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 March 31, 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: 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 10285-2900
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 March 31, At December31,
1997 1996
Assets
Property held for disposition $ 42,258,690 $ --
Real estate, at cost:
Land -- 4,409,980
Building -- 43,972,310
Improvements -- 7,286,406
-- 55,668,696
Less accumulated depreciation
and amortization -- (13,529,644)
-- 42,139,052
Cash and cash equivalents 7,051,221 6,362,256
Restricted cash 1,360,319 1,346,091
Cash-held in escrow 752,037 535,313
Accounts receivable, net of allowance
of $123,753 in 1997 and $125,805
in 1996 714,123 836,705
Deferred rent receivable -- 343,990
Deferred charges, net of
accumulated amortization of $539,606
in 1997 and $622,906 in 1996 1,120,602 1,353,384
Prepaid expenses 224,238 389,559
Total Assets $ 53,481,230 $ 53,306,350
Liabilities, Minority Interest
and Partners' Capital
Liabilities:
Accounts payable and accrued
expenses $ 415,327 $ 417,511
Mortgage loan payable 51,000,000 51,000,000
Due to affiliates 17,000 --
Security deposits payable 40,621 46,819
Deferred income 396,688 424,580
Distribution payable 288,826 288,826
Total Liabilities 52,158,462 52,177,736
Minority interest (521,598) (541,161)
Partners' Capital (Deficit):
General Partner (95,823) (97,569)
Limited Partners (4,575 limited
partnership units authorized,
issued and outstanding) 1,940,189 1,767,344
Total Partners' Capital 1,844,366 1,669,775
Total Liabilities, Minority
Interest and Partners' Capital $ 53,481,230 $ 53,306,350
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $ (97,569) $ 1,767,344 $ 1,669,775
Net income 4,634 458,783 463,417
Distributions (2,888) (285,938) (288,826)
Balance at March 31, 1997 $ (95,823) $ 1,940,189 $ 1,844,366
Consolidated Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rental income $ 1,792,051 $ 1,651,037
Percentage rental income 276,548 309,571
Escalation income 896,738 1,018,162
Interest income 82,835 90,977
Miscellaneous income 36,091 42,291
Total Income 3,084,263 3,112,038
Expenses
Interest expense 1,021,275 1,021,275
Property operating expenses 817,458 1,040,861
Depreciation and amortization 511,394 499,550
Real estate taxes 154,248 149,201
General and administrative 67,993 44,556
Total Expenses 2,572,368 2,755,443
Income before minority interest 511,895 356,595
Minority interest (48,478) (30,752)
Net Income $ 463,417 $ 325,843
Net Income Allocated:
To the General Partner $ 4,634 $ 3,258
To the Limited Partners 458,783 322,585
$ 463,417 $ 325,843
Per limited partnership unit
(4,575 outstanding) $ 100.28 $ 70.51
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities:
Net income $ 463,417 $ 325,843
Adjustments to reconcile net
income to net cash provided by
operating activities:
Minority interest 48,478 30,752
Depreciation and amortization 511,394 499,550
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Restricted cash (14,228) (17,123)
Cash-held in escrow (216,724) (232,851)
Accounts receivable 122,582 6,578
Deferred rent receivable 626 45,068
Deferred charges (32,516) (35,882)
Prepaid expenses 165,321 165,800
Accounts payable and accrued expenses (2,184) (810)
Due to affiliates 17,000 (617)
Security deposits payable (6,198) --
Deferred income (27,892) (10,351)
Net cash provided by operating activities 1,029,076 775,957
Cash Flows From Investing Activities:
Additions to real estate (22,370) (98,916)
Net cash used for investing activities (22,370) (98,916)
Cash Flows From Financing Activities:
Distributions paid (288,826) (288,826)
Distributions paid-minority interest (28,915) (28,915)
Net cash used for financing activities (317,741) (317,741)
Net increase in cash and cash equivalents 688,965 359,300
Cash and cash equivalents,
beginning of period 6,362,256 6,254,501
Cash and cash equivalents,
end of period $ 7,051,221 $ 6,613,801
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 1,021,275 $ 1,021,275
Supplemental Disclosure of Non-Cash Operating Activities:
In connection with the General Partner's intent to sell the Mall in 1997,
deferred rent receivable and prepaid leasing commissions in the amounts of
$343,364 and $214,547, respectively, were reclassified to Property held for
disposition at March 31, 1997.
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1996 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all normal and
reoccurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of March 31, 1997 and the
results of operations and cash flows for the three months ended March 31, 1997
and 1996 and the statement of partner's capital (deficit) for the three months
ended March 31, 1997. 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 1996
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by Eastern Avenue, Inc. (the "General Partner") and its
affiliates in servicing the Partnership to the extent permitted by the
partnership agreement. In prior years, affiliates of the General Partner had
voluntarily absorbed these expenses.
On April 9, 1997, Eastpoint Partners L.P. (the "Owner Partnership") received
$476,010 from Ames Department Stores, Inc. in connection with the Compromise
and Mutual Release Agreement executed with Consolidated Fidelity Life Insurance
Company ("Consolidated") in July 1994. Of this amount, $104,722 is payable to
Consolidated. It is uncertain at this time if there will be any additional
payments made to the Owner Partnership.
The General Partner has taken preliminary steps in connection with marketing
Eastpoint Mall (the "Mall") for sale and intends to sell the Mall in 1997. As
a result, the Partnership's real estate assets, deferred rent receivable and
prepaid leasing commissions were reclassified on the consolidated balance
sheets at March 31, 1997 to "Property held for disposition." Accordingly, the
Partnership suspended depreciation and amortization in accordance with the
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Part 1. Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At March 31, 1997, the Partnership had a cash balance of $7,051,221, compared
to $6,362,256 at December 31, 1996. The increase is primarily due to cash
provided by operating activities exceeding cash distributions paid during the
first quarter of 1997 and additions to real estate. The Partnership maintains
a restricted cash account representing a loan reserve of $1,000,000 as
established under the terms of its first mortgage loan. This constitutes
additional collateral which can be used for capital improvements and leasing
commissions. Cash held in escrow totaled $752,037 at March 31, 1997 compared
with $535,313 at December 31, 1996. 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 decreased from $836,705 at December 31, 1996 to $714,123 at
March 31, 1997 which primarily reflects the receipt of percentage rent accrued
at December 31, 1996 and a decrease in receivables for temporary tenants.
Prepaid expenses decreased from $389,559 at December 31, 1996 to $224,238 at
March 31, 1997 primarily as a result of the recognition of insurance and real
estate tax expense for the first quarter of 1997.
Due to affiliates increased from $0 at December 31, 1996 to $17,000 at March
31, 1997 due to a change in the billing method for reimbursable expenses
incurred by an affiliate of the General Partner. Please refer to the Notes to
the Consolidated Financial Statements.
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:
Square Footage
Tenant Leased
Marianne 3,750
Marianne Plus 3,000
Jeans West 2,400
Rave 2,000
As of March 31, 1997, 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.
The Partnership has taken preliminary steps in connection with marketing the
Mall for sale and intends to sell the Mall in 1997; however, it is not certain
whether acceptable offers will be received. As a result, the Partnership's
real estate assets, deferred rent receivable and prepaid leasing commissions
were reclassified on the consolidated balance sheets at March 31, 1997 to
"Property held for disposition. " At such time as the Mall is sold and all
obligations are fulfilled, the Partnership will wind up its affairs and be
dissolved. The exact timing of these events is dependent on the success of the
marketing effort.
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
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 (the "Release Agreement"). 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 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 Owner
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. On April 9, 1997, the Owner Partnership received
an additional $476,010 from Ames in connection with the Release Agreement. Of
this amount, $104,722 is payable to Consolidated. At March 31, 1997, the total
payments received from Ames were $1,009,458, of which $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 to the Owner Partnership.
Cash Distributions
A distribution for the first quarter of 1997, in the amount of $62.50 per Unit,
will be paid on May 15, 1997. 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 three months ended March 31, 1997 and 1996 net cash flow from operating
activities totaled $1,029,076 and $775,957, respectively. The increase
reflects an increase in net income and a decrease in accounts receivable.
For the three months ended March 31, 1997, the Partnership recognized net
income of $463,417 compared to $325,843 for the three months ended March 31,
1996. The increase in net income is primarily attributable to an increase in
rental income and a decrease in property operating expenses, partially offset
by a decrease in escalation income.
Rental income increased to $1,792,051 for the three months ended March 31, 1997
from $1,651,037 during the same period in 1996 reflecting 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 subsequent to March 31,
1996.
Escalation income represents the income received from Mall tenants for their
proportionate share of common area maintenance and real estate tax expenses.
Escalation income decreased for the three months ended March 31, 1997 compared
to the same period in 1996 mainly due to a decrease in common area maintenance
expenses which are charged back to tenants.
Property operating expenses decreased to $817,458 for the three months ended
March 31, 1997 compared to $1,040,861 for the corresponding period in 1996.
This decrease is the result of lower common area maintenance expenses, which
are charged back to tenants, and a reduction in bad debt expense related to the
tenants that have filed for bankruptcy protection.
General and administrative expenses for the three months ended March 31, 1997
were $67,993, compared to $44,556 for the same period in 1996. During the 1997
period, certain expenses incurred by the General Partner, its affiliates, and
an unaffiliated third party service provider in servicing the Partnership,
which were voluntarily absorbed by affiliates of the General Partner in prior
periods, were reimbursed to the General Partner and its affiliates.
Total Mall tenant sales (exclusive of anchor tenants) were $10,048,000 for the
two months ended February 28, 1997, compared to $9,332,000 for same period in
1996. Sales for tenants (exclusive of anchor tenants) which operated at the
Mall for each of the last two years were $9,564,000 and $8,977,000,
respectively. As of March 31, 1997, the Mall was 89% occupied, excluding
anchor tenants and office space, compared to 93% at March 31, 1996.
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 three months ended March 31, 1997.
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: May 9, 1997 BY: /s/ Paul L. Abbott
Director, Chief Executive Officer
and Chief Operating Officer
Date: May 9, 1997 BY: /s/ Robert J. Hellman
President
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 7,051,221
<SECURITIES> 000
<RECEIVABLES> 837,876
<ALLOWANCES> 123,753
<INVENTORY> 000
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<PP&E> 42,258,690
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<CURRENT-LIABILITIES> 1,158,462
<BONDS> 51,000,000
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<OTHER-SE> 1,844,366
<TOTAL-LIABILITY-AND-EQUITY> 53,481,230
<SALES> 000
<TOTAL-REVENUES> 3,084,263
<CGS> 000
<TOTAL-COSTS> 971,706
<OTHER-EXPENSES> 579,387
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,021,275
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 463,417
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