United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
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: 0-16024
EASTPOINT MALL LIMITED PARTNERSHIP
Exact Name of Registrant as Specified in its Charter
Delaware 13-3314601
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Consolidated Balance Sheets At September 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 4,166,230 $ 4,166,230
Building 43,241,060 43,241,060
Improvements 7,305,675 7,050,087
54,712,965 54,457,377
Less accumulated depreciation
and amortization (13,095,292) (11,738,595)
41,617,673 42,718,782
Cash and cash equivalents 5,715,200 6,254,501
Restricted cash 2,100,000 2,100,000
Cash-held in escrow 254,006 443,811
Accounts receivable, net of
allowance of $516,124 in 1996
and $80,405 in 1995 943,546 638,436
Accrued interest receivable 313,140 224,567
Deferred rent receivable 340,699 356,656
Note receivable -- 738,000
Deferred charges, net of
accumulated amortization of $574,613
in 1996 and $423,597 in 1995 1,399,847 1,510,981
Prepaid expenses 527,378 381,278
Total Assets $ 53,211,489 $ 55,367,012
Liabilities, Minority Interest
and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 389,786 $ 192,779
Mortgage loan payable 51,000,000 51,000,000
Accrued interest payable 340,425 340,425
Due to affiliates 25,064 22,226
Security deposits payable 46,819 46,819
Deferred income 491,966 415,081
Distribution payable 288,826 288,826
Total Liabilities 52,582,886 52,306,156
Minority interest (585,807) (344,786)
Partners' Capital (Deficit):
General Partner (102,122) (80,211)
Limited Partners (4,575 limited
partnership units authorized,
issued and outstanding) 1,316,532 3,485,853
Total Partners' Capital 1,214,410 3,405,642
Total Liabilities,
Minority Interest and
Partners' Capital $ 53,211,489 $ 55,367,012
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 3,485,853 $ (80,211) $ 3,405,642
Net income 1,187,587 11,996 1,199,583
Distributions (3,356,908) (33,907) (3,390,815)
Balance at September 30, 1996 $ 1,316,532 $ (102,122) $ 1,214,410
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Income
Rental income $ 1,905,019 $ 1,681,423 $ 5,543,880 $ 5,075,475
Percentage rent 216,860 297,347 674,516 891,890
Escalation income 905,850 872,640 2,785,229 2,560,376
Interest income 74,082 99,471 244,088 296,069
Miscellaneous income 34,137 42,442 122,418 76,948
Total Income 3,135,948 2,993,323 9,370,131 8,900,758
Expenses
Interest expense 1,021,275 1,021,275 3,038,325 3,050,197
Property operating
expenses 962,605 772,035 2,890,439 2,300,099
Depreciation and
amortization 505,216 486,622 1,507,713 1,448,320
Real estate taxes 152,982 144,137 446,319 432,537
General and administrative 50,176 54,405 164,290 142,850
Total Expenses 2,692,254 2,478,474 8,047,086 7,374,003
Income before minority
interest 443,694 514,849 1,323,045 1,526,755
Minority interest (41,783) (48,613) (123,462) (145,963)
Net Income $ 401,911 $ 466,236 $ 1,199,583 $ 1,380,792
Net Income Allocated:
To the General Partner $ 4,019 $ 4,662 $ 11,996 $ 13,808
To the Limited Partners 397,892 461,574 1,187,587 1,366,984
$ 401,911 $ 466,236 $ 1,199,583 $ 1,380,792
Per limited partnership
unit (4,575 outstanding) $ 86.97 $ 100.89 $ 259.58 $ 298.79
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities:
Net income $ 1,199,583 $ 1,380,792
Adjustments to reconcile net
income to net cash provided by
operating activities:
Minority interest 123,462 145,963
Depreciation and amortization 1,507,713 1,448,320
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Cash-held in escrow 189,805 87,503
Accounts receivable (305,110) (280,108)
Accrued interest receivable (88,573) (87,694)
Deferred rent receivable 15,957 (62,703)
Deferred charges (39,882) (34,946)
Prepaid expenses (146,100) (165,418)
Accounts payable and accrued expenses 197,007 (6,140)
Due to affiliates 2,838 749
Deferred income 76,885 14,626
Security deposits payable -- (2,083)
Net cash provided by operating activities 2,733,585 2,438,861
Cash Flows From Investing Activities:
Proceeds from note receivable 738,000 --
Additions to real estate (255,588) (368,445)
Net cash provided by (used for)
investing activities 482,412 (368,445)
Cash Flows From Financing Activities:
Distributions paid (3,390,815) (1,876,213)
Distributions paid-minority interest (364,483) (187,830)
Net cash used for financing activities (3,755,298) (2,064,043)
Net increase (decrease) in cash
and cash equivalents (539,301) 6,373
Cash and cash equivalents,
beginning of period 6,254,501 5,661,047
Cash and cash equivalents,
end of period $ 5,715,200 $ 5,667,420
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 3,038,325 $ 3,050,197
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1995 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of September 30, 1996 and the results of operations and
cash flows for the nine months ended September 30, 1996 and 1995 and the
statement of partner's capital (deficit) for the nine months ended September
30, 1996. Results of operations for the periods are not necessarily indicative
of the results to be expected for the full year.
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
The following significant events have occurred subsequent to fiscal year 1995,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
Ames Bankruptcy:
Land leased to Ames by Eastpoint Partners L.P. (the "Owner Partnership"),
together with the building constructed thereon by Ames, secured a deed of
trust (the "Deed of Trust") held by Consolidated Fidelity Life Insurance
Company ("Consolidated"). In 1990, Ames filed for bankruptcy protection under
Chapter 11 of the Federal Bankruptcy Code, thereby defaulting on the Deed of
Trust. On December 18, 1992, the Bankruptcy Court confirmed a Plan of
Reorganization for Ames (the "Plan") and the Plan was subsequently consummated.
Pursuant to the Plan, Ames assumed the lease of its store at Eastpoint Mall
(the "Mall") and continues its operations there.
In July 1994, the Partnership executed a Compromise and Mutual Release (the
"Release Agreement") with Consolidated. Pursuant to the terms of the Release
Agreement , the Partnership paid Consolidated $2 million in return for the
assignment of the Deed of Trust and related Ames promissory note, as well as
Consolidated's claim in the Ames bankruptcy case relating to such promissory
note. Consolidated's total claims, in the face amount of approximately $2.3
million, consist of the balances due on the Ames promissory note, totaling $1.7
million, and another promissory note. Pursuant to the Release Agreement, the
Partnership is entitled to any recovery based on the Ames promissory note;
Consolidated will receive any recovery on the other note. Various trusts were
established through Ames' Plan of Reorganization by which different classes of
claims were to be paid from different pools of monies. The Trustee for the
trust responsible for payment of Consolidated's claim (the "Subsidiaries
Trustee") had filed an objection to the allowance of Consolidated's claim,
including that portion attributable to the Ames promissory note. The
Partnership pursued legal action in opposition to the objection.
In mid-March 1996, the Trustee and the Partnership settled the Trustee's
objection by reducing and allowing Consolidated's claim in the approximate
amount of $2,050,000 (the "Claim"), of which approximately $1,530,142 is for
amounts due under the Ames promissory note, and requiring Ames to make a
payment of $10,000 to the Owner Partnership. An Agreed Order approving the
settlement was entered by the Bankruptcy Court on May 1, 1996. Ames' $10,000
payment to the Partnership was received on June 4, 1996. On August 7, 1996 and
September 23, 1996, payments on the claim were received from Ames in the
amounts of $887,520 and $111,938, respectively. At September 30, 1996, the
total payments received from Ames were $1,009,458, of which approximately
$222,000, is payable to Consolidated and is reflected in accounts payable and
accrued expenses on the Partnership's balance sheet. It is uncertain at this
time if there will be any additional payments.
On August 21, 1996, the Owner Partnership retired the Ames promissory note
secured by the Deed of Trust.
Purchase of Leasehold Interest:
On November 8, 1996, the Owner Partnership purchased for $975,000 the leasehold
interest in a vacant, free-standing building and the underlying land located
adjacent to the J.C. Penney anchor tenant at the Mall from J.C. Penney Company,
Inc.
Part 1. Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1996, the Partnership had cash and cash equivalents of
$5,715,200, compared to $6,254,501 at December 31, 1995. The decrease is
primarily due to cash distributions and additions to real estate exceeding cash
provided by operating activities. The Partnership maintains a restricted cash
account representing a loan reserve of $2,100,000 as established under the
terms of its first mortgage loan. Of this balance, $1.1 million represents a
portion of the proceeds of the Partnership's first mortgage loan which was
withheld pending resolution of the Consolidated dispute (see "Ames Parcel and
Consolidated Release Agreement" below). The remaining balance constitutes
additional collateral which can be used for capital improvements and leasing
commissions. Cash held in escrow totaled $254,006 at September 30, 1996
compared with $443,811 at December 31, 1995. The decrease is primarily
attributable to payments made for real estate taxes and insurance premiums
partially offset by additional fundings made to the real estate tax and
insurance escrows as specified under the terms of the Partnership's first
mortgage loan.
Accounts receivable increased from $638,436 at December 31, 1995 to $943,546 at
September 30, 1996 primarily due to the continued billing of base rents to
bankrupt tenants which have vacated the Mall and an increase in recoverable
common area maintenance expenses. Billings of base rents to bankrupt tenants
which have vacated the Mall continue until a settlement is reached between the
parties involved in such bankruptcy proceedings. The increase in accounts
receivable is partially offset by an increase in the allowance for doubtful
accounts related to the bankrupt tenants.
Accrued interest receivable increased from $224,567 at December 31, 1995 to
$313,140 at September 30, 1996 reflecting interest earned in 1996 on the loan
reserve.
Note receivable decreased from $738,000 at December 31, 1995 to $0 at September
30, 1996 reflecting receipt from the Ames Trustee of payments on the claim.
Please refer to "Ames Parcel and Consolidated Release Agreement" below.
Prepaid expenses increased from $381,278 at December 31, 1995 to $527,378 at
September 30, 1996 reflecting the payment of real estate taxes for the July 1,
1996 to June 30, 1997 real estate tax year.
The increase in accounts payable and accrued expenses is attributable to the
receipt from the Ames trustee of payment on the claim, a portion of which is
payable to Consolidated. Please refer to "Ames Parcel and Consolidated Release
Agreement" below.
As of the filing date of this report, the following current tenants at the
Mall, or their parent corporations, have filed for protection under the U.S.
Bankruptcy Code:
Tenant Square Footage Leased
Marianne 3,750
Marianne Plus 3,000
Jeans West 2,400
Rave 2,000
As of September 30, 1996, these tenants occupied 11,150 square feet, or
approximately 3% of the Mall's leasable area (exclusive of anchor tenants and
office space). Pursuant to the provisions of the U.S. Federal Bankruptcy Code,
these tenants may, with court approval, choose to reject or accept the terms of
their leases. Should any of these tenants exercise the right to reject their
leases, this could have an adverse impact on cash flow generated by the Mall
and revenues received by the Partnership depending on the Partnership's ability
to replace them with new tenants at comparable rents.
Ames Parcel and Consolidated Release Agreement
On April 26, 1990, Ames filed for bankruptcy protection under Chapter 11 of the
Federal Bankruptcy Code. On December 18, 1992, the Bankruptcy Court confirmed
a Plan of Reorganization for Ames (the "Plan") pursuant to which Ames assumed
its lease at the Mall. Land leased to Ames by the Owner Partnership, together
with the building constructed thereon by Ames, secured a deed of trust held by
Consolidated, as successor to Southwestern Life Insurance Company. By filing
its bankruptcy petition, Ames was in default under the Consolidated deed of
trust.
On July 14, 1994, the Partnership executed a Release Agreement with
Consolidated. Pursuant to the terms of the Release Agreement, the Partnership
paid Consolidated $2 million in return for the assignment of the deed of trust
and related Ames promissory note, as well as Consolidated's claim in the Ames
bankruptcy case relating to such promissory note. Consolidated's total claims,
in the face amount of approximately $2.3 million, consist of the balances due
on the Ames promissory note, totaling $1.7 million, and another promissory
note. Pursuant to the Release Agreement, the Partnership is entitled to any
recovery based on the Ames promissory note; Consolidated will receive any
recovery on the other note. Various trusts were established through Ames' Plan
of Reorganization by which different classes of claims were to be paid from
different pools of monies. The Trustee for the trust responsible for payment
of Consolidated's claim (the "Subsidiaries Trustee"), had filed an objection to
the allowance of Consolidated's claim, including that portion attributable to
the Ames promissory note. The Partnership pursued legal action in opposition
to the objection. In mid- March 1996, the Trustee and the Partnership settled
the Trustee's objection by reducing and allowing Consolidated's claim in the
approximate amount of $2,050,000, of which approximately $1,530,142 is for
amounts due under the Ames promissory note, and requiring Ames to make a
payment of $10,000 to the Owner Partnership. An Agreed Order approving the
settlement was entered by the Bankruptcy Court on May 1, 1996. Ames' $10,000
payment to the Partnership was received on June 4, 1996. On August 7, 1996 and
September 23, 1996, additional payments were received from Ames in the amounts
of $887,520 and $111,938, respectively. At September 30, 1996, the total
payments received from Ames were $1,009,458, of which 22%, or $222,081, is
payable to Consolidated and is reflected in accounts payable and accrued
expenses on the Partnership's balance sheet. It is uncertain at this time if
there will be any additional payments.
The Partnership's mortgage lender withheld certain of the proceeds of the first
mortgage loan until the Partnership resolved the Consolidated dispute. It is
anticipated that these funds, which total $1.1 million, will be released to the
Partnership in 1996 since the first mortgage secured by the Ames parcel, which
was retained by the Partnership pending a final decision on Consolidated's
claims, has been extinguished. These funds are held in escrow with interest
payable to the Partnership.
Leasehold Purchase
On November 8, 1996, the Owner Partnership purchased for $975,000 the leasehold
interest in a vacant, free-standing building and the underlying land located
adjacent to the J.C. Penney anchor tenant at the Mall from J.C. Penney Company,
Inc. The acquisition of the leasehold interest in this parcel allows for
expansion of the center or the addition of parking.
Cash Distributions
A regular cash distribution for the second quarter of 1996, in the amount of
$62.50 per Unit, was paid on August 15, 1996. A regular cash distribution for
the third quarter of 1996 , in the amount of $62.50 per Unit, will be paid on
or about November 15, 1996. The level, timing, and amount of future
distributions will be reviewed on a quarterly basis after an evaluation of the
Mall's performance and the Partnership's current and future cash needs.
Results of Operations
For the nine months ended September 30, 1996 and 1995, net cash flow from
operating activities totaled $2,733,585 and $2,438,861, respectively. The
increase is primarily due to an increase in accounts payable and accrued
expenses.
For the three and nine months ended September 30, 1996, the Partnership
recognized net income of $401,911 and $1,199,583, respectively, compared to
$466,236 and $1,380,792 for the same periods in 1995. The decrease for the
three-month period is primarily due to an increase in property operating
expenses and a decrease in percentage rent, partially offset by an increase in
rental income. The decrease for the nine-month period is primarily due to
increases in all expense categories, with the exception of interest expense,
partially offset by increases in rental and escalation income.
Rental income totaled $1,905,019 and $5,543,880 for the three and nine months
ended September 30, 1996 compared to $1,681,423 and $5,075,475 for the same
periods in 1995. The increase during the 1996 periods is primarily due to
higher base rent billings resulting from a lease amendment with anchor tenant
Value City, whereby Value City's base rent payments are increased and
percentage rent payments are decreased, and the addition of new tenants during
1996. Percentage rent for the three and nine months ended September 30, 1996
totaled $216,860 and $674,516, respectively compared to $297,347 and $891,890
for corresponding periods in 1995. The decreases are due to the lease
amendment with Value City noted above. In addition, rental income reflects
approximately $200,000 of base rent billings to tenants which have filed for
bankruptcy and/or have vacated the Mall. This income is offset by a
corresponding increase in bad debt expense, which is a component of property
operating expenses.
Escalation income represents the income received from Mall tenants for their
proportionate share of common area maintenance and real estate tax expenses.
Escalation income increased for the three and nine months ended September 30,
1996 compared to the same periods in 1995. The increase for the nine-month
period is primarily due to an increase in common area maintenance expenses,
which are charged back to tenants. The increase for the three-month period is
also due to additional billings to tenants during the third quarter of 1996 for
adjustments made for prior-year common area maintenance expenses.
Interest income for the three and nine months ended September 30, 1996 totaled
$74,082 and $244,088, respectively, compared to $99,471 and $296,069 for the
same periods in 1995. The decreases are primarily due to a decrease in the
Partnership's invested cash balances.
Property operating expenses increased to $962,605 and $2,890,439 for the three
and nine months ended September 30, 1996 from $772,035 and $2,300,099 during
the corresponding periods in 1995. The increases are primarily due to increased
bad debt expense related to the tenants that have filed for bankruptcy
protection and, for the nine-month period, increased snow removal expenses.
Total Mall tenant sales (exclusive of anchor tenants) were $44,699,000 for the
eight months ended August 31, 1996, compared to $41,495,000 for same period in
1995, an increase of 8%. Sales for tenants (exclusive of anchor tenants) which
operated at the Mall for each of the last two years were $39,445,000 for the
eight months ended August 31, 1996 compared to $39,425,000 for the same period
in 1995 an increase of 0.05%. As of September 30, 1996, the Mall was 93%
occupied, excluding anchor tenants and office space, compared to 96% at
September 30, 1995.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EASTPOINT MALL LIMITED PARTNERSHIP
BY: EASTERN AVENUE INC.
General Partner
Date: November 14, 1996 BY: /s/ Paul L. Abbott
Director and Chief Executive
Officer
Date: November 14, 1996 BY: /s/ Robert Hellman
President
Date: November 14, 1996 BY: /s/ Elizabeth Rubin
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 5,715,200
<SECURITIES> 0
<RECEIVABLES> 2,113,509
<ALLOWANCES> 516,124
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 54,712,905
<DEPRECIATION> 13,095,292
<TOTAL-ASSETS> 53,211,489
<CURRENT-LIABILITIES> 1,582,886
<BONDS> 51,000,000
<COMMON> 0
0
0
<OTHER-SE> 1,214,410
<TOTAL-LIABILITY-AND-EQUITY> 53,211,489
<SALES> 0
<TOTAL-REVENUES> 9,370,131
<CGS> 0
<TOTAL-COSTS> 3,336,758
<OTHER-EXPENSES> 1,672,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,038,325
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,199,583
<EPS-PRIMARY> 259.58
<EPS-DILUTED> 259.58
</TABLE>
