United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 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 June 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 7,232,909 7,050,087
54,640,199 54,457,377
Less accumulated depreciation
and amortization (12,640,814) (11,738,595)
41,999,385 42,718,782
Cash and cash equivalents 4,086,831 6,254,501
Restricted cash 2,100,000 2,100,000
Cash-held in escrow 914,577 443,811
Accounts receivable, net of
allowance of $350,140 in 1996
and $80,405 in 1995 867,955 638,436
Accrued interest receivable 282,632 224,567
Deferred rent receivable 326,318 356,656
Note receivable 728,000 738,000
Deferred charges, net of
accumulated amortization of
$100,278 in 1996 and
$423,597 in 1995 1,450,585 1,510,981
Prepaid expenses 54,991 381,278
Total Assets $ 52,811,274 $ 55,367,012
Liabilities, Minority Interest
and Partners' Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $ 194,615 $ 192,779
Mortgage loan payable 51,000,000 51,000,000
Accrued interest payable 340,425 340,425
Due to affiliates 27,000 22,226
Security deposits payable 46,819 46,819
Deferred income 410,939 415,081
Distribution payable 288,826 288,826
Total Liabilities 52,308,624 52,306,156
Minority interest (598,675) (344,786)
Partners' Capital (Deficit):
General Partner (103,253) (80,211)
Limited Partners (4,575 limited
partnership units authorized,
issued and outstanding) 1,204,578 3,485,853
Total Partners' Capital 1,101,325 3,405,642
Total Liabilities,
Minority Interest and
Partners' Capital $ 52,811,274 $ 55,367,012
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 3,485,853 $ (80,211) $ 3,405,642
Net income 789,695 7,977 797,672
Distributions (3,070,970) (31,019) (3,101,989)
Balance at June 30, 1996 $ 1,204,578 $ (103,253) $ 1,101,325
Consolidated Statements of Operations
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
Income
Rental income $ 1,987,824 $ 1,685,631 $ 3,638,861 $ 3,394,052
Percentage rent 148,085 297,109 457,656 594,543
Escalation income 861,217 836,142 1,879,379 1,687,736
Interest income 79,029 97,038 170,006 196,598
Miscellaneous income 45,990 24,298 88,281 34,506
Total Income 3,122,145 2,940,218 6,234,183 5,907,435
Expenses
Interest expense 995,775 1,033,147 2,017,050 2,028,922
Property operating
expenses 886,973 685,505 1,927,834 1,528,064
Depreciation and
amortization 502,947 481,351 1,002,497 961,698
Real estate taxes 144,136 144,200 293,337 288,400
General and administrative 69,558 44,851 114,114 88,445
Total Expenses 2,599,389 2,389,054 5,354,832 4,895,529
Income before
minority interest 522,756 551,164 879,351 1,011,906
Minority Interest (50,927) (52,975) (81,679) (97,350)
Net Income $ 471,829 $ 498,189 $ 797,672 $ 914,556
Net Income Allocated:
To the General Partner $ 4,718 $ 4,982 $ 7,977 $ 9,146
To the Limited Partners 467,111 493,207 789,695 905,410
$ 471,829 $ 498,189 $ 797,672 $ 914,556
Per limited partnership
unit (4,575 outstanding) $ 102.10 $ 107.80 $ 172.61 $ 197.90
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities:
Net income $ 797,672 $ 914,556
Adjustments to reconcile net
income to net cash provided
by operating activities:
Minority interest 81,679 97,350
Depreciation and amortization 1,002,497 961,698
Increase (decrease) in cash
arising from changes in operating
assets and liabilities:
Cash-held in escrow (470,766) (325,838)
Accounts receivable (229,519) (43,052)
Accrued interest receivable (58,065) (54,374)
Deferred rent receivable 30,338 (45,737)
Note receivable 10,000 --
Deferred charges (39,882) (6,720)
Prepaid expenses 326,287 258,304
Accounts payable and accrued expenses 1,836 (51,543)
Due to affiliates 4,774 713
Deferred income (4,142) (27,833)
Security deposits -- (2,083)
Net cash provided by operating activities 1,452,709 1,675,441
Cash Flows From Investing Activities:
Additions to real estate (182,822) (97,070)
Net cash used for investing activities (182,822) (97,070)
Cash Flows From Financing Activities:
Distributions paid (3,101,989) (1,587,387)
Distributions paid-minority interest (335,568) (158,914)
Net cash used for financing activities (3,437,557) (1,746,301)
Net decrease in cash and cash equivalents (2,167,670) (167,930)
Cash and cash equivalents,
beginning of period 6,254,501 5,661,047
Cash and cash equivalents,
end of period $ 4,086,831 $ 5,493,117
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period for interest $ 2,017,050 $ 2,028,922
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 June 30, 1996 and the results of operations and cash
flows for the six months ended June 30, 1996 and 1995 and the statement of
partner's capital (deficit) for the six months ended June 30, 1996. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
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).
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 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 Consolidated 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, 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,
the Partnership was paid $887,520 of which $663,623 represents approximately
43% of amounts due under the Ames promissory note. The remaining $223,897 is
due to Consolidated by the Partnership. At the current time, the Trustee
anticipates the Partnership will receive some modest additional amounts on its
claim.
Part 1. Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1996 the Partnership had a cash balance of $4,086,831, 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 Fidelity Life Insurance Company ("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 $914,577 at June 30, 1996 compared
with $443,811 at December 31, 1995. The increase is primarily attributable to
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 $867,955 at
June 30, 1996 primarily due to an increase in common area maintenance expenses,
which are billed back to tenants.
Prepaid expenses decreased from $381,278 at December 31, 1995 to $54,991 at
June 30, 1996 primarily as a result of the recognition of real estate tax
expense for the first and second quarters of 1996.
As of the filing date of this report, the following tenants, or their parent
corporations, at the Mall 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
No Name* 2,000
* anticipates vacating in 1996
As of June 30, 1996, these tenants occupied 13,150 square feet, or
approximately 4% 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 has
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 $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, which was received on June 4, 1996. On August 7,
1996, the Partnership was paid $887,520 of which approximately $663,623
represents approximately 43% of amounts due under the Ames promissory note. The
remaining $223,897 is due to Consolidated by the Partnership. At the
current time, the Trustee estimates the Partnership will receive some modest
additional amounts on its claim.
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 when the first mortgage secured by the Ames parcel, which
has been retained by the Partnership pending a final decision on Consolidated's
claims, is extinguished. These funds are held in escrow with interest payable
to the Partnership.
The Partnership has negotiated to purchase from J.C. Penney Company, Inc. the
leasehold interest in a vacant, free-standing building and underlying land
located adjacent to the J.C. Penney store at the Mall. Control of this parcel
is considered necessary to allow for expansion of the center by the Partnership
or subsequent owner, thereby enhancing the Mall's overall value. The cost of
this tenant buyout is expected to be $975,000. Absent such buyout, J.C. Penney
could continue to control this parcel for the next 18 years.
Cash Distributions
On April 4, 1996, the Partnership paid a special cash distribution, funded by
its cash reserves, in the amount of $546.25 per Unit. A distribution for the
first quarter of 1996, in the amount of $62.50 per Unit, was paid on May 15,
1996. A regular cash distribution for the second quarter of 1996 , in the
amount of $62.50 per Unit, will be paid on or about August 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 six months ended June 30, 1996 and 1995, net cash flow from operating
activities totaled $1,452,709 and $1,675,441, respectively. The decrease is
primarily due to increased fundings to cash held in escrow, an increase in
accounts receivable and a decrease in net income, which resulted from increased
property operating expense.
For the three and six months ended June 30, 1996, the Partnership recognized
net income of $471,829 and $797,672, respectively, compared to $498,189 and
$914,556 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 six-month period is primarily attributable to increases in
property operating expenses, partially offset by increases in rental and
escalation income.
The Partnership generated total income for the three and six months ended June
30, 1996 of $3,122,145 and $6,234,183, respectively, compared to $2,940,218 and
$5,907,435 for the same periods in 1995. Rental income totaled $1,987,824 and
$3,638,861 for the three and six months ended June 30, 1996 compared to
$1,685,631 and $3,394,052 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. In addition, rental income reflects base
rents from tenants which have vacated or are in bankruptcy. Base rent during
the 1996 period from tenants which have either filed for bankruptcy or have
vacated the Mall totaled approximately $148,000 and has been reserved for.
Percentage rent for the three and six months ended June 30, 1996 totaled
$148,085 and $457,656, respectively compared to $297,109 and $594,543 for
corresponding periods in 1995. The decreases are due to the lease amendment
with Value City noted above.
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 six months ended June 30, 1996
compared to the same periods in 1995 mainly due to an increase in common area
maintenance expenses which are charged back to tenants.
Interest income for the three and six months ended June 30, 1996 totaled
$79,029 and $170,006, respectively, compared to $97,038 and $196,598 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 $886,973 and $1,927,834 for the three
and six months ended June 30, 1996 from $685,505 and $1,528,064 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 six-month period, increased snow removal expenses.
Total Mall tenant sales (exclusive of anchor tenants) were $27,879,000 for the
five months ended May 31, 1996, compared to $25,627,000 for same period in
1995. Sales for tenants (exclusive of anchor tenants) which operated at the
Mall for each of the last two years were $24,616,000 for the five months ended
May 31, 1996 compared to $24,344,000 for the same period in 1995. As of June
30, 1996, the Mall was 93% occupied, excluding anchor tenants and office space,
compared to 94% at June 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 June 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: August 14, 1996 BY: /s/ Paul L. Abbott
Director and Chief Executive Officer
Date: August 14, 1996 BY: /s/ Robert Hellman
President
Date: August 14, 1996 BY: /s/ Elizabeth Rubin
Vice President and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 4,086,831
<SECURITIES> 0
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