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, 1995
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
Attention: 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
September 30, December 31,
Assets 1995 1994
Real estate, at cost:
Land $ 5,304,011 $ 5,304,011
Building 61,060,584 60,029,923
Improvements 3,659,865 3,181,448
70,024,460 68,515,382
Less accumulated depreciation and amortization (13,604,596) (12,170,608)
56,419,864 56,344,774
Cash 11,875,279 10,431,820
Accounts receivable, net of allowance
of $329,199 in 1995 and $131,759 in 1994 443,983 528,845
Deferred rent receivable 423,362 309,478
Deferred charges, net of accumulated amortization
of $259,158 in 1995 and $218,353 in 1994 139,138 142,322
Prepaid expenses 795,941 530,446
Total Assets $ 70,097,567 $ 68,287,685
Liabilities, Minority Interest
and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 188,220 $ 179,794
Zero coupon first mortgage note payable 52,203,285 48,456,864
Second mortgage note payable 2,000,000 2,000,000
Second mortgage note accrued interest payable 19,167 19,167
Due to affiliates 10,625 9,891
Security deposits payable 14,633 14,633
Deferred income 819,129 766,727
Distributions payable 588,384 588,384
Total Liabilities 55,843,443 52,035,460
Minority interest (552,045) (526,787)
Partners' Capital:
General Partner 924,715 944,444
Limited Partners (4,660,000 limited
partnership units authorized, issued
and outstanding) 13,881,454 15,834,568
Total Partners' Capital 14,806,169 16,779,012
Total Liabilities, Minority Interest and
Partners' Capital $ 70,097,567 $ 68,287,685
Consolidated Statement of Partners' Capital
For the nine months ended September 30, 1995
Limited General
Partners Partner Total
Balance at December 31, 1994 $ 15,834,568 $ 944,444 $ 16,779,012
Net loss (205,614) (2,077) (207,691)
Distributions (1,747,500) (17,652) (1,765,152)
Balance at September 30, 1995 $ 13,881,454 $ 924,715 $ 14,806,169
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rental income $ 1,515,640 $ 1,353,885 $ 4,359,157 $ 3,996,546
Escalation income 1,252,270 1,307,454 3,889,071 3,817,072
Miscellaneous income 131,919 99,101 306,803 231,568
Interest income 145,916 79,261 424,239 180,858
Total Income 3,045,745 2,839,701 8,979,270 8,226,044
Expenses
Interest expense 1,336,095 1,217,970 3,918,921 3,567,103
Property operating expenses 1,022,097 1,061,893 2,869,158 2,899,286
Depreciation and amortization 497,742 468,379 1,474,793 1,400,814
Real estate taxes 255,665 255,984 767,632 778,672
General and administrative 50,855 39,929 157,701 135,956
Total Expenses 3,162,454 3,044,155 9,188,205 8,781,831
Loss before minority interest (116,709) (204,454) (208,935) (555,787)
Minority interest 1,418 1,649 1,244 4,219
Net Loss $ (115,291) $ (202,805) $ (207,691) $ (551,568)
Net Loss Allocated:
To the General Partner $ (1,153) $ (2,028) $ (2,077) $ (5,516)
To the Limited Partners (114,138) (200,777) (205,614) (546,052)
$ (115,291) $ (202,805) $ (207,691) $ (551,568)
Per limited partnership
unit(4,660,000 outstanding) $ (.02) $ (.05) $ (.04) $ (.12)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $ (207,691) $ (551,568)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest (1,244) (4,219)
Depreciation and amortization 1,474,793 1,400,814
Increase in interest on zero coupon first
mortgage note payable 3,746,421 3,391,650
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable 84,862 49,768
Deferred rent receivable (113,884) (126,426)
Deferred charges (37,621) (44,338)
Prepaid expenses (265,495) (240,915)
Accounts payable and accrued expenses 8,426 (143,406)
Due to affiliates 734 (2,128)
Deferred income 52,402 34,381
Net cash provided by operating activities 4,741,703 3,763,613
Cash Flows from Investing Activities:
Additions to real estate (1,509,078) (205,289)
Net cash used for investing activities (1,509,078) (205,289)
Cash Flows from Financing Activities:
Cash distributions to partners (1,765,152) (1,765,152)
Cash distributions - Minority interest (24,014) (36,025)
Net cash used for financing activities (1,789,166) (1,801,177)
Net increase in cash 1,443,459 1,757,147
Cash at beginning of period 10,431,820 7,685,010
Cash at end of period $ 11,875,279 $ 9,442,157
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 172,500 $ 175,453
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1994 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, 1995 and the results of operations and
cash flows for the nine months ended September 30, 1995 and 1994 and the
statement of changes in partners' capital for the nine months ended September
30, 1995. 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 1994
and require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
J.C. Penney's and Montgomery Ward's operating covenants expired on October 10,
1994 and have not been renewed. The operating covenants of Hecht's is
scheduled to expire in May, 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.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Partnership had cash totaling $11,875,279, an
increase of $1,443,459 from December 31, 1994. The increase is primarily the
result of net cash provided by operating activities exceeding cash
distributions and expenditures for property improvements. On or about November
15, 1995, 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 capital needs in the near term, the General Partner expects to
continue to build cash reserves. The level of future cash distributions will
be reviewed by the General Partner on a quarterly basis.
Renovation of the HVAC system at Laurel Centre continued during the third
quarter of 1995. The total cost of the renovation is estimated to be
approximately $1.3 million and work is expected to be completed during the
fourth quarter of 1995. As of September 30, 1995, the Partnership has paid
$1,030,661 from cash reserves towards the renovation.
A primary focus of the Partnership will be to address its current and future
capital requirements. The Partnership must either sell the Mall, or refinance
or extend the mortgage loans by October 1996, each of which option is being
considered at present. 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 and the second mortgage note. During 1993, Kemper sold its
participating interest in the first note and the second note to CBA Associates,
Inc., which placed the loans into a pool of mortgages 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 or
restructure the loans with CBA Associates, Inc. or Capital Growth Mortgage
Investors L.P. at maturity in the event that refinancing is not available
elsewhere and t he Mall is not sold and the mortgage loans repaid. 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 also be
affected by general economic conditions, and factors such as: (i) increased
competition in the area; (ii) the status of the anchor tenants' operating
covenants; and (iii) the need for capital improvements. Furthermore, the cost,
if necessary, related to positioning the Mall for sale or refinancing the
mortgage debt, could impact the level of Partnership cash reserves.
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. Federal
Bankruptcy Code.
Tenant Square Footage Leased
Merry Go 'Round 3,050
Royal Formalwear 2,198
Earring Tree 180
Mariane & Mariane Plus 11,033
Time Out Amusement Center 1,635
J Riggings 2,700
These tenants currently occupy 20,796 square feet, or approximately 8.5% of the
Mall's leasable area (exclusive of anchor tenants), and at this point their
plans to remain at the Mall remain uncertain. 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.
At September 30, 1995, the accounts receivable balance, net of allowance for
doubtful accounts, was $443,983 as compared to $528,845 at December 31, 1994.
The decrease reflects an increase in the allowance for doubtful accounts to
reserve for several tenants who vacated their space. The decrease is also due
to the timing of payments received from tenants for percentage rent.
Deferred rent receivable increased from $309,478 at December 31, 1994 to
$423,362 at September 30, 1995 as a result of accruing rents that are not to be
received until later periods due to scheduled rent increases on a straight-line
basis over the lease terms as required by generally accepted accounting
principals, and the addition of new tenants over the past year.
Prepaid expenses increased from $530,446 at December 31, 1994 to $795,941 at
September 30, 1995 due to the payment of real estate taxes for the July 1, 1995
to June 30, 1996 period.
The zero coupon first mortgage note payable increased $3,746,421 from December
31, 1994 to $52,203,285 at September 30, 1995, due to the accrual of interest
on the zero coupon note.
Results of Operations
Net cash flow from operating activities totaled $4,741,703 for the nine months
ended September 30, 1995 compared to $3,763,613 for the nine months ended
September 30, 1994. The increase is primarily due to a lower net loss in the
1995 period and an increase in accounts payable and accrued expenses.
For the three and nine months ended September 30, 1995, the Partnership
reported net losses of $115,291 and $207,691, respectively, compared to net
losses of $202,805 and $551,568 for the same periods in 1994. The lower net
losses in 1995 are primarily the result of increases in all income categories,
except escalation income during the three-month period, partially offset by
increases in interest expense, depreciation and amortization and general and
administrative expense.
Rental income totaled $1,515,640 and $4,359,157 for the three and nine months
ended September 30, 1995, respectively, compared with $1,353,885 and $3,996,546
for the respective periods in 1994. The increases are primarily attributable
to higher lease rates for new tenants, lease renewals at higher rates and an
increase in temporary tenant income. Miscellaneous income increased for both
the three and nine months ended September 30, 1995, reflecting increased
promotional expense billed back to tenants. Interest income also increased for
both the three and nine-month periods, due to the Partnership's increased cash
balance and higher interest rates in the 1995 periods.
Total expenses for the three and nine months ended September 30, 1995 were
$3,162,454 and $9,188,205, respectively, compared with $3,044,155 and
$8,781,831 for the corresponding periods in 1994. The increases are primarily
due to increases in interest expense during both periods due to the compounding
of interest on the Partnership's zero coupon loan.
General and administrative expenses for the three and nine months ended
September 30, 1995 totaled $50,855 and $157,701, respectively, compared to
$39,929 and $135,956 for the same periods in 1994. The increases are primarily
attributable to increased quarterly board of director fees, due to the addition
of a third independent director, and an adjustment made for audit fees, which
were under-accrued at September 30, 1994.
Mall tenant sales (exclusive of anchor tenants) for the eight months ended
August 31, 1995 and 1994 were $32,833,000 and $35,083,000, respectively.
Mature tenant sales for the eight months ended August 31, 1995 and 1994 were
$27,049,000 and $28,869,000, respectively. A mature tenant is defined as a
tenant that has operated at the Mall for each of the last two years. The
declines in tenant sales reflect lower occupancy at the property as well as
continued weakness in apparel sales and strong competition from nearby discount
stores.
At September 30, 1995 and 1994, the Mall was approximately 87% and 91%
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
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1995.
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.
SHOPCO LAUREL CENTRE, L.P.
BY: LAUREL CENTRE INC.
General Partner
Date: November 14, 1995
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President, and
Chief Executive Officer
Date: November 14, 1995
BY: /s/ Robert J. Hellman
Name: Robert J. Hellman
Title: Director, Vice President and
Chief Financial Officer
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