31, 1996 1
Consolidated statements of operations for
the three and six months ended
June 30, 1997 and 1996 2
Consolidated statements of cash flows for
the six months ended June 30, 1997 and 1996 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
Signatures 19
Part I. Financial Information
Item 1. Financial Statements
MARK CENTERS TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except for per share amounts)
June 30, December 31,
1997 1996
(unaudited)
ASSETS
Rental property - at cost:
Land $ 30,855 $ 31,084
Buildings and improvements 271,209 271,423
Construction-in-progress 6,949 4,904
-------- --------
309,013 307,411
Less: accumulated depreciation 77,725 72,956
-------- --------
Net rental property 231,288 234,455
Cash and cash equivalents 1,917 3,912
Rents receivable - less allowance
for doubtful accounts of $714
and $544, respectively 3,979 4,956
Prepaid expenses 799 1,421
Due from related parties 168 203
Furniture, fixtures and equipment, net 471 570
Deferred charges 9,689 9,034
Mortgage escrows 9,203 3,578
Other assets 716 388
-------- --------
$258,230 $258,517
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $179,090 $156,772
Lines of credit 5,267 16,051
Accounts payable and accrued expenses 6,264 9,397
Payable to Principal Shareholder 3,069 3,050
Distributions payable 2,035 3,662
Other liabilities 1,373 2,027
-------- --------
Total Liabilities 197,098 190,959
-------- --------
Minority Interest 9,721 10,752
-------- --------
Shareholders' Equity:
Common shares, $.001 par value,
authorized 50,000,000 shares, issued
and outstanding 8,554,177 and
8,548,817 shares, respectively 9 9
Additional paid-in capital 52,783 57,521
Deficit (1,381) (724)
-------- --------
Total Shareholders' Equity 51,411 56,806
-------- --------
$258,230 $258,517
======== ========
See accompanying notes
1
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 1997 AND 1996
(in thousands except for per share amounts)
Three months ended Six months ended
6/30/97 6/30/96 6/30/97 6/30/96
(unaudited) (unaudited)
Revenue:
Minimum rents $ 8,306 $ 8,259 $16,750 $16,725
Percentage rents 841 614 1,525 1,216
Expense reimbursements 1,627 1,607 3,404 3,551
Other 354 239 573 462
------- ------- ------- -------
Total revenue 11,128 10,719 22,252 21,954
------- ------- ------- -------
Expenses:
Property operating 2,129 2,274 4,692 5,091
Real estate taxes 1,414 1,368 2,853 2,666
Depreciation and
amortization 3,365 3,269 6,689 6,471
General and administrative 570 714 1,107 1,472
------- ------- ------- -------
Total operating expenses 7,478 7,625 15,341 15,700
------- ------- ------- -------
Operating income 3,650 3,094 6,911 6,254
Loss on sale of property -- -- 12 --
Interest and financing
expense 3,910 3,076 7,646 6,050
------- ------- ------- -------
(Loss) income before
minority interest (260) 18 (747) 204
Minority interest 18 (22) 89 (74)
------- ------- ------- -------
Net (loss) income $ (242) $ (4) $ (658) $ 130
======= ======= ======= =======
Net (loss)income per
common share $ (.03) $ .00 $ (.08) $ .02
======= ======= ======= =======
See accompanying notes
2
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(in thousands)
June 30, June 30,
1997 1996
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (658) $ 130
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of leasing
costs 6,384 6,002
Amortization of deferred financing costs 305 469
Minority interest (89) 74
Provision for bad debts 287 574
Loss on sale of property 12 --
Other 52 56
------- -------
6,293 7,305
Changes in assets and liabilities:
Rents receivable 689 (398)
Prepaid expenses 622 530
Due to/from related parties 55 95
Other assets (328) 374
Accounts payable and accrued expenses 511 1,197
Other liabilities (654) (472)
------- -------
Net cash provided by operating activities 7,188 8,631
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and improvements (4,105) (11,305)
(Decrease)increase in accounts payable
related to construction in progress (3,645) 6,252
Net proceeds from sale of property 1,288 --
Payment of deferred leasing charges (401) (2,951)
Expenditures for furniture, fixtures and
equipment (6) --
------- -------
Net cash used in investing activities (6,869) (8,004)
------- -------
3
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages (11,467) (2,433)
Proceeds received on mortgage notes 23,000 5,377
Net (increase) decrease in mortgage escrows (5,625) 1,791
Payment of deferred financing costs (866) (335)
Dividends paid (6,155) (6,151)
Distributions paid to Principal Shareholder (1,201) (1,212)
------- ------
Net cash used in financing activities (2,314) (2,963)
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (1,995) (2,336)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,912 3,068
------ -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,917 $ 732
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest, net
of amounts capitalized of $261 and $449,
respectively $ 7,390 $ 5,867
======= =======
See accompanying notes
4
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for per share amounts)
1. BASIS OF PRESENTATION
The consolidated financial statements include the consolidated
accounts of Mark Centers Trust (the "Company") and its majority
owned partnerships, including Mark Centers Limited Partnership
(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
six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal
year ending December 31, 1997.
The aforementioned consolidated financial statements should be
read in conjunction with the notes to the aforementioned
consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
2. ORGANIZATION AND FORMATION OF THE COMPANY
The Company was formed as a Maryland Real Estate Investment Trust
("REIT") on March 4, 1993 by Marvin L. Slomowitz (the "Principal
Shareholder"), the principal owner of Mark Development Group (the
"Predecessor"), to continue the business of the Predecessor in
acquiring, developing, renovating, owning and operating shopping
center properties. The Company effectively commenced operations
on June 1, 1993 with the completion of its initial public
offering, whereby it issued an aggregate of 8,350,000 common
shares of beneficial interest to the public at an initial public
offering price of $19.50 per share (the "Offering"). The
proceeds from the Offering were used to repay certain property-
related indebtedness, for costs associated with the Offering and
transfer of the properties to the Company and for working
capital. The acquisition of the properties was recorded by the
Company at the historical cost reflected in the Predecessor's
financial statements since these transactions were conducted with
entities deemed to be related parties.
5
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
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, the Operating Partnership
and its majority owned partnerships. As of June 30, 1997, 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. 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.
3. SHAREHOLDERS' EQUITY AND MINORITY INTEREST
The following table summarizes the change in the shareholders'
equity and minority interest since December 31, 1996:
Shareholders' Minority
Equity Interest
Balance at December 31, 1996 $56,806 $10,752
Net loss for the period January 1
through June 30, 1997 (658) (89)
Vesting of restricted shares 52 --
Distributions to Principal Shareholder -- (942)
Dividends, $.56 per share (4,789) --
------- -------
Balance at June 30, 1997 $51,411 $ 9,721
======= =======
4. RELATED PARTY TRANSACTIONS
As of June 30, 1997 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) $ 190
Other amounts (net) due to Principal Shareholder (22)
-------
$ 168
=======
6
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
5. MORTGAGE NOTES AND LINES OF CREDIT
On June 4, 1997 , the Company extended the maturity date on its
line of credit with Firstrust Bank to August 31, 1997. All other
terms and conditions of the facility remain in effect.
6. PER SHARE DATA
Primary earnings per share are computed based on 8,559,535 and
8,561,294 shares outstanding, which represent the weighted
average number of shares outstanding (including restricted
shares) during the six month periods ended June 30, 1997 and
1996, respectively. Fully diluted earnings per share is based on
an increased number of shares that would be outstanding assuming
the exercise of share options at the market price at the end of
the period. Since fully diluted earnings per share is not
materially dilutive or is anti-dilutive, such amounts are not
presented.
7. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("FAS 128"). FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997,
including interim periods. Early adoption is not permitted and
the statement requires restatement of all prior-period earnings
per share ("EPS") presented after the effective date. The
Company will adopt FAS 128 effective with the year ending
December 31, 1997 and does not expect the impact on EPS to be
material.
8. DISTRIBUTIONS PAYABLE
On June 17, 1997, the Trustees declared a cash distribution of
$0.20 per common share and OP Unit payable on July 31, 1997 to
shareholders and limited partners of record as of June 30, 1997.
7
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
9. ENVIRONMENTAL MATTERS
Upon conducting environmental site inspections in connection with
the 1996 financing with Morgan Stanley Mortgage Capital, Inc.
("Morgan Stanley"), certain environmental contamination was
identified at the Cloud Springs Plaza in Fort Oglethorpe, Georgia
(the "Property"), prompting Morgan Stanley to escrow $375,000 of
the available loan proceeds to pay for estimated remediation
costs. In March 1997, the Company received notice from the
Georgia Department of Natural Resources that contamination
exceeding a reportable quantity had not occurred and, therefore,
the Property would not be listed on the State's Hazardous Site
Inventory. Consequently, in July 1997, Morgan Stanley released
$375,000 of the escrowed funds to the Company. As the Company
expects no further remediation costs will be required by the
State of Georgia, the $245,000 reserve for further environmental
remediation costs at the Property has been reversed in the June
30, 1997 financial statements.
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 June 30,
1997 and 1996 and for the three and six months then ended.
This information should be read in conjunction with the
accompanying consolidated financial statements and notes thereto.
These financial statements include all adjustments which, in the
opinion of management, are necessary to reflect a fair statement
of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. Operating results
for the six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal
year ending December 31, 1997.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1997 to Three Months
Ended June 30, 1996
Total revenue increased $409,000, or 4%, to $11.1 million for the
quarter ended June 30, 1997 compared to $10.7 million for the
quarter ended June 30, 1996.
Minimum rents increased $47,000 for the quarter ended June 30,
1997 compared to the same period in 1996. Increases in minimum
rents of $235,000 following the completion of Phase I at the
Union Plaza in October 1996 and of $132,000 following the opening
of HomePlace at the New Louden Center in June 1996 were offset by
a decline in minimum rents at two centers resulting from the loss
of two anchor tenants (Jamesway at the Ledgewood Mall and Rich's
Department Store at the Auburn Plaza) as well as certain tenants
at these two centers paying percentage rent in lieu of minimum
rent pursuant to anchor cotenancy requirements subsequent to June
30, 1996. Further offsetting the above increases in minimum rent
was the loss of $103,000 in minimum rent as a result 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.
Percentage rents, representing the Company's participation in
tenants' gross sales above predetermined thresholds, increased
$227,000, or 37%, to $841,000 for the quarter ended June 30, 1997
compared to $614,000 for the same period in 1996 primarily as a
result of tenants paying percentage rent in lieu of minimum rent
pursuant to anchor cotenancy requirements at the Ledgewood Mall
and Auburn Plaza.
9
RESULTS OF OPERATIONS, continued
Other income increased $115,000, or 48%, to $354,000 for the
quarter ended June 30, 1997 from $239,000 for the same period in
1996 primarily as a result of an early lease termination payment
of $75,000 received from a tenant at the Troy Plaza in June 1997
and interest earned on mortgage escrows for the quarter ended
June 30, 1997.
Total operating expenses of $7.5 million for the quarter ended
June 30, 1997 decreased $147,000, or 2%, from $7.6 million for
the quarter ended June 30, 1996.
Property operating expenses decreased $145,000 for the quarter
ended June 30, 1997 compared to the same period in 1996 primarily
due to the reversal of a $245,000 reserve for previously
estimated environmental remediation costs for the Cloud Springs
Plaza in June 1997 (Reference Note 9 to the financial statements)
offset by increased maintenance at various centers within the
Company's portfolio.
General and administrative expenses decreased $144,000, or 20%,
to $570,000 for the quarter ended June 30, 1997 compared to
$714,000 for the same period in 1996 primarily as a result of the
write-off of certain non-recurring costs totalling $162,000
during the quarter ended June 30, 1996 as a result of the
Company's decision to terminate the acquisition of a center.
The foregoing decreases in operating expenses were partially
offset by increases in real estate taxes and depreciation and
amortization totalling $142,000 for the quarter ended June 30,
1997 primarily due to the Company's property development and
expansion activities.
Interest and financing expenses increased $834,000 for the
quarter ended June 30, 1997 compared to the quarter ended June
30, 1996. This variance was primarily a result of higher average
outstanding borrowings related to increased property development
and expansion activities.
Income before minority interest declined $278,000 to a loss of
$260,000 for the quarter ended June 30, 1997 from income of
$18,000 for the same period in 1996.
10
Comparison of Six Months Ended June 30, 1997 to Six Months Ended
June 30, 1996
Total revenue increased approximately $298,000, or 1%, to $22.3
million for the six months ended June 30, 1997 compared to $22.0
million for the same period in 1996. Increases in minimum rents
of $468,000 following the completion of Phase I at the Union
Plaza in October 1996, of $263,000 following the opening of
HomePlace at the New Louden Center in June 1996 and of $67,000
following the opening of Dunham's Sporting Goods at the East End
Centre in August 1996 were offset by a decline in minimum rents
at two centers resulting from the loss of two anchor tenants
(Jamesway at the Ledgewood Mall and Rich's Department Store at
the Auburn Plaza) as well as certain tenants at these two centers
paying percentage rent in lieu of minimum rent pursuant to anchor
cotenancy requirements subsequent to June 30, 1996. Further
offsetting the above increases in minimum rent was the loss of
$103,000 in minimum rent as a result 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.
Percentage rents increased $309,000, or 25%, to $1.5 million for
the six months ended June 30, 1997 compared to $1.2 million for
the same period in 1996 primarily as a result of tenants paying
percentage rent in lieu of minimum rent pursuant to anchor
cotenancy requirements at the Ledgewood Mall and Auburn Plaza.
Other income increased $111,000, or 24%, to $573,000 for the six
months ended June 30, 1997 from $462,000 for the same period in
1996 primarily as a result of an early lease termination payment
of $75,000 received from a tenant at the Troy Plaza in June 1997
and interest earned on mortgage escrows for the six months ended
June 30, 1997.
Total operating expenses decreased $359,000, or 2%, to $15.3
million for the six months ended June 30, 1996 compared to $15.7
million for the same period in 1996.
Property operating expenses decreased $399,000, or 8%, for the
six months ended June 30, 1997 compared to the same period in
1996 primarily due to the reversal of the $245,000 reserve for
environmental remediation costs for the Cloud Springs Plaza in
June 1997 (Reference Note 9 to the financial statements) and a
$352,000 reduction in snow removal costs as a result of the
milder 1997 seasonal weather. These were partially offset by
increased maintenance, landscaping and cleaning expenses at
various centers within the Company's portfolio for the six months
ended June 30, 1997.
11
RESULTS OF OPERATIONS, continued
General and administrative expenses decreased $365,000, or 25%,
to $1.1 million for the six months ended June 30, 1997 compared
to $1.5 million for the same period in 1996 primarily as a result
of the write-off of non-recurring costs totalling $269,000
following the Company's decision to terminate certain acquisition
and development activities during the six months ended June 30,
1996.
The foregoing decreases in operating expenses were partially
offset by increases in real estate taxes and depreciation and
amortization totalling $405,000 for the six months ended June 30,
1997 primarily due to the Company's property development and
expansion activities.
Net interest and related financing expenses increased
approximately $1.6 million for the six months ended June 30, 1997
compared to the same period in 1996. This increase was
attributable to higher average outstanding borrowings related to
retenanting, acquisition, expansion and development activities.
Income before minority interest for the six months ended June 30,
1997 decreased $951,000 to a loss of $747,000 from income before
minority interest of $204,000 for the same period in 1996.
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.
12
FUNDS FROM OPERATIONS
FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 1997 AND 1996
(in thousands, except per share amounts)
Three months ended Six months ended
6/30/97 6/30/96 6/30/97 6/30/96
Revenue
Minimum rents (a) $ 8,264 $ 8,168 $16,612 $16,574
Percentage rents 841 614 1,525 1,216
Expense reimbursements 1,627 1,607 3,404 3,551
Other 354 239 573 462
------- ------- ------- -------
Total revenue 11,086 10,628 22,114 21,803
------- ------- ------- -------
Expenses
Property operating (b) 2,336 2,222 4,888 4,963
Real estate taxes 1,414 1,368 2,853 2,666
General and administrative 568 710 1,100 1,461
------- ------- ------- -------
Total operating expenses 4,318 4,300 8,841 9,090
------- ------- ------- -------
Operating income 6,768 6,328 13,273 12,713
Interest and financing
expense 3,910 3,076 7,646 6,050
Amortization of deferred
financing costs (156) (235) (305) (469)
Depreciation of non-real
estate assets (53) (54) (105) (111)
------- ------- ------- -------
Funds from operations $ 2,649 $ 2,963 $ 5,217 $ 6,083
======= ======= ======= =======
Funds from operations
per share (c) $ .26 $ .29 $ .51 $ .60
======= ======= ======= =======
Reconciliation of funds from Operations to Net Income
determined in accordance with Generally Accepted Accounting
Principles (GAAP)
Funds from operations above $ 2,649 $ 2,963 $ 5,217 $ 6,083
Depreciation and amortization
of leasing costs (3,156) (2,980) (6,279) (5,891)
Straight-line rents and
related write-offs, net 8 42 100 34
Reversal of reserve for
environmental remediation costs 245 -- 245 --
Minority interest 18 (22) 89 (74)
Loss on sale of property -- -- (12) --
Other non-cash adjustments (6) (7) (18) (22)
------- ------- ------- -------
Net (loss) income $ (242) $ (4) $ (658) $ 130
======= ======= ======= =======
Net (loss) income
per share (d) $ (.03) $ .00 $ (.08) $ .02
======= ======= ======= =======
13
(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 Operating Partnership
Units into common shares of the Company for the six months
ended June 30, 1997 and 1996 respectively, for a total of
10,177,177 and 10,171,817 shares, respectively.
(d) Net income per share is computed based on the weighted
average number of shares outstanding for the six months ended
June 30, 1997 and 1996 of 8,559,535 and 8,561,294,
respectively.
14
LIQUIDITY AND CAPITAL RESOURCES
The Company has $2.2 million outstanding on its line of credit
facility with Firstrust Savings Bank ("Firstrust"). The facility
bears interest at the higher of 8.75% or the prime rate
established by Firstrust Bank plus 1/2%, requires the monthly
payment of principal through the maturity date of August 31, 1997
and is secured by the Mark Plaza. The Company has obtained a
commitment from Firstrust to provide additional financing of $3.3
million for the expansion and renovation of the Mark Plaza (of
which $3.0 million is included in the 1997 estimated capital
outlays as discussed below), and convert the entire facility of
$5.5 million to a construction loan to mature in 18 months
following closing.
The Company has additional mortgage indebtedness of $182.2
million outstanding which bears rates of interest ranging from
7.70% to 9.50% with maturities ranging from April 2, 1998 to
November 1, 2021.
At June 30, 1997, the Company's capitalization consisted of
$184.4 million of debt and $98.0 million of market equity (using
a June 30, 1997 market price of $9.625 per share). Of the total
outstanding debt, $175.1 million, or 95%, is carried at fixed
interest rates and the remaining $9.3 million, or 5%, is carried
at variable rates.
The Company currently estimates that capital outlays for property
development, property expansion and tenant improvements
associated with recent leasing activity will require $9.1 million
during the remainder of 1997. At June 30, 1997, $652,000 of these
outlays are reflected in accounts payable and accrued expense
balances and $1.8 million in mortgage escrows.
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
borrowing from various lenders. Consistent with the Company's
historical practice of funding certain property expansion and
tenant improvements with internally generated cash, the Company
believes it prudent to fund certain of the estimated 1997 capital
outlays above in a similar manner. As a consequence, in June
1997 the Company reduced its dividend to an annual rate of $.80
per share.
15
LIQUIDITY AND CAPITAL RESOURCES, continued
The Company anticipates that this dividend level will enable the
funding of certain tenant improvements with internal cash while
providing for a sustainable distribution level. Furthermore, the
Company anticipates that cash flow from operating activities will
continue to provide adequate capital for all debt service
payments and recurring capital expenditures as well. This
conservative dividend policy which allows for reinvestment in the
Company's properties in conjunction with amounts currently
escrowed with lenders and the use of construction financing as
well as other debt and equity financing alternatives will provide
the necessary capital to fund planned 1997 outlays for property
development, property expansion and tenant improvements, and
achieve continued growth.
HISTORICAL CASH FLOW
The following discussion of historical cash flow compares the
Company's cash flow for the six months ended June 30, 1997 with
the Company's cash flow for the six months ended June 30, 1996.
Net cash provided by operating activities decreased from $8.6
million for the six months ended June 30, 1996 to $7.2 million
for the six months ended June 30, 1997. This variance was
primarily attributable to a $1.0 million decrease in cash
provided from net income before changes in operating assets and
liabilities and a $431,000 decrease in cash provided by changes
in operating assets and liabilities for 1997.
Investing activities used $6.9 million during the six months
ended June 30, 1997, a $1.1 million decrease in cash used from
the same period in 1996. This was due to a $2.6 million decrease
in deferred leasing charges paid and the receipt of $1.3 million
from the sale of the Newberry Plaza during the six months ended
June 30, 1997. These amounts were partially offset by $2.7
million more cash used during the six months ended June 30, 1997
related to property development, expansion and retenanting
activities (including the payment of accounts payable related
thereto).
Net cash used in financing activities was $2.3 million for the
six months ended June 30, 1997 representing a $649,000 decrease
from net cash used in financing activities of $3.0 million for
the six months ended June 30, 1996 primarily attributable to
financing obtained from Nomura Asset Capital Corporation
("Nomura") on March 4, 1997.
16
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.
17
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 (e) Amendment Number Three to First Amended and Restated
Assumption, Extension and Loan Agreement between the
Company and Fleet National Bank
10.17(e) Fourth Amendment to Revolving Credit Loan Agreement
between the Company and Mellon Bank, N.A.
27 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
None
18
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: August 14, 1997
19
INDEX OF EXHIBITS
10.3 (e) Amendment Number Three to First Amended and Restated
Assumption, Extension and Loan Agreement between the
Company and Fleet National Bank
10.17(e) Fourth Amendment to Revolving Credit Loan Agreement
between the Company and Mellon Bank, N.A.
27 Financial Data Schedule (EDGAR filing only)
20
5
0000899629
MARK CENTERS TRUST
1,000
6-MOS
DEC-31-1997
JAN-01-1997
JUN-30-1997
1,917
0
4,693
714
0
0
309,013
77,725
258,230
0
184,357
0
0
9
51,402
258,230
0
22,252
0
15,341
0
0
7,646
0
0
(646)
(12)
0
0
(658)
(.08)
(.08)
AMENDMENT NUMBER THREE TO FIRST AMENDED AND
RESTATED ASSUMPTION, EXTENSION AND LOAN AGREEMENT
This Amendment Number Three to First Amended and Restated
Assumption, Extension and Loan Agreement (the "Amendment") is
made as of May 16, 1997 by and among Fleet National Bank, a
national banking association with a place of business at 75 State
Street, Boston, Massachusetts 02109 (the "Lender"), Marvin L.
Slomowitz, individual, with a place of business at 600 Third
Avenue, Kingston, Pennsylvania 18704 (the "Sponsor"), Mark
Centers Limited Partnership, a Delaware limited partnership, with
a place of business at 600 Third Avenue, Kingston, Pennsylvania
18704 (the "Borrower"), and Mark Centers Trust, a Maryland real
estate investment trust, with a place of business at 600 Third
Avenue, Kingston, Pennsylvania 18704 (the "REIT"). Capitalized
terms used in this Amendment shall have the same meaning as set
forth in the Loan Agreement (hereinafter defined) unless they are
otherwise defined in this Amendment. Other capitalized terms not
contained in the Loan Agreement shall have the meanings as set
forth herein.
WITNESSETH THAT:
WHEREAS, Lender, Borrower, REIT and Sponsor entered into
that First Amended and Restated Assumption, Extension and Loan
Agreement dated as of May 30, 1995, as amended by Amendment
Number One to First Amended and Restated Assumption Extension and
Loan Agreement dated as of December 6, 1995, by Amendment Number
Two to First Amendment and Restated Assumption, Extension and
Loan Agreement dated October 21, 1996 and by letter agreement
dated February 27, 1997 from the Lender to the Borrower (the
"Loan Agreement" and collectively with this Amendment, the
"Agreement") which established a so-called revolving line of
credit subject to the terms of the Loan Agreement and the
Consolidated Revolving Credit Note; and
WHEREAS, Borrower has requested the Lender to extend the
only remaining outstanding Application and Agreement for Standby
Letter of Credit No. RS1034937 dated March 27, 1995 from the
Borrower to the Lender and Standby Letter of Credit No. RS1034937
dated March 30, 1995 from the Lender in favor of John Hancock
Mutual Life Insurance Company in the amount of $1,740,000; and
WHEREAS, Lender is willing to extend the SBLC upon the
condition that the Borrower enter into this Amendment of the Loan
Agreement;
NOW, THEREFORE, the parties hereto, in consideration of Ten
Dollars ($10.00) and other valuable consideration paid, the
receipt and sufficiency of which is hereby acknowledged by each,
hereby act and agree as follows:
1. Amendments.
(a) Subparagraph (a) of Subsection 2.1.2 of the Loan
Agreement entitled "Existing Loan Indebtedness" is hereby
stricken and the following is substituted therefor:
"(a) Consolidated Note dated June 3, 1993 from the
Borrower to Fleet-Mass in the original principal amount of
$40,000,000.00 as assigned to the Lender pursuant to that certain
Allonge to Promissory Note dated as of March 30, 1995 and amended
by a Second Allonge to Consolidated Note dated May 30, 1995;"
(b) Subsection 2.2 of the Loan Agreement entitled
"Existing Loan Indebtedness" is hereby stricken in its entirety
and the following is substituted therefor:
"The Borrower and Lender hereby acknowledge and agree
that as of May 16, 1997, there is no principal amount advanced by
and due to the Lender under the Consolidated Note (the "Present
Advanced Principal") and the aggregate principal amount of the
SBLC issued by the Lender on behalf of the Borrower (the "Present
Committed Principal") is $1,740,000 pursuant to SBLC No.
RS1034937."
(c) Subsection 3 of the Loan Agreement entitled
"Maximum Loan Amounts; Revolving Line of Credit Loan" is hereby
amended by striking therefrom the words the lesser of $12,000,000
(the "Maximum Loan Amount") or an amount equal to the Borrowing
Base at such time" and by substituting therefor the words
$1,740,000 (the "Maximum Loan Amount.").
(d) (i) Subsection 4.2 of the Loan Agreement entitled
"Evidence of Indebtedness" is hereby amended by striking
therefrom the words "shall mature on May 31, 1997 (the "Maturity
Date")" and substituting therefor the words "shall be payable on
demand but in any event no later than on March 15, 1998 (the
"Maturity Date").
2
(ii) Said Section 4.2 is further amended by adding
the following paragraph thereto "The SBLC shall be extended to a
date not later than March 15, 1998 subject to the terms of this
Agreement."
(e) With respect to Subsections 2.3, and 3 entitled
"Amendment and Restatement," and "Maximum Loan Amounts; Revolving
Line of Credit Loan', respectively, and Sections 4-4.13,
inclusive, and the Loan Agreement generally, the Borrower and the
Lender hereby agree that as of the date hereof the Revolving Line
of Credit created by the Loan Agreement is hereby modified and
amended to a be non-revolving line of credit to the effect that
any amounts advanced by the Lender pursuant to the Agreement from
and after the date hereof may not be reborrowed once same have
been repaid. The term "Line of Credit" under the Loan Agreement
is hereby amended to mean a line of credit on which amounts may
be advanced pursuant to the Agreement but which amounts may not
be reborrowed once same have been repaid. From and after the
date hereof, any outstanding Readvances and any Readvances made
after the date hereof pursuant to the Agreement shall be payable
on demand and shall constitute Prime Rate Advances under the
Agreement. In addition from and after the date hereof the
Agreement is hereby modified and amended by deleting words
"Consolidated Revolving Credit Note" wherever they appear and by
substituting therefor the words "Consolidated Credit Note."
(f) Subsection 4.6 of the Loan Agreement entitled
"Borrowing Base" is hereby stricken in its entirety.
(g) Subsection 4.13 (untitled) is hereby stricken in
its entirety and the following is substituted therefor:
"Without limiting in any way any of the Lender's rights
under the SBLC, the Borrower hereby acknowledges that the Lender
is authorized under the SBLC to charge any accounts of the
Borrower with the Lender, including the Wal-Mart Escrow Account,
(hereinafter defined) and that, at the option of the Lender, to
make an advance under the Consolidated Credit Note (a Readvance
hereunder) in order to (a) satisfy any obligations owing to the
Lender under the SBLC, (b) to secure the Borrower's Obligations
to the Lender with cash collateral to be held on deposit with the
Lender or (c) to fund drawings under the SBLC. Any such advance
shall be a Prime Rate Readvance and shall be payable on demand
and any portion thereof which is repaid may not be reborrowed.
3
(h) The Loan Agreement is hereby further amended by
adding Subsections 4.14, 4.15 and 4.16 entitled, "Additional
Collateral - Cash Collateral," "Disbursement of Cash Collateral,"
and "Grant of Security Interest" as follows:
"4.14 Additional Collateral - Cash Collateral. With
the execution of this amendment, the Borrower shall deposit with
the Lender to be held in escrow pursuant to the terms of this
Agreement, a cash deposit in the initial amount of $1,740,000
(the "Wal-Mart Escrow Fund") to be held in a separate account
(the "Wal-Mart Escrow Account") to fund the completion of the
construction of a Wal-Mart store at Ledgewood Mall, Ledgewood,
New Jersey ("Ledgewood Wal-Mart Store"), in accordance with the
terms and provisions of that certain Amended and Restated Lease
Agreement dated July 11, 1996 by and between the Borrower and
Wal-Mart Stores, Inc., as amended from time to time (the "Wal-
Mart Lease"). The Borrower shall use due diligence to complete
the construction of Ledgewood Wal-Mart Store on or before the
final completion dated stated in the Wal-Mart Lease. The Wal-
Mart Escrow Account shall be held in a so-called premium master
fund account bearing interest at such rates as may be announced
by the Lender from time to time. Such amounts shall be disbursed
as provided in Section 4.15 of this Agreement.
4.15 Disbursement of Wal-Mart Escrow Account. Subject
to all the terms and conditions of this agreement and so long as
there exists no Default hereunder, funds held in the Wal-Mart
Escrow Account to complete the Ledgewood Wal-Mart Store may be
disbursed upon the following terms and conditions:
(1) Lender shall have received the following documents
in form and substance satisfactory to the Lender
(a) copies of construction plans and specifications as
defined in the Wal-Mart Lease (Wal-Mart Lease Exhibits B and C)
(b) copies of building permits and driveway entrance
permits and any other permits necessary for commencement and
completion of construction of the Wal-Mart Store
(c) copies of Construction Contracts
(d) copy of Schedule of Work
(e) copies of Cost Breakdown of Work and Trades
4
(f) Such other documents Lender may request concerning
the construction of the Ledgewood Wal-Mart Store.
Items (a) - (i), inclusive, are hereinafter referred to
as the "Construction Documents."
(2) Disbursements shall be made from the Wal-Mart Escrow
Account ("Wal-Mart Advances"), but not more frequently than
monthly, upon the Lender's receipt of the following documents in
form and substance satisfactory to the Lender; provided, however,
no requested disbursement (or partial payment thereof) shall be
made from the Wal-Mart Escrow Account unless the Lender is
satisfied the balance remaining in such account after the
requested disbursement exceeds the projected cost of completion
of the Ledgewood Wal-Mart Store.
(a) Borrower's Certificate and Request that the cost
to complete the Wal-Mart Store shall not exceed the amount
remaining in the Wal-Mart Escrow Account after the requested
disbursement and that there are no changes to the Construction
Documents other than those previously disclosed to the Lender.
Such certification shall be in the form attached hereto as
Exhibit D.
(b) The requested Requisition on AIA Forms G702 and
G703, together with Lien Waivers from the General Contractor and
each subcontractor performing work prior to the requested
disbursement and receipts for prior payments from such
contractors and subcontractors. Said requisition forms shall be
executed by the contractor and Borrower's Architect. As used
herein "Borrower's Architect" shall mean the Wal-Mart Architect
or the Wal-Mart Construction Manager.
(c) Reports satisfactory to the Lender by its
construction consultant/engineer approving the requisition and
compliance with the Contract Documents.
(d) Such other documents and certifications deemed
appropriate and advisable by Lender or its counsel to administer
properly disbursements from the Wal-Mart Escrow Account.
5
(e) Proof of compliance with the provisions of Exhibit
E entitled "Construction Advances" and attached hereto as Exhibit
E and by this references made a part hereof."
4.16 Grant of Security Interest. The Borrower hereby
pledges, assigns and grants to Lender, as security for the prompt
observance and performance by Borrower of all other terms,
conditions and provisions of the Agreement and the Loan Documents
on the Borrower's part to be observed and performed, all of
Borrower's right, title, and interest in and to the Wal-Mart
Escrow Fund and the Wal-Mart Escrow Account (collectively, the
"Collateral"), and Borrower agrees that Lender shall have a
security interest (as defined in the Uniform Commercial Code) in,
and a banker's lien and right of set-off against, the Collateral.
In addition, the Borrower shall not further pledge, assign or
grant any security interest in the Collateral or permit any lien
or encumbrance to attach thereto, or any levy to be made thereon,
or any UCC-1 Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto.
Upon an Event of Default, in addition to the rights and remedies
in this Agreement, at Lender's option, Lender shall be entitled
to exercise all rights and remedies available to it under the
Uniform Commercial Code of the Commonwealth of Massachusetts.
The Borrower (a) shall execute any instruments or take any steps
required by Lender in order that notice of the security interest
granted and assigned by Borrower to Lender under this Agreement
shall be given to all appropriate parties and/or as may be
required to enable Lender to enforce its rights under this
Agreement, (b) shall execute, at the request of Lender, all UCC-1
Financing Statements and other instruments and documents required
by Lender to perfect the security interest intended to be created
under this Agreement.
(i) Subparagraph (a) of Subsection 6.1 of the Loan
Agreement is hereby stricken and the following is substituted
therefor:
"(a) the Third Allonge to Consolidated Note in
substantially the form attached hereto as Exhibit A (the
"Consolidated Credit Note").":
6
(j) Subparagraph (ii) of Subsection 8.9.2 is hereby amended
by striking therefrom the words "and all accounts receivable and
accounts payable which have been outstanding for more than ninety
(90) days".
(k) Subsection 8.11 of the Loan Agreement, entitled
"Mortgaged Property Debt Service Coverage" is hereby amended by
striking therefrom the following words:
"Annualized Operating Income shall be calculated as of the
end of each Fiscal quarter and shall at times be equal to or
greater than 225% of Projected Debt Service."
and by substituting therefor the following:
"Annualized Operating Income shall be calculated as of the
end of each fiscal quarter and shall at all times be greater than
$400,000."
(l) Subsection 8.11.3 of the Loan Agreement entitled
"Defined Operating Expenses" is hereby amended as follows:
(i) by striking from subparagraph (a) thereof the
following words:
"plus (ii) an allowance for management fees equal to 4%
of Eligible Revenues as of such date, plus (iii) a quarterly
replacement reserve allowance of two and one-half cents (2.5
cents)per square foot of Rental Space in the Mortgage
Properties".
(ii) by striking from said subparagraph (a) "(i)".
(iii) by striking therefrom subparagraph (b) in its
entirety.
(m) Subsection 8.12 of the Loan Agreement entitled "Overall
Debt Service Coverage" is hereby amended by striking therefrom
the words 175% of Debt Service" and substituting therefrom the
words "140% of Debt Service."
(n) Subsection 8.13.1 of the Loan Agreement entitled
"Funded Debt to Restated Value" is hereby stricken in its
entirety.
7
(o) Subsection 8.14 of the Loan Agreement entitled
"Tangible Net Worth" is hereby stricken in its entirety.
(p) Subsection 8.15 of the Loan Agreement entitled
"Liquidity" is hereby stricken in its entirety.
(q) Subsection 8.16 of the Loan Agreement entitled
"Unimproved Real Estate" is hereby stricken in its entirety.
(r) Subsection 10.3 of the Loan Agreement entitled
"Distributions" is hereby stricken in its entirety and the
following substituted therefor:
"10.3 Distributions. The REIT shall not make any
Distribution, including Distributions to the owner(s) of
operating partnership units of the Borrower, unless it shall have
given the Lender at least ten (10) days prior written notice
thereof identifying such Distribution, the amount thereof and the
Person or persons to whom it is to be made; provided however, if
at the time of any Distribution there shall exist an Event of
Default which has not been cured to the satisfaction of the
Lender, then the amount of such Distribution shall not exceed the
minimum amount which the REIT must distribute to retain its legal
status as a REIT."
(s) Section 18 of the Loan Agreement entitled "Notices" is
hereby amended by striking the address of the Lender stated
therein and substituting therefor the following "Fleet National
Bank, 75 State Street, Mail Stop: MA BO F11C, Boston,
Massachusetts 02109-1810, Attention: Thomas T. Hanold, Vice
President, Commercial Real Estate."
(t) Section 20 of the Loan Agreement entitled "Choice of
Law" is hereby amended by striking therefrom the words "the state
of Rhode Island" and by substituting therefor the words "the
Commonwealth of Massachusetts".
(u) Section 21 of the Loan Agreement entitled "Consent to
Jurisdiction" is hereby amended by substituting for the words
"Rhode Island" and "Providence", respectively, whenever they
appear the words "Massachusetts" and "Boston", respectively.
8
2. Payments. At the time of the execution of this Amendment,
the Borrower shall pay to the Lender any current or previously
outstanding legal, appraisal, construction consulting/engineer
and title insurance fees, costs or expenses.
3. Representations and Warranties. To induce Lender to enter
into this Amendment, the Borrower, REIT and Sponsor represent and
warrant to Lender as follows:
(a) The information set forth in this Amendment is true and
correct.
(b) The Borrower, REIT and Sponsor have full power,
authority and legal right to execute and deliver this Amendment,
and this Amendment constitutes the valid and binding obligation
of Borrower, REIT and Sponsor, enforceable against them in
accordance with its terms.
(c) None of the Borrower, the REIT or the Sponsor has any
charge, claim, demand, plea or setoff upon, for or against the
Agreement or any of the Loan Documents. There is no Outstanding
Principal of the Loan as of the date hereof.
(d) If the effect of the amendments contained in this
Amendment are taken into account, no Default exists under the
Agreement or any other Loan Document.
(e) The execution, delivery and performance of this
Amendment has been duly authorized by all requisite partnership
or trust action on the part of the Borrower and the REIT, as the
case may be, and will not violate any partnership documents of
the Borrower or trust documents of the REIT or any provision of
any law or any order of any tribunal, and will not conflict with,
result in a breach of or constitute a default under any mortgage,
security agreement, loan or other credit agreement, or any other
agreement or instrument to which the Borrower or the REIT or the
Sponsor is a party, or result in the imposition of any Lien upon
the assets of the Borrower, the REIT or the Sponsor except as
contemplated by this Amendment.
9
4. Effectiveness of Loan Documents. Except as specifically
amended by this Amendment, the Loan Agreement and the other Loan
Documents remain unmodified and in full force and effect.
References in any of the Loan Documents to the Loan Agreement
shall hereafter be deemed to mean and refer to the Loan Agreement
as amended by this Amendment.
5. Miscellaneous
(a) This Amendment constitutes the entire understanding
among the Borrower, the REIT, the Sponsor and the Lender
concerning the modification of the Loan Agreement. All prior and
contemporaneous negotiations and understandings are merged in
this Amendment.
(b) The captions preceding the sections of this Amendment
are for convenience of reference only. They are not a part of
this Agreement and shall not be considered in construing its
meaning or effect.
(c) The Borrower, the REIT and the Sponsor shall pay the
attorneys' fees and costs incurred by Lender in connection with
the modification of the Loan Agreement evidenced by this
Amendment.
(d) This Amendment shall be construed in accordance with
the laws of the State of Rhode Island as provided in Section 20
of the Loan Agreement, and shall be binding upon the parties
hereto and their respective heirs, personal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties hereof have caused this
Amendment to be duly executed as a sealed instrument the day and
year first above written.
FLEET NATIONAL BANK
By: /s/ Thomas T. Hanold
Name: Thomas T. Hanold
Title: Vice President
10
MARK CENTERS LIMITED PARTNERSHIP
By: Mark Centers Trust,
its general partner
By: /s/ Joshua Kane
Name: Joshua Kane
Title: Senior Vice President and
Chief Financial Officer
MARK CENTERS TRUST
By: /s/ Joshua Kane
Name: Joshua Kane
Title: Senior Vice President and
Chief Financial Officer
/s/ Marvin L. Slomowitz
Marvin L. Slomowitz
11
Fourth Amendment to Revolving Credit Loan Agreement
("Fourth Amendment") by and among Mark Centers Limited
Partnership ("Borrower"), Mark Centers Trust ("MCT")
and Mellon Bank, N.A. ("Lender")
Ladies and Gentlemen:
Borrower, MCT and Lender are parties to a Revolving Credit
Loan Agreement dated October 5, 1994, amended by a First
Amendment to Revolving Credit Loan Agreement dated November 15,
1995 (the "First Amendment"); a Second Amendment to Revolving
Credit Loan Agreement dated February 29, 1996 (the "Second
Amendment") and a Third Amendment to Revolving Credit Loan
Agreement dated October 3, 1996 (the "Third Amendment"). The
Revolving Credit Loan Agreement, as amended by the First
Amendment, Second Amendment and Third Amendment, shall
hereinafter be referred to as the "Loan Agreement." Capitalized
terms used in this Agreement without definition shall have the
same meanings ascribed to those terms in the Loan Agreement.
Borrowers and MCT have requested Lender to agree to modify
certain covenants in the Loan Agreement and Lender has agreed to
do so on the terms and conditions hereinafter set forth. In
consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Amendments
(a) Restated Value. Section 1.1 of the Loan Agreement
is amended so that the definition of "Restated Value" and all
references thereto in the Loan Agreement are deleted in their
entirety.
(b) Financial Covenants. Section 5.16 of the Loan
Agreement is amended so that Sections 5.16(B) (Tangible Net
Worth), 5.16(C) (Liquidity), 5.16(F) (Loan to Value), 5.16(G)
(Funds From Operations), 5.16(H) (Dividends) and all references
thereto in the Loan Agreement are deleted in their entirety.
(c) Earnings. Section 5.16(D) (Earnings) of the Loan
Agreement is amended so that the ratio "1.75 to 1" in the fourth
line of the first sentence is deleted and the ratio "1.40 to 1"
is substituted therefor.
(d) Encumbrances. Section 5.5(b) of the Loan
Agreement is deleted in its entirety.
2. Representations and Warranties. To induce Lender to
amend the Loan Agreement as provided herein, Borrower and MCT
represent and warrant to Lender as follows:
(a) Borrower and MCT have full power, authority and
legal right to execute and deliver this Amendment, and this
Amendment constitutes the valid and binding obligation of
Borrower and MCT, enforceable against them in accordance with its
terms.
(b) Neither MCT nor any Borrower has any charge,
claim, demand, plea or setoff upon, for or against the Loan
Agreement or any of the Loan Documents. The outstanding
principal balance of the Revolving Credit as of the date hereof
is $3,076,296.44 and such sum remains due and payable in
accordance with the terms and provisions of the Loan Agreement
and other Loan Documents, as modified by this Fourth Amendment.
(c) No Event of Default exists under the Loan
Agreement or any other Loan Document and there is no Unmatured
Event of Default under the Loan Agreement or any other Loan
Document.
(d) The execution, delivery and performance of this
Amendment has been duly authorized by all requisite partnership
action on the part of each Borrower and MCT, and will not violate
the partnership documents of Borrower or MCT or any provision of
any law or any order of any tribunal, and will not conflict with,
result in a breach of or constitute a default under any mortgage,
security agreement, loan or other credit agreement, or any other
agreement or instrument to which Borrower or MCT is a party, or
result in the imposition of any lien upon the assets of Borrower
or MCT except as contemplated by this Amendment.
-2-
3. Effectiveness of Loan Documents. Except as
specifically amended by this Fourth Amendment, the Loan Agreement
and the other Loan Documents remain unmodified and in full force
and effect. References in any of the Loan Documents to the Loan
Agreement shall hereafter be deemed to mean and refer to the Loan
Agreement as amended by this Amendment.
4. Miscellaneous.
(a) This Fourth Amendment constitutes the entire
understanding among Borrower, MCT and Lender concerning the
modification of the Loan Agreement. All prior and
contemporaneous negotiations and understandings are merged in
this Fourth Amendment.
(b) The captions preceding the sections of this Fourth
Amendment are for convenience of reference only. They are not a
part of this Fourth Amendment and shall not be considered in
construing its meaning or effect.
(c) Borrower and MCT shall pay the attorneys' fees and
costs incurred by Lender in connection with the modification of
the Loan Agreement evidenced by this Fourth Amendment.
(d) This Fourth Amendment may be executed in any
number of counterparts, each of which shall be an original, and
such counterparts together shall constitute one and the same
instrument. The parties hereto agree that a facsimile
transmission of an executed counterpart of this Fourth Amendment
shall have the same binding effect upon the signatory as an
executed and delivered original hereof. The parties hereto
further agree, for confirmatory purposes only, to exchange copies
of executed counterpart originals promptly after the aforesaid
facsimile transmission so that each party may have one fully
executed original hereof.
(e) This Fourth Amendment shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania and
shall be binding upon the parties hereto and their respective
successors and assigns.
-3-
IN WITNESS WHEREOF the parties hereto have caused this
Fourth Amendment to be duly executed the day and year first above
written.
Borrowers:
MARK CENTERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: MARK CENTERS TRUST, a Maryland
business trust, its general
partner
By: /s/ Joshua Kane
Senior Vice President
Chief Financial Officer
MARK CENTERS TRUST, a Maryland
business trust
By: /s/ Joshua Kane
Senior Vice President
Chief Financial Officer
Lender:
MELLON BANK, N.A., national banking
association
By: /s/ D. Charles Felmlee
Vice President
-4-
