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, 1994
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: 1-9419
SHOPCO LAUREL CENTRE, L.P. AND CONSOLIDATED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 13-3392074
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 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
September 30, December 31,
1994 1993
Assets
Real estate, at cost:
Land $ 5,304,011 $ 5,304,011
Building 59,985,674 59,983,624
Improvements 3,019,559 2,818,627
--------- ---------
68,309,244 68,106,262
Less accumulated depreciation
and amortization (11,710,676) (10,346,073)
---------- ----------
56,598,568 57,760,189
Cash 9,442,157 7,685,010
Accounts receivable, net of
allowance of $281,182 in 1994 and
$121,721 in 1993 657,065 580,407
Deferred charges, net of accumulated
amortization of $386,972 in 1994 and
$353,068 in 1993 145,735 135,301
Prepaid expenses and other assets 768,837 527,922
--------- --------
Total Assets $ 67,612,362 $ 66,688,829
========== ==========
Liabilities, Minority Interest and
Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 140,155 $ 283,561
Zero coupon first mortgage note payable 47,259,856 43,868,206
Second mortgage note payable 2,000,000 2,000,000
Second mortgage note accrued interest payable 19,167 19,167
Due to affiliates 7,697 9,825
Security deposits payable 12,133 12,133
Deferred income 823,147 788,766
Distributions payable 588,384 588,384
-------- --------
Total Liabilities 50,850,539 47,570,042
Minority interest (511,350) (471,106)
Partners' Capital:
General Partner 949,385 972,553
Limited Partners (4,660,000 limited
partnership units authorized,
issued and outstanding) 16,323,788 18,617,340
---------- ----------
Total Partners' Capital 17,273,173 19,589,893
Total Liabilities, Minority Interest
and Partners' Capital $ 67,612,362 $ 66,688,829
========== ==========
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
Income
Rental income $ 1,353,885 $ 1,275,786 $ 3,996,546 $ 3,777,380
Escalation income 1,307,454 1,178,996 3,817,072 3,584,882
Miscellaneous income 99,101 73,237 231,568 225,750
Interest income 79,261 53,085 180,858 120,859
-------- --------- --------- ---------
Total Income 2,839,701 2,581,104 8,226,044 7,708,871
Expenses
Interest expense 1,217,970 1,105,405 3,567,103 3,242,974
Property operating expenses 1,061,893 944,935 2,899,286 2,486,313
Depreciation and amortization 468,379 459,375 1,400,814 1,374,061
Real estate taxes 255,984 261,344 778,672 789,347
General and administrative 39,929 56,819 135,956 147,262
-------- -------- --------- ---------
Total Expenses 3,044,155 2,827,878 8,781,831 8,039,957
Loss before minority interest (204,454) (246,774) (555,787) (331,086)
Minority interest 1,649 1,976 4,219 1,912
-------- -------- -------- --------
Net Loss $ (202,805) $ (244,798) $ (551,568) $ (329,174)
======= ======= ======= =======
Net Loss Allocated:
To the General Partner $ (2,028) $ (2,448) $ (5,516) $ (3,292)
To the Limited Partners (200,777) (242,350) (546,052) (325,882)
------- ------- ------- -------
$ (202,805) $ (244,798) $ (551,568) $ (329,174)
======= ======= ======= =======
Per limited partnership unit
(4,660,000 outstanding) $ (.05) $ (.05) $ (.12) $ (.07)
Consolidated Statement of Partners' Capital
For the nine months ended September 30, 1994
Limited General Total
Partners' Partner's Partners'
Capital Capital Capital
Balance at December 31, 1993 $ 18,617,340 $ 972,553 $ 19,589,893
Net loss (546,052) (5,516) (551,568)
Distributions (1,747,500) (17,652) (1,765,152)
--------- -------- ---------
Balance at September 30, 1994 $ 16,323,788 $ 949,385 $ 17,273,173
========== ======== ==========
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
1994 1993
Cash Flows from Operating Activities:
Net loss $ (551,568) $ (329,174)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,400,814 1,374,061
Increase in interest on zero coupon
mortgage payable 3,391,650 3,070,474
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Accounts receivable (76,658) (112,322)
Deferred charges (44,338) (17,428)
Prepaid expenses and other assets (240,915) (267,582)
Accounts payable and accrued expenses (143,406) 35,206
Due to affiliates (2,128) 2,536
Security deposits payable 0 2,500
Deferred income 34,381 68,518
Minority interest (40,244) (42,017)
--------- ---------
Net cash provided by operating activities 3,727,588 3,784,772
--------- ---------
Cash Flows from Investing Activities:
Additions to real estate (205,289) (293,186)
Cash held in escrow 0 69,074
------- --------
Net cash used for investing activities (205,289) (224,112)
Cash Flows from Financing Activities:
Cash distributions paid (1,765,152) (1,765,152)
--------- ---------
Net cash used for financing activities (1,765,152) (1,765,152)
--------- ---------
Net increase in cash 1,757,147 1,795,508
Cash at beginning of period 7,685,010 4,761,412
--------- ---------
Cash at end of period $ 9,442,157 $ 6,556,920
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 175,453 $ 172,500
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1993 audited financial statements
within Form 10-K.
The unaudited consolidated financial statements include all adjustments
consisting of only normal recurring accruals which are, in the opinion of
management, necessary to present a fair statement of financial position as of
September 30, 1994 and the results of operations, changes in partners' capital,
and cash flows for the nine months then ended. Results of operations for the
period are not necessarily indicative of the results to be expected for the
full year.
No significant events have occurred subsequent to fiscal year 1993, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
PART l, Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- - -------------------------------
At September 30, 1994, the Partnership had cash totalling $9,442,157 which
represents a $1,757,147 increase from the December 31, 1993 balance of
$7,685,010. The increase is primarily a result of cash provided by operating
activities which exceeded cash distributions to limited partners and
expenditures for property improvements. On or about November 15, 1994, the
Partnership will pay a third quarter cash distribution of $.125 per Unit. Based
upon the General Partner's current assessment of the Partnership's needs in the
near term, the General Partner expects to continue to build cash reserves;
however, cash distribution levels are reviewed by the General Partner on a
quarterly basis.
Due to the current limited availability of financing for real estate projects
and substantially more stringent underwriting criteria being applied when
financing is available, a primary focus of the Partnership will be its efforts
to address its current and future capital requirements. The Partnership's two
mortgage loans mature on October 15, 1996, at which time the Partnership will
be obligated to pay the lenders approximately $59.9 million, including interest
on its zero coupon first mortgage note. During 1993, Kemper sold its
participating interest in the loans to CBA Conduit, Inc., which placed the
loans into a pool of mortgages to be held by a real estate mortgage investment
conduit. Although the terms of these loans have not changed, this sale may
affect the Partnership's ability to refinance the loans at maturity. The
ability of the Partnership to obtain refinancing of its current mortgages in
whole or in part, or, as an alternative, to find a purchaser for the Mall, may
al so be affected by general economic conditions.
J.C. Penney's operating covenant expired on October 10, 1994 and has not been
renewed. The operating covenants of Hecht's and Montgomery Ward, the Mall's
other anchor tenants, are scheduled to expire by 1996. Although all three
stores remain liable for all payments under their respective lease agreements,
which do not begin to expire until 2009, the expiration of their operating
covenants allows them to sublet the premises or assign their lease. To date,
none of the three tenants has given any indication that it intends to leave the
Mall. While the center's anchor tenant stores continue to register respectable
sales performances, the Partnership's ability to retain them at the center may
depend upon continued efforts to upgrade the Mall to ensure that anchor tenant
sales levels do not diminish. Accordingly, the General Partner has pursued,
and will continue to pursue, leasing and capital expenditure strategies
intended to maintain the long-term viability of the center's anchor tenant
mix.
At September 30, 1994, the accounts receivable balance, net of allowance for
doubtful accounts, was $657,065 compared to $580,407 at December 31, 1993.
The increase is primarily due to the increase in rental receivables offset by
the timing of payments received from tenants for percentage rent and common
area maintenance, as well as an increase in allowance for bad debt associated
with three former tenants.
Prepaid expenses and other assets increased $240,915 from $527,922 at December
31, 1993 to $768,837 at September 30, 1994 due to the payment of real estate
taxes for the year ended June 30, 1995. At September 30, 1994 accounts payable
and accrued expenses totalled $140,155 compared to $283,561 at December 31,
1993. The decrease is primarily due to a difference in the timing of payments
for electricity expense.
The zero coupon first mortgage note payable increased $3,391,650 from December
31, 1993 to $47,259,856 at September 30, 1994, due to the accrual of interest
on the zero coupon note.
Results of Operations
- - ---------------------
Net cash flow from operating activities totaled $3,727,588 for the nine months
ended September 30, 1994, relatively unchanged from $3,784,772 for the
comparable period in 1993.
For the three and nine months ended September 30, 1994, the Partnership
reported a net loss of $202,805 and $551,568, respectively as compared to net
losses of $244,798 and $329,174 for the three and nine months ended September
30, 1993. The increased net loss in the 1994 nine-month period is primarily
the result of an increase in interest and property operating expenses, offset
by an increase in rental and escalation income.
Rental income totalled $1,353,885 and $3,996,546, respectively, for the three
and nine months ended at September 30, 1994 as compared to $1,275,786 and
$3,777,380, respectively, for the three and nine months ended September 30,
1993. The increases are primarily attributable to changes in tenant mix.
Escalation income for the three and nine months ended September 30, 1994
totalled $1,307,454 and $3,817,072 respectively, compared with $1,178,996 and
$3,584,882 for the same period in 1993. Escalation income represents billings
to tenants for their proportional share of common area maintenance, operating
and real estate tax expenses. The increase in escalation income is primarily
due to an increase in property operating costs and temporary tenant HVAC income
from 1993 to 1994.
Total expenses for the three and nine months ended September 30, 1994 were
$3,044,155 and $8,781,831, respectively, compared to $2,827,878 and $8,039,957
for the corresponding periods in 1993. The increase is primarily due to higher
interest and property operating expense. Interest expense for both the three
and nine months ended September 30, 1994 increased from the corresponding
periods in 1993, reflecting the compounding of interest on the Zero Coupon
Loan. Property operating expense also increased for the nine month period due
primarily to increases in electricity costs, payroll, association and
professional fees and bad debt expense.
Mall tenant sales (exclusive of anchor tenants) for the eight months ended
August 31, 1994 were $33,984,000, a decrease of 2.7% from $34,936,000 in the
comparable period in 1993. Mature tenant sales for the eight months ended
August 31, 1994 decreased 3.4% from $31,665,000 in the 1993 period to
$30,600,000 in 1994. A mature tenant is defined as a tenant that has been open
for business and operating out of the same store for twelve months or more.
The General Partner attributes the decrease to a slight decline in occupancy at
the Mall and a decline in consumer spending on softgoods, particularly apparel,
a trend experienced by retailers across the country. At September 30, 1994 and
1993, the Mall was 90.6% and 94.1% occupied, respectively, exclusive of anchor
tenants.
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHOPCO LAUREL CENTRE, L.P.
BY: LAUREL CENTRE INC.
General Partner
Date: November 11, 1994 BY: /S/ Paul L. Abbott
-----------------------
Director, President, and
Chief Executive Officer
Date: November 11, 1994 BY: /S/ Robert J. Hellman
--------------------------
Director, Vice President, and
Chief Financial Officer
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