UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ x ] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the Transition period from to
Commission file number: 1-9419
SHOPCO LAUREL CENTRE, L.P.
and
LAUREL CENTRE DEPOSITARY CORP.
Exact name of Registrant as specified in its charter
Shopco Laurel Centre, L.P.
is a Delaware limited partnership 13-3392074
Laurel Centre Depositary Corp.
is a Delaware corporation 13-3392094
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
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
4,660,000 UNITS REPRESENTING ASSIGNMENTS OF LIMITED PARTNERSHIP INTERESTS
Title of Class
AMERICAN STOCK EXCHANGE
Name of each exchange on which registered
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
Aggregate market value of voting stock held by non-affiliates of the
registrant: Not applicable.
Documents Incorporated by Reference: Amended and Restated Agreement of Limited
Partnership, dated April 16, 1987, incorporated by reference to Exhibit B to
the prospectus contained in the Registration Statement No. 33-11994
PART I
Item 1. Business
(a) General Development of Business
Shopco Laurel Centre, L.P., a Delaware limited partnership ("SLC" or the
"Partnership"), was formed on December 22, 1986. The affairs of SLC are
conducted by its general partner, Laurel Centre Inc. (the "General Partner",
formerly Shearson Laurel Inc.), a Delaware corporation. On April 16, 1987 the
Partnership commenced investment operations with the acceptance of
subscriptions of 4,660,000 depositary units of limited partnership units, the
maximum authorized by the limited partnership agreement ("Limited Partnership
Agreement"). Upon the admittance of the additional limited partners, the
Assignor Limited Partner withdrew from the Partnership. Registered holders
("Unitholders") received an assignment of the economic, voting and other rights
attributable to the limited partnership units held by the Assignor Limited
Partner. SLC is the sole general partner of Laurel Owner Partners Limited
Partnership (the "Owner Partnership"), a Maryland limited partnership that is
the owner of an e nclosed regional shopping mall located in Laurel, Maryland
("Laurel Centre" or the "Mall"). The sole limited partner of the Owner
Partnership is NAT Limited Partnership ("NAT"), a Delaware limited partnership
and an affiliate of The Shopco Group. NAT is not an affiliate of either SLC or
the General Partner. (SLC and NAT are collectively referred to as the "Owner
Partners").
On December 31, 1986, the Owner Partners acquired the Mall by purchasing all of
the partnership interests in the Laurel Company Limited Partnership (the
"Seller"), the owner of the Mall at such time, for a purchase price of
$59,150,000.
On April 16, 1987, the Partnership commenced investment operations with the
acceptance of subscriptions of 4,660,000 depositary units of limited
partnership units, the maximum authorized by the limited partnership agreement
("Limited Partnership Agreement"). Upon the admittance of the additional
limited partners, the Assignor Limited Partner withdrew from the Partnership.
Registered holders ("Unitholders") received an assignment of the economic,
voting and other rights attributable to the limited partnership units held by
the Assignor Limited Partner.
In conjunction with the October 15, 1996 maturity of the two mortgage loans
securing the Mall, the Partnership is exploring sales and refinancing
alternatives. See Item 7 for a discussion of the upcoming loan maturities and
factors impacting a possible sale or refinancing.
(b) Financial Information About Industry Segments
All of SLC's revenues, operating profit or loss and assets relate solely to its
interest as the general partner of the Owner Partnership. All of the Owner
Partnership's revenues, operating profit or loss and assets relate solely to
its ownership and operation of the Mall.
(c) Narrative Description of Business
SLC's sole business is acting as the general partner of the Owner Partnership.
The Owner Partnership's sole business is the ownership and operation of the
Mall. See Item 2 for a description of the Mall and its operations. SLC's
principal objectives are to:
(i) provide quarterly cash distributions to the holders of Units ("Unit
Holders"), substantially all of which should not be subject to Federal
income tax on a current basis due to Partnership tax deductions for
cost recovery on the Mall and accrued but unpaid interest on the Zero
Coupon Loan (see Note 5 to the Notes to the Consolidated Financial
Statements);
(ii) achieve long-term appreciation in the value of the Mall; and
(iii) preserve and protect SLC and Owner Partnership capital.
There is no guarantee that the Partnership's objectives will be achieved.
The Mall is managed on a day-to-day basis by Shopco Management Corp. (the
"Property Manager"), a New York corporation and an affiliate of NAT. The
Property Manager is responsible for rent collection, leasing and day-to-day
on-site management of the Mall. See Note 8 to the Consolidated Financial
Statements for the terms of the management agreement between the Owner
Partnership and the Property Manager. The Owner Partnership's business, as
owner and operator of the Mall, is seasonal since a portion of its revenue is
derived from a percentage of the retail sales of certain tenants at the Mall.
Generally such sales are higher in November and December due to the holiday
season.
Employees
The Partnership has no employees. The affairs of the Partnership are conducted
by the General Partner. See Items 11 and 13 for further information.
Item 2. Properties
Laurel Centre is located on approximately 35.5 acres of land in Laurel,
Maryland. The Owner Partnership's property interest in Laurel Centre comprises
approximately 23.22 acres of the site. Laurel is located seven miles north of
the Washington, D.C. beltway and forms part of the economic and geographic area
known as the Baltimore-Washington corridor.
The Mall, which originally opened in 1979, consists of an enclosed shopping
mall containing a total of approximately 100 retail stores and three attached
anchor stores J.C. Penney, Inc. ("J.C. Penney"), Montgomery Ward and Hecht's
located on approximately 12.28 acres. The retail tenant portion of the Mall is
contained on two levels, and parking is provided at Laurel Centre for
approximately 3,400 cars.
Laurel Centre contains 661,786 square feet of gross leasable area (including
kiosk space) and is operated as an integral unit. The Owner Partnership owns
and leases to tenants approximately 382,000 square feet of gross leasable area
of Laurel Centre, of which approximately 245,000 square feet is leasable to
retail mall space tenants and 136,864 square feet is leased to J.C. Penney.
Hecht's owns its store at Laurel Centre, which contains 118,354 square feet of
the gross leasable building area, and leases the land under such store pursuant
to a ground lease with the Owner Partnership. Montgomery Ward leases
approximately 161,204 square feet of gross leasable building area of Laurel
Centre, together with the land on which it is located and an adjacent parking
area, from an independent third party with which the Owner Partnership is not
affiliated or related.
Adjacent to Laurel Centre is an open air shopping center of approximately
440,000 gross leasable square feet which is not owned by the Owner Partnership
but which, pursuant to a reciprocal easement agreement governing the owners of
the Mall and the adjacent shopping center, shares with the Mall certain areas
of ingress and egress.
The total building area of the Mall is allocated as shown in the table below.
Square Feet Square Feet Total
Leasable to Owned by Square
Occupants Tenants Anchors Feet
J.C. Penney 136,864 - 136,864
Montgomery Ward - 161,204(1) 161,204
Hecht's - 118,354(2) 118,354
Enclosed Mall Tenants 245,364 - 245,364
382,228 279,558 661,786
(1) Building and land are independently owned and are not subject to reversion
to Owner Partnership.
(2) Building is independently owned but reverts to Owner Partnership on
termination of ground lease.
Anchor Tenants
J.C. Penney leases 20.7% of the gross leasable building area, and is located at
the northern end of the Mall. The initial term of the J.C. Penney lease
expires on October 31, 2009. Five five-year renewal options are available on
the same terms and conditions. The annual minimum rent payable under the J.C.
Penney lease is $495,448 and the annual contingent rent payable thereunder is 1
1/2% of net retail sales in excess of $24,772,384. Expense contributions
include a charge for common area maintenance, merchant association dues and a
portion of real estate taxes. J.C. Penney pays for gas, electricity and water
consumed at the leased premises, and for sewer charges based on water
consumption. The Owner Partnership, as landlord, is responsible for making
structural repairs to the J.C. Penney store, non-structural repairs to the
exterior of the J.C. Penney store and to repaint and decorate the exterior of
the J.C. Penney Store once every five years. The lease with J.C. Penney
contain s an operating covenant pursuant to which J.C. Penney was obligated to
operate a department store at the Mall until October 10, 1994, under the name
"J.C. Penney", or "Penney", or such other name as is used at a majority of its
stores in the Baltimore/Washington area. See "Operating Covenants" below.
Montgomery Ward leases its store, which is 24.4% of the gross leasable building
area, the land on which the store is constructed and an adjacent parking area
totalling approximately twelve acres, from an independent third party with
which the Owner Partnership is neither affiliated nor related. Expense
contributions to be made by Montgomery Ward to the Owner Partnership include a
charge for common area maintenance and merchant association dues. Montgomery
Ward is obligated to pay all real estate taxes and assessments, water charges
and sewer rents levied against its site. The lease with Montgomery Ward
contains an operating covenant pursuant to which Montgomery Ward was obligated
to operate a department store until October 10, 1994, at the Mall under the
name of Montgomery Ward or such other name as is used by Montgomery Ward by the
majority of its department stores in the eastern part of the United States.
See "Operating Covenants" below.
A reciprocal operation and easement agreement (the "ROEA"), which governs the
Owner Partnership, Montgomery Ward and the owner of the Montgomery Ward
property, provides for the operation of Laurel Centre as an integral unit.
Among other things, the ROEA creates certain cross easements between the
Montgomery Ward parcel and the remainder of the Mall for access to and use of
common areas for such purposes as parking, vehicular and pedestrian traffic and
ingress and egress. The term of the ROEA expires on October 10, 2078. The
ROEA is binding on successors and assigns of the parties, and runs with the
land and binds future owners of the Montgomery Ward parcel and of the Mall.
Pursuant to the ROEA, Montgomery Ward and the owner of the Montgomery Ward
property are prohibited from voluntarily terminating the lease between them,
except that Montgomery Ward may exercise certain unilateral cancellation rights
contained in such lease. Pursuant to the ROEA, if the Montgomery Ward lease
expires or terminates prior to the expiration or termination of the ROEA, then
Montgomery Ward is released from all obligations thereafter accruing and the
owner of the Montgomery Ward property becomes automatically obligated and
liable therefor, except that the owner of the Montgomery Ward property is not
obligated to operate a Montgomery Ward store at the premises.
Hecht's leases a parcel of land pursuant to a ground lease on which it has
constructed a store containing approximately 118,354 square feet or 17.9% of
the gross leasable building area. Ownership of the anchor store currently
owned and occupied by Hecht's will revert to the Owner Partnership upon the
expiration of the ground lease. The initial term of the ground lease expires
on May 6, 2011. Thirteen five-year renewal options are available on the same
terms and conditions. The rent payable thereunder is $10.00 per annum.
Expense contributions include a charge for maintenance of common areas and real
estate taxes. Hecht's is obligated to obtain all utilities directly from the
public utility, except natural gas and water which may be sub-metered. Hecht's
is obligated to pay all expenses in connection with the maintenance and repair
of its store.
The lease with Hecht's contains an operating covenant pursuant to which Hecht's
is obligated to operate a department store at the Mall until May 6, 1996 under
the name of "Hecht's" or "The Hecht Co." or such other name as is used by
Hecht's in the Baltimore- Washington area. The lease with Hecht's provides
that Hecht's does not have to operate if (i) J.C. Penney or Montgomery Ward
ceases to operate its store as a department store under a permitted name for a
period in excess of fifteen months, or (ii) less than seventy-five (75%) of the
gross leasable area of the retail mall stores is open for business for a period
of six consecutive months (Hecht's may suspend its operation at its Mall store
if such condition exists for a period of three (3) consecutive months), or
(iii) the Owner Partnership, as landlord, breaches its operating covenant, or
(iv) damage or destruction to the demised premises occurs during the last (2)
years of the operating covenant, or (v) damage or destruction occu rs to the
Mall and, upon restoration, the retail mall stores contain less than 200,000
square feet of gross leasable area, or (vi) damage or destruction occurs to the
Mall during the last (2) years of the operating lease and, pursuant to the
lease, the Owner Partnership elects to restore less than all of the damaged
area, or (vii) in a number of instances on the occurrence of condemnation of
all or a portion of the Mall, or (viii) if the Owner Partnership defaults under
the lease beyond applicable grace periods and Hecht's terminates the lease.
If, upon the expiration of its operating covenant, Hecht's notifies the Owner
Partnership that it intends to sublet the premises or assign its lease, the
Owner Partnership will have an option to purchase the Hecht's leasehold and
building. Hecht's is entitled to mortgage its leasehold interest and building.
Operating Covenants
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, assign their lease or cease operations (but continue to
pay rent). 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 maintain the aesthetic
integrity and economic viability of 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.
Rent
The following table sets forth SLC revenue for the last five years from base
rents and percentage rents, on the basis of Mall tenants and Anchor tenants:
1995 1994 1993 1992 1991
Base Rents
Mall Tenants $ 5,259,484 $ 4,687,584 $ 4,539,564 $ 3,967,502 $ 3,883,832
Anchor Tenants 495,448 495,448 495,448 495,448 495,448
Total Base
Rents 5,754,932 5,183,032 5,035,012 4,462,950 4,379,280
Percentage Rents
Mall Tenants 80,906 343,061 338,712 370,589 456,757
Total Rental
Income $ 5,835,838 $ 5,526,093 $ 5,373,724 $ 4,833,539 $ 4,836,037
Mall Tenants
As of December 31, 1995, the Mall had 100 mall tenants (excluding anchor
stores) occupying approximately 216,000 square feet of gross leasable area, and
was 88.1% occupied.
As of the filing date of this report, 5 tenants, or their parent corporations,
at the Mall have filed for protection under the U.S. Federal Bankruptcy Code.
These tenants currently occupy 20,616 square feet, or approximately 8.0% 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 as well as an adverse effect on the Partnership's efforts to sell
or refinance the Mall (See Item 7).
Historical Occupancy
The following table shows the historical occupancy percentage at the Mall at
December 31 of the indicated years.
1995 1994 1993 1992 1991
Including
Anchor Stores 95.6% 97.9% 97.7% 98.1% 99.3%
Excluding
Anchor Stores 88.1% 93.4% 93.6% 95.1% 97.6%
Physical Improvements
During 1995, several interior and exterior improvement projects were completed
which were designed to maintain and enhance the appeal of Laurel Centre. The
most significant of these projects was the replacement of the Mall's HVAC
system, the majority of which was completed during 1995, at a cost of
approximately $1.3 million. Total capital improvements completed during 1995
amounted to $1,518,973.
Following an examination by an independent engineer, it was determined that the
Mall's roof may require extensive repairs or replacement to address age and
weather related deterioration. Currently, the General Partner estimates the
cost of such repairs or replacement, which would be funded by cash flow
generated by Laurel Centre, the Partnership's cash reserve or a combination of
the two, to be approximately $400,000. These and other improvements may be
necessary in order to maintain the physical integrity of the Mall and allow the
Mall to compete aggressively for renewals of existing tenants and for new
tenants. The timing and costs of such repairs are uncertain at this time,
however, they are expected to be funded from operating cash flow and
Partnership cash reserves.
Competition
The principal methods generally utilized by shopping malls to compete
effectively are (i) location in a prime trade area, (ii) leasing to anchor
tenants who can attract customers from the Mall's trade area, (iii) creating
and maintaining an attractive tenant mix and (iv) maintaining or upgrading the
mall's physical condition.
Laurel Centre remains a dominant retail center within its primary trade area of
a 10 mile radius from the center, but competes with a number of nearby strip
malls and stand-alone discount retailers, many of which are new or newly
refurbished. Retail development in the area continues, and the number of
retailers in the Laurel area has grown considerably in recent years. The
General Partner believes that three large centers are competitive with the
Mall.
Laurel Lakes, an open air center located approximately 1/4 mile south of the
Mall, occupies approximately 455,000 square feet of space. Laurel Lakes is
anchored by Kmart, Best Buy Co., Safeway Stores and Kids "R" Us, and contains
approximately 58 smaller mall stores.
Laurel Shopping Center is an open-air shopping center immediately adjacent to
Laurel Centre. Please see Item 2 , paragraph 3 for a discussion of Laurel
Shopping Center.
Columbia Mall is located approximately 12 miles northwest of the Mall. It is
anchored by, Hecht's, Sears, and Woodward & Lothrop, and includes approximately
200 mall stores. The owners of Columbia Mall are planning a fashion-oriented
redevelopment program with the addition of a fourth anchor tenant which has yet
to be named.
Two currently proposed developments in the area of the Mall, the New Town
Center in Bowie and Konterra near Laurel may provide increased competition in
the future. Both projects, however, have not proceeded beyond the planning
stages and a construction date for either project is uncertain at this time.
The New Town Center, approximately 15 miles southeast of Laurel, is a planned
mixed use development which includes eleven office buildings with 1.3 to 1.4
million square feet of space, 1,340 residential units, 250 hotel rooms and a
five anchor regional mall with The Edward J. DeBartolo Corp. as a joint
partner. Four office buildings are completed, three of which are condominium
space and the fourth, a 110,000 square foot building, is 96% leased.
Konterra, whose planned location is immediately south of Laurel Centre Mall, is
expected to have a regional shopping center within its master planned
community. The project remains delayed as it is believed that the success of
Konterra depends greatly on the completion of the Intercounty Connector Route
for which funding is not completed. Based on its location, it is expected that
Konterra will adversely affect the Mall.
Item 3. Legal Proceedings
Neither SLC, nor the Owner Partnership is a party to, nor is either of them the
subject of, any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unit Holders at a meeting or
otherwise during the three months ended December 31, 1995.
PART II
Item 5. Market for the Registrant's Limited Partnership Units and Related
Security Holder Matters
(a) Market Information
The Units are listed on the American Stock Exchange and trade under the symbol
"LSC". The high and low sales price of the Units on the American Stock
Exchange as reported on the consolidated transaction reporting system, during
the periods January 1, 1994 to December 31, 1994 and January 1, 1995 to
December 31, 1995 were as follows:
High Low
1994
First Quarter $ 4.25 $ 3.31
Second Quarter 3.88 3.06
Third Quarter 3.31 2.88
Fourth Quarter 3.38 2.25
1995
First Quarter $ 3.13 $ 2.38
Second Quarter 3.00 2.31
Third Quarter 2.81 2.44
Fourth Quarter 2.63 1.69
(b) Holders
As of December 31, 1995, there were 3,099 Unit Holders.
(c) Distribution of Net Cash Flow
SLC's policy is to distribute to the Unit Holders their allocable portion of
Net Cash Flow (as defined in the Partnership Agreement) in respect of each
fiscal year in quarterly installments based on estimated Net Cash Flow for the
current year. Distribution levels are also determined based on the
Partnership's need for reserves and estimates of future expenditures which can
impact distribution levels over time. Distributions of Net Cash Flow are paid
on a quarterly basis to registered Unit Holders on record dates established by
SLC, which generally are the last day of each quarter. If a Unit Holder
transfers a Unit prior to a record date for a quarterly distribution of Net
Cash Flow, the transferor Unit Holder may be subject to tax on part or all of
the net income from operations, if any, for such quarter (since net income from
operations is allocated on a monthly basis, rather than quarterly), but will
not be entitled to receive any portion of the Net Cash Flow to be distributed
wi th respect to such quarter.
Pursuant to the Owner Partnership's Amended and Restated Limited Partnership
Agreement (the "Owner Partnership Agreement"), Net Cash Flow (as defined) of
the Owner Partnership from the operation of the Mall generally will be
distributed 98% to SLC and 2% to NAT.
In determining the amount of Net Cash Flow of the Owner Partnership and SLC to
be distributed, the General Partner, in its discretion, takes into account the
cash requirements of each, including operating expenses, contingencies and such
additional funding requirements for the Partnership, the Owner Partnership and
the Mall as deemed necessary.
In addition to distributions of Net Cash Flow, upon the occurrence of certain
events (e.g., a refinancing or sale of the Mall), "Net Proceeds" generally will
be distributed by the Owner Partnership, first, 99.5% to SLC and .5% to NAT
until SLC receives an amount equal to its "Preferred Return Arrearage" and
"Unrecovered Capital," and then 90% to SLC and 10% to NAT, as such terms are
defined in the Owner Partnership Agreement. "Net Proceeds" of SLC generally
will be distributed, first, 99.5% to the Unitholders and .5% to the General
Partner until each Unitholder receives an amount equal to his "Preferred Return
Arrearage" and "Unrecovered Capital," and then 89% to the Unitholders and 11%
to the General Partner, as such terms are defined in the SLC Partnership
Agreement. For additional details regarding distributions of Net Cash Flow and
Net Proceeds from SLC, reference is made to Section 5 of the SLC Partnership
Agreement, which is incorporated by reference.
Quarterly Cash Distributions Per Limited Partnership Unit
Distribution amounts are reflected in the period for which they are declared.
The record date is the last day of the respective quarter and the actual cash
distributions are paid approximately 45 days after the record date.
1995(1) 1994(1)
First Quarter $ .125 $ .125
Second Quarter .125 .125
Third Quarter .125 .125
Fourth Quarter .125 .125
TOTAL $ .50 $ .50
(1) All cash distributions in 1994 and 1995 constitute returns of
capital.
Related Security Holder Matters
The Partnership is a "publicly traded partnership" for purposes of Federal
income taxation. The Revenue Act of 1987 (the "Act") changed the Federal
income tax treatment of "publicly traded partnerships." Under the Act, the
Partnership could be taxed as a corporation for Federal income tax purposes
beginning in 1998 if the Partnership does not satisfy an income test under the
Act. While the Partnership currently expects to meet this income test, it is
unclear whether the Partnership will always meet the income requirements for an
exception to the rule treating a publicly traded partnership as a corporation.
Publicly traded partnerships are subject to a modified version of the passive
loss rules if they are not taxed as corporations. Under the modified rules
applicable to publicly traded partnerships, the passive loss rules are applied
separately for the items attributable to each publicly traded partnership.
Any Tax-Exempt Entity acquiring Units after December 17, 1987 (including any
acquired pursuant to a reinvestment plan) realizes unrelated business income
("UBI"), with respect to such Units for periods during which the Partnership is
a "publicly traded partnership", and such UBI may cause the Tax-Exempt Entity
to incur a federal income tax liability. It should be noted that the
prospectus pursuant to which the Units were initially offered stated that "An
investment in the Units is not suitable for Tax-Exempt Entities, including
Individual Retirement Accounts ("IRA's") and Keogh and other retirement plans,
because such investment would give rise to unrelated business taxable
income".
Item 6. Selected Financial Data
As of and for the years ended December 31,
1995 1994 1993 1992 1991
Total
Income $ 11,949,820 $ 11,122,199 $ 10,597,213 $ 9,845,067 $ 9,450,299
Net Loss $ 315,269 $ 457,345 $ 244,452 $ 486,291 $ 390,460
Net Loss
per Limited
Partnership
Unit * $ .07 $ .10 $ .05 $ .10 $ .08
Real Estate,
net of
accumulated
depreciation $ 55,933,856 $ 56,344,774 $ 57,760,189 $ 59,113,389 $ 60,651,179
Notes Payable
and Accrued
Interest $ 55,544,670 $ 50,476,031 $ 45,887,373 $ 41,733,243 $ 37,972,490
Total
Assets $ 70,772,712 $ 68,287,685 $ 66,688,829 $ 65,112,312 $ 64,256,412
Cash
Distributions
per
Limited
Partnership
Unit * $ .50 $ .50 $ .50 $ .50 $ .655
* 4,660,000 Units outstanding
The above selected financial data should be read in conjunction with the
Consolidated Financial Statements and notes thereto in Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1995, the Partnership had cash and cash equivalents totalling
$13,427,085, compared with $10,431,820 at December 31, 1994. The increase is
primarily a result of net cash provided by operating activities exceeding cash
distributions to limited partners and expenditures for property improvements.
The Partnership paid cash distributions of $.50 per unit for 1995, including a
fourth quarter cash distribution of $.125 per unit paid on February 9, 1996.
The level of future cash distributions will be reviewed by the General Partner
on a quarterly basis.
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. The
General Partner is pursuing two possible options to address the upcoming
maturities: (i) a sale of the Mall or (ii) an extension or refinancing of the
mortgages, in whole or in part. Either option is likely to be hindered by the
current limited availability of financing for real estate projects, and the
stringent underwriting criteria being applied when financing is available. The
ability of the Partnership to find a purchaser for the Mall or to obtain
refinancing for its current mortgages 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 (see Item 2); and (iii)
the need for capital improvements. Furthermore, the cost, if necessary,
related t o positioning the Mall for sale or refinancing the mortgage debt,
could impact the level of Partnership cash reserves.
During 1993, Kemper sold its 76% participating interest in the first mortgage
loan and its entire interest in the second mortgage loan to CBA Associates,
Inc., which placed the loans into a pool of mortgages to be held by a real
estate mortgage investment conduit (the "Lender"). Although the terms of these
loans have not changed, this sale may affect the Partnership's ability to
refinance or restructure the loans with the Lender and CBA Associates, Inc. in
the event that refinancing is not available elsewhere.
As of December 31, 1995, 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
Marianne & Marianne Plus 11,033
Time Out Amusement Center 1,635
J Riggings 2,700
These tenants occupy 20,616 square feet, or approximately 8.0% 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.
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, as well as an
adverse effect on the Partnership's efforts to sell or refinance the Mall.
Merry Go 'Round closed its store in February 1996.
At December 31, 1995 real estate at cost increased to $70,034,355 from
$68,515,382 at December 31, 1994. The increase is primarily attributable to
the replacement of the Mall's HVAC system at a cost of approximately $1.3
million, of which $1 million had been paid as of December 31, 1995. Total
capital improvements completed during 1995 amounted to $1,518,973. Following
an examination by an independent engineer, it was determined that the Mall's
roof may require extensive repairs to address age and weather related
deterioration. These and other improvements may be necessary in order to
preserve the physical integrity of the Mall and to allow the Mall to compete
for renewals of existing tenants and for new tenants. The timing and costs of
such repairs are uncertain at this time, however, they are expected to be
funded from operating cash flow and Partnership cash reserves.
At December 31, 1995, the accounts receivable balance, net of allowance for
doubtful accounts, was $242,818 as compared to $528,845 at December 31, 1994.
The decrease reflects an increase in the allowance for doubtful accounts and
the timing of payments received from tenants for percentage rent and common
area maintenance charges.
Deferred rent receivable increased from $309,478 at December 31, 1994 to
$482,624 at December 31, 1995. The increase was primarily 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 principles, and the addition of new tenants over
the past year.
Accounts payable and accrued expenses totalled $285,035 at December 31, 1995
compared to $179,794 at December 31, 1994. The increase is primarily due to an
increase in electricity expenses accrued at December 31, 1995.
The zero coupon first mortgage note payable increased $5,068,639 from December
31, 1994 to $53,525,503 at December 31, 1995, due to the accrual of interest on
the zero coupon first mortgage note.
The Partnership paid cash distributions to Limited Partners totaling
$2,330,000, or $.50 per Unit, for each of the years ended December 31, 1995 and
1994. Such distributions constitute returns of capital in both years.
Results of Operations
1995 versus 1994
The results of operations are primarily attributable to the Mall's operations
and to a lesser extent the interest earned on cash reserves held by the
Partnership. Net cash flow from operating activities totaled $6,921,415 for
the year ended December 31, 1995, compared with $5,564,906 for the year ended
December 31, 1994. The increase is primarily attributable to a reduced net
loss in 1995 and the increase in accounts payable and accrued expenses.
For the year ended December 31, 1995, the Partnership reported a net loss of
$315,269 compared with a net loss of $457,345 for the year ended December 31,
1994. The lower net loss in 1995 is primarily the result of an increase in
rental and interest income in 1995 offset by increases in interest expense and
depreciation and amortization expense.
Rental income totalled $5,835,838 for the year ended December 31, 1995 compared
with $5,526,093 in 1994. The increase is primarily attributable to higher
lease rates for new tenants, lease renewals at higher rates and an increase in
temporary tenant income. Escalation income totalled $5,092,316 in 1995
compared with $5,004,831 in 1994. 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 higher recoverable property operating expenses in 1995.
Interest income totaled $567,284 for the year ended December 31, 1995 compared
with $274,960 in 1994. The increase is due to the Partnership's increased cash
balance and higher interest rates earned in 1995. Miscellaneous income totaled
$454,382 for the year ended December 31, 1995 compared with $316,315 in 1994,
up due to increased promotional expense billed back to tenants.
Total expenses for 1995 were $12,267,900 compared with $11,582,091 in 1994.
The increase is primarily due to higher interest expense and property operating
expense. Interest expense for 1995 increased from 1994, reflecting the
compounding of interest on the Zero Coupon Loan. Property operating expenses
also increased from 1994 due primarily to higher bad debt expense, an increase
in insurance premiums and management fees. Bad debt expense in 1995, totaling
$145,721 during 1995 as compared to $81,610 during 1994, relates primarily to
reserves established for tenants at the Mall, or their parent companies, which
have filed for bankruptcy.
Mall tenant sales (exclusive of anchor tenants) for the twelve months ended
December 31, 1995 and 1994 were $57,327,000 and $61,261,000, respectively.
Mature tenant sales for the twelve months ended December 31, 1995 and 1994 were
$45,011,000 and $49,224,000, 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 December 31, 1995 and 1994, the Mall was 88.1% and 93.4% occupied,
respectively, exclusive of anchor tenants.
1994 versus 1993
Net cash flow from operating activities totaled $5,564,906 for the year ended
December 31, 1994, largely unchanged from the year ended December 31, 1993.
For the year ended December 31, 1994, the Partnership reported a net loss of
$457,345 as compared to a net loss of $244,452 for the year ended December 31,
1993. The increased net loss in 1994 is primarily the result of an increase in
interest expense and property operating expenses offset by an increase in
rental and escalation income.
Rental income totalled $5,526,093 for the year ended December 31, 1994 as
compared to $5,373,724 for the year ended December 31, 1993. The increase is
primarily attributable to higher lease rates for new tenants and an increase in
temporary tenant income. Escalation income for the year ended December 31, 1994
totalled $5,004,831, as compared with $4,763,187 for the same period in 1993.
The increase in escalation income is primarily due to an increase in property
operating costs and temporary tenant HVAC income from 1993 to 1994.
Additionally, the increase in escalation income reflects an increase in certain
costs of the renovation being charged back to Mall tenants.
Total expenses for 1994 were $11,582,091 as compared to $10,841,749 for 1993.
The increase is primarily due to higher interest expense and property operating
expense. Interest expense for 1994 increased from 1993, reflecting the
compounding of interest on the Zero Coupon Loan. Property operating expense
also increased for the year due primarily to increases in insurance,
association and professional fees, and payroll costs.
Mall tenant sales (exclusive of anchor tenants) for the twelve months ended
December 31, 1994 and 1993 were $61,261,000 and $62,732,000, respectively.
Mature tenant sales for the twelve months ended December 31, 1994 and 1993 were
$49,224,000 and $55,470,000, respectively. 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
decline in occupancy during the year at the Mall and a decline in consumer
spending on softgoods, particularly apparel, a trend experienced by retailers
across the country. At December 31, 1994 and 1993, the Mall was 93.4% and
93.6% occupied, respectively, exclusive of anchor tenants.
Property Appraisal
The appraised fair market value of the Mall at January 1, 1996, as determined
by Cushman & Wakefield, Inc., an independent, third-party appraisal firm, was
$77,000,000, compared with $81,000,000 at January 1, 1995. It should be noted
that appraisals are only estimates of current values and actual values
realizable upon sale may be significantly different. A significant factor in
establishing an appraised value is the actual selling price for properties
which the appraiser believes are comparable. Because of the nature of the
Partnership's property and the limited market for such properties, there can be
no assurance that the other properties reviewed by the appraiser are
comparable. Additionally, the lower level of liquidity as a result of the
current restrictive capital environment has had the effect of limiting the
number of transactions in real estate markets and the availability of financing
to potential purchasers, which may have a negative impact on the value of an
asset. Further, the appraised value does not reflect the actual costs which
would be incurred in selling the property, including brokerage fees and
prepayment penalties.
Inflation
Inflation generally does not adversely affect the business of the Partnership
and the Owner Partnership relative to other industry segments. Most increases
in operating expenses incurred by the Mall are passed through to its tenants
under the terms of their leases. Alternatively, inflation may cause an
increase in sales revenue reported by the tenants at the Mall, which serves to
increase the Owner Partnership's revenue, since a portion of its rental income
is derived from "percentage rents" paid by certain tenants.
Item 8. Financial Statements and Supplementary Data
See Item 14a for a listing of the Consolidated Financial Statements and
Supplementary data filed in this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no Directors or Executive Officers. The affairs of the
Partnership are conducted through the General Partner.
On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of
its domestic retail brokerage and asset management businesses to Smith Barney,
Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to this sale,
Shearson changed its name to Lehman Brothers Inc. The transaction did not
affect the ownership of the Partnership or the General Partner. However, the
assets acquired by Smith Barney included the name "Shearson." Consequently,
the General Partner changed its name to Laurel Centre Inc. to delete any
references to "Shearson."
Certain executive officers and directors of the General Partner are now serving
(or in the past have served) as executive officers or directors of entities
which act as general partners of a number of real estate limited partnerships
which have sought protection under the provisions of the U.S. Bankruptcy Code.
The partnerships which have filed bankruptcy petitions own real estate which
has been adversely affected by the economic conditions in the markets in which
the real estate is located and, consequently, the partnerships sought the
protection of the bankruptcy laws to protect the partnerships' assets from loss
through foreclosure.
Set forth below are the names, positions, offices held, and brief accounts of
the business experience of each Director and Executive Officer of the General
Partner, each such person holding similar positions in the General Partner and
the Assignor Limited Partner. The following is a list of the officers and
directors of Laurel Centre Inc. as of December 31, 1995.
Name Office
Paul L. Abbott Director, President, and
Chief Executive Officer
Robert J. Hellman Director, Vice President,
and Chief Financial Officer
Kathleen Carey Director
Elizabeth L. Jarvis Director
Raymond C. Mikulich Director
Richard A. Morton Director
Joan B. Berkowitz Vice President
Elizabeth Rubin Vice President
Robert Sternlieb Vice President
Paul L. Abbott, 50, is a Managing Director of Lehman Brothers. Mr. Abbott
joined Lehman Brothers in August 1988, and is responsible for investment
management of residential, commercial and retail real estate. Prior to joining
Lehman Brothers, Mr. Abbott was a real estate consultant and a senior officer
of a privately held company specializing in the syndication of private real
estate limited partnerships. From 1974 through 1983, Mr. Abbott was an officer
of two life insurance companies and a director of an insurance agency
subsidiary. Mr. Abbott received his formal education in the undergraduate and
graduate schools of Washington University in St. Louis.
Robert J. Hellman, 41, is a Senior Vice President of Lehman Brothers and is
responsible for investment management of retail, commercial and residential
real estate. Since joining Lehman Brothers in 1983, Mr. Hellman has been
involved in a wide range of activities involving real estate and direct
investments including origination of new investment products, restructurings,
asset management and the sale of commercial, retail and residential properties.
Prior to joining Lehman Brothers, Mr. Hellman worked in strategic planning for
Mobil Oil Corporation and was an associate with an international consulting
firm. Mr. Hellman received a bachelor's degree from Cornell University, a
master's degree from Columbia University, and a law degree from Fordham
University.
Kathleen B. Carey, 42, is an attorney specializing in commercial real estate.
She is a graduate of the State University of New York at Albany and St. John's
University Law School. In 1987, she joined the Connecticut law firm of
Cummings & Lockwood and served as a partner in the firm from 1989 until
mid-1994. Kathleen's practice has involved all facets of acquisitions, sales
and financing of commercial properties, including multifamily housing, office
buildings and shopping centers. She is admitted to practice in New York,
Connecticut and California and currently works as an independent commercial
real estate consultant.
Elizabeth L. Jarvis, 60, has been a director of SLC since April 1987. Ms.
Jarvis is currently President and principal owner of Jarvis & Associates,
specializing in the development, merchandising, leasing and management of
shopping centers. From 1978 through 1983, prior to establishing Jarvis &
Associates, she was Senior Vice President of the Taubman Company, responsible
for the financial performance of nineteen shopping centers.
Raymond C. Mikulich, 43, is a Managing Director of Lehman, and since January
1988, has been head of the Real Estate Investment Banking Group. Prior to
joining Lehman Brothers Kuhn Loeb in 1982, Mr. Mikulich was a Vice President
with LaSalle National Bank, Chicago, in the Real Estate Advisory Group, where
he was responsible for the acquisition of equity interests in commercial real
estate. Over his fifteen years in the real estate business, Mr. Mikulich has
orchestrated acquisitions and dispositions on behalf of individuals and
institutional investors alike. Mr. Mikulich holds a BA degree from Knox
College and a JD degree from Kent College of Law.
Richard A. Morton, 43, is a principal in entities that own and manage eight
million square feet of real estate. Mr. Morton is principal of Ashley Capital
which is in the business of owning and operating real estate. Mr. Morton
worked with Rosenberg Real Estate Equity Fund as the East Coast Director of
Properties from February 1982 to July 1983. From 1977 to 1982, Mr. Morton was
employed by the Prudential Insurance Company and from 1980 to 1982 as the
General Manager of the New York City Real Estate Investment Office.
Joan B. Berkowitz, 36, is a Vice President of Lehman Brothers, responsible for
asset management within the Diversified Asset Group. Ms. Berkowitz joined
Lehman Brothers in May 1986 as an accountant in the Realty Investment Group.
From October 1984 to May 1986, she was an Assistant Controller to the Patrician
Group. From November 1983 to October 1984, she was employed by Diversified
Holdings Corporation. From September 1981 to November 1983, she was employed
by Deloitte Haskins & Sells. Ms. Berkowitz, a Certified Public Accountant,
received a B.S. degree from Syracuse University in 1981.
Elizabeth Rubin, 29, is a Vice President of Lehman Brothers in the Diversified
Asset Group. Ms. Rubin joined Lehman Brothers in April 1992. Prior to joining
Lehman Brothers, she was employed from September 1988 to April 1992 by the
accounting firm of Kenneth Leventhal and Co. Ms. Rubin is a Certified Public
Accountant and received a B.S. degree from the State University of New York at
Binghamton in 1988.
Robert Sternlieb, 31, is an Assistant Vice President of Lehman Brothers and is
responsible for asset management within the Diversified Asset Group. Mr.
Sternlieb joined Lehman Brothers in April 1989 as an asset manager. From May
1986 to April 1989, he was a systems analyst at Drexel Burnham Lambert. Mr.
Sternlieb received a B.S. degree in Finance from Lehigh University in 1986.
Item 11. Executive Compensation
The Directors and Officers of the General Partner do not receive any salaries
or other compensation from the Partnership, except that Elizabeth Jarvis,
Richard Morton and Kathleen Carey each receive $12,000 per year for serving as
independent Directors of the General Partner and $2,400 for attendance in
person at any meeting of the Board of Directors of the General Partner. Prior
to September 1, 1993, Mr. Morton and Ms. Jarvis each received $10,000 per year
for serving as outside directors and $2,000 for attendance. During 1995, Ms.
Jarvis and Mr. Morton each received $21,600, and Ms. Carey received $19,600
since she became a director on March 8, 1995.
The General Partner is entitled to receive 1% of Net Cash Flow distributed in
any fiscal year and to varying percentages of the Net Proceeds of capital
transactions. See page 3 of the Partnership Agreement for a description of
such arrangements which description is incorporated by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1995, no one person was known by SLC to be the beneficial
owner of more than five percent of the Units.
Set forth below is a chart indicating as of December 31, 1995 the name and the
amount and nature of beneficial ownership of Units held by the General Partner
and Officers and Directors thereof. Only the General Partner and those
officers and directors thereof which beneficially own any units are listed. No
General Partner or any officer or directors thereof, or the officers and
directors of the General Partners as a group (9 persons), beneficially owns in
excess of 1% of the total Units outstanding.
Beneficial Ownership of Units Number of Units Owned
General Partner 0
Raymond Mikulich 500
(The General Partner and all
Officers and Directors
thereof as a group, 9 persons) 500
Item 13. Certain Relationships and Related Transactions
Certain Officers and Directors of the General Partner are employees of Lehman.
The General Partner is entitled to receive 1% of SLC's Net Cash Flow from
operations and varying percentages of SLC's Net Proceeds from capital
transactions. See pages 3 and 7 of the Partnership Agreement for a description
of distribution agreements.
Capital Growth Mortgage Investors Fund, L.P. a Delaware limited partnership,
the general partner of which is an affiliate of Lehman, acquired a 24% interest
in the Zero Coupon Loan. Laurel Capital Growth Investors Corp., a Subchapter S
corporation whose officers, directors and shareholders are current or former
employees of Shearson, acquired a 76% interest in the equity kicker interest
payment in the Zero Coupon Loan.
The General Partner and certain affiliates may be reimbursed by SLC for the
actual costs of goods, services and materials used for or by SLC or the Owner
Partnership including, but not limited to audit, appraisal, legal and tax
preparation fees as well as costs of data processing. Services are provided by
the General Partner and two unaffiliated companies. First Data Investor
Services Group, formerly The Shareholder Services Group, provides partnership
accounting and investor relations services for the Registrant. Prior to May
1993, these services were provided by an affiliate of a general partner. The
Registrant's transfer agent and certain tax reporting services are provided by
Service Data Corporation.
As of December 31, 1995, and 1994, $3,226, and $4,266, respectively, was due to
affiliates for expenditures paid on behalf of the Partnership. For the years
ended December 31, 1995, 1994 and 1993, $92,519, $56,290 and $55,113,
respectively, was earned by affiliates.
On December 1, 1986, the Partnership entered into an agreement with Shopco
Management Corporation, an affiliate of NAT Limited Partnership, for the
management of the Mall. The agreement, which expired on December 31, 1992
provided for an annual fee equal to 3% of the gross rents collected from the
Mall, as defined, payable monthly. On September 1, 1993, the Partnership and
Shopco Management Corporation executed a new management agreement which
provides for an annual fee equal to 4.5% of the fixed minimum and percentage
rents effective January 1, 1993. The new agreement initially expired on
December 31, 1995, but allows for automatic renewal at one year intervals
thereafter. The new management agreement was renewed through December 31,
1996. For the years ended December 31, 1995, 1994, and 1993, management fee
expense amounted to $311,601, $276,795 and $296,618, respectively.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2).
SHOPCO LAUREL CENTRE, L.P. AND CONSOLIDATED PARTNERSHIP
(a Delaware limited partnership)
Index to Consolidated Financial Statements and Schedules
Page
Number
Independent Auditors' Report F-1
Consolidated Balance Sheets
At December 31, 1995 and 1994 F-2
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993 F-4
Notes to the Consolidated Financial Statements F-5
Schedule II - Valuation and Qualifying Accounts F-10
Schedule III - Real Estate and Accumulated Depreciation F-11
(b) Exhibits.
Subject to Rule 12b-32 of the Securities Act of 1934 regarding incorporation by
reference, listed below are the exhibits which are filed as part of this
report:
3.* SLC's Amended and Restated Agreement of Limited Partnership, dated as
of April 16, 1987, is hereby incorporated by reference to Exhibit B to
the Prospectus contained in Registration Statement No. 33-11994, which
Registration Statement (the "Registration Statement") was declared
effective by the SEC on April 9, 1987.
4.* The form of Unit Certificate is hereby incorporated by reference to
Exhibit 4.1 to the Registration Statement.
10.1* Investor Services Agreement between SLC and The Boston Company is
hereby incorporated by reference to Exhibit No. 10.1 to the
Registration Statement.
10.2* The Property Management Agreement between the Owner Partnership and the
Manager relating to the operation and leasing of the Mall is hereby
incorporated by reference to Exhibit No. 10.2 to the Registration
Statement.
10.3* Closing Agreement among JMB Income Properties, Ltd. - VI, JMB Income
Properties Ltd. - VIII, SLC and NAT Limited Partnership is hereby
incorporated by reference to Exhibit No. 10.3 to the Registration
Statement.
10.4* Demand Promissory Note from Shearson Group to the General Partner is
hereby incorporated by reference to Exhibit No. 10.4 to the
Registration Statement.
10.5* Documents relating to the Pre-Existing Mortgage held by Equitable Life
Assurance Society of the United States is hereby incorporated by
reference to Exhibit No. 10.5 to the registration Statement.
10.6* Letter from Equitable Life Assurance Society of the United States
consenting to the prepayment of the Pre-existing Mortgage is hereby
incorporated by reference to Exhibit No. 10.6 to the Registration
Statement.
10.8* Documents relating to the Zero Coupon Loan are hereby incorporated by
reference to Exhibit No. 10.7 to the Registration Statement.
10.9* Indemnity Agreement between Shearson and Cushman & Wakefield, Inc. is
hereby incorporated by reference to Exhibit No. 10.9 to the
Registration Statement.
10.10* Reciprocal Operation and Easement Agreement is hereby incorporated by
reference to Exhibit No. 10.10 to the Registration Statement.
10.11* Easement Agreement is hereby incorporated by reference to Exhibit No.
10.11 to the Registration Statement.
10.13* The Second Mortgage Loan Agreement from Kemper to the Owner Partnership
dated December 28, 1990 which is hereby incorporated by reference to
exhibit 10.13 of the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1991.
10.14* Real Estate Management Agreement by and Between Laurel Owner Partners
Limited Partnership, As Owner, and Shopco Management Corp., As Agent,
is hereby incorporated by reference to exhibit 10.14 of the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1993.
27 Financial Data Schedule (filed herewith)
*Previously filed
(c) Reports on Form 8-K in the fourth quarter of fiscal 1995: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 28, 1996
SHOPCO LAUREL CENTRE, L.P.
BY: Laurel Centre Inc.
General Partner
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President and
Chief Executive Officer
BY: /s/ Robert J. Hellman
Name: Robert J. Hellman
Title: Director, Vice President and
Chief Financial Officer
LAUREL CENTRE DEPOSITARY CORP.
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President and
Chief Executive Officer
BY: /s/ Robert J. Hellman
Name: Robert J. Hellman
Title: Director, Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
LAUREL CENTRE INC.
General Partner and
LAUREL CENTRE DEPOSITARY CORP.
Date: March 28, 1996
BY: /s/ Paul L. Abbott
Paul L. Abbott
Director, President and
Chief Executive Officer
Date: March 28, 1996
BY: /s/ Elizabeth Jarvis
Elizabeth Jarvis
Director
Date: March 28, 1996
BY: /s/ Richard A. Morton
Richard A. Morton
Director
Date: March 28, 1996
BY: /s/ Robert J. Hellman
Robert J. Hellman
Director, Vice President and
Chief Financial Officer
Date: March 28, 1996
BY: /s/ Raymond Mikulich
Raymond Mikulich
Director
Date: March 28, 1996
BY: /s/ Joan Berkowitz
Joan Berkowitz
Vice President
Date: March 28, 1996
BY: /s/ Elizabeth Rubin
Elizabeth Rubin
Vice President
Date: March 28, 1996
BY: /s/ Kathleen Carey
Kathleen Carey
Director
Independent Auditors' Report
The Partners
Shopco Laurel Centre, L.P.:
We have audited the consolidated financial statements of Shopco Laurel Centre,
L.P. (a Delaware limited partnership) and Consolidated Partnership as listed in
the accompanying index. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedules as
listed in the accompanying index. These consolidated financial statements and
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Shopco Laurel
Centre, L.P. and Consolidated Partnership as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
The accompanying consolidated financial statements and financial statement
schedules have been prepared assuming that the Partnership will continue as a
going concern. As discussed in Note 5 to the financial statements, the
Partnership's zero coupon mortgage note payable matures on October 15, 1996.
Currently, it is management's intent to either sell the Partnership's property
or obtain an extension or refinancing to satisfy the mortgage loan obligation.
However, market conditions may prevent the Partnership from obtaining
sufficient proceeds from a sale or refinancing to satisfy the mortgage
obligation. These conditions raise substantial doubt about the Partnership's
ability to continue as a going concern. The consolidated financial statements
and financial statement schedules do not include any adjustments that might
result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 25, 1996
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
Real estate, at cost
(notes 3, 5 and 6):
Land $ 5,304,011 $ 5,304,011
Building 61,062,234 60,029,923
Improvements 3,668,110 3,181,448
70,034,355 68,515,382
Less accumulated depreciation
and amortization (14,100,499) (12,170,608)
55,933,856 56,344,774
Cash and cash equivalents 13,427,085 10,431,820
Accounts receivable,
net of allowance of $254,927
in 1995 and $131,759 in 1994 242,818 528,845
Deferred rent receivable 482,624 309,478
Deferred charges, net of
accumulated amortization
of $273,442 in 1995 and
$218,353 in 1994 133,295 142,322
Prepaid expenses 553,034 530,446
Total Assets $ 70,772,712 $ 68,287,685
Liabilities, Minority Interest and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 285,035 $ 179,794
Zero coupon first mortgage
note payable (note 5) 53,525,503 48,456,864
Second mortgage note payable (note 6) 2,000,000 2,000,000
Second mortgage note accrued
interest payable 19,167 19,167
Due to affiliates (note 7) 8,851 9,891
Security deposits payable 14,633 14,633
Deferred income 804,171 766,727
Distribution payable (note 9) 588,384 588,384
Total Liabilities 57,245,744 52,035,460
Minority interest (583,239) (526,787)
Partners' Capital (notes 1, 4 and 10):
General Partner 917,755 944,444
Limited Partners (4,660,000 limited
partnership units authorized,
issued and outstanding) 13,192,452 15,834,568
Total Partners' Capital 14,110,207 16,779,012
Total Liabilities, Minority Interest
and Partners' Capital $ 70,772,712 $ 68,287,685
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Income 1995 1994 1993
Rental income (note 3) $ 5,835,838 $ 5,526,093 $ 5,373,724
Escalation income (note 3) 5,092,316 5,004,831 4,763,187
Interest income 567,284 274,960 170,185
Miscellaneous income 454,382 316,315 290,117
Total Income 11,949,820 11,122,199 10,597,213
Expenses
Interest expense 5,298,639 4,822,735 4,384,130
Property operating expenses 3,737,361 3,642,418 3,325,995
Depreciation and amortization 1,984,980 1,873,237 1,835,776
Real estate taxes 1,023,297 1,034,656 1,050,690
General and administrative 223,623 209,045 245,158
Total Expenses 12,267,900 11,582,091 10,841,749
Loss before minority interest (318,080) (459,892) (244,536)
Minority interest 2,811 2,547 84
Net Loss $ (315,269) $ (457,345) $ (244,452)
Net Loss Allocated:
To the General Partner $ (3,153) $ (4,573) $ (2,445)
To the Limited Partners (312,116) (452,772) (242,007)
$ (315,269) $ (457,345) $ (244,452)
Per limited partnership unit
(4,660,000 outstanding) $ (.07) $ (.10) $ (.05)
Consolidated Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993
Limited General
Partners Partner Total
Balance at December 31, 1992 $ 21,189,347 $ 998,534 $ 22,187,881
Net loss (242,007) (2,445) (244,452)
Distributions (note 9) (2,330,000) (23,536) (2,353,536)
Balance at December 31, 1993 18,617,340 972,553 19,589,893
Net loss (452,772) (4,573) (457,345)
Distributions (note 9) (2,330,000) (23,536) (2,353,536)
Balance at December 31, 1994 15,834,568 944,444 16,779,012
Net loss (312,116) (3,153) (315,269)
Distributions (note 9) (2,330,000) (23,536) (2,353,536)
Balance at December 31, 1995 $ 13,192,452 $ 917,755 $ 14,110,207
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
Cash Flows from Operating Activities: 1995 1994 1993
Net loss $ (315,269) $ (457,345) $ (244,452)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Minority interest (2,811) (2,547) (84)
Depreciation and amortization 1,984,980 1,873,237 1,835,776
Increase in interest on zero
coupon mortgage payable 5,068,639 4,588,658 4,154,130
Increase (decrease) in cash
arising from changes in
operating assets and
liabilities:
Accounts receivable 286,027 (64,367) 2,830
Deferred rent receivable (173,146) (193,549) (99,629)
Deferred charges (46,062) (53,417) (26,334)
Prepaid expenses (22,588) (2,524) 7,249
Accounts payable and
accrued expenses 105,241 (103,767) 67,692
Due to affiliates (1,040) 66 2,400
Security deposits payable - 2,500 2,500
Deferred income 37,444 (22,039) (20)
Net cash provided by operating
activities 6,921,415 5,564,906 5,702,058
Cash Flows from Investing Activities:
Additions to real estate (1,518,973) (411,426) (441,885)
Cash-held in escrow - - 69,074
Net cash used for
investing activities (1,518,973) (411,426) (372,811)
Cash Flows from Financing Activities:
Cash distributions to partners (2,353,536) (2,353,536) (2,353,536)
Cash distributions - minority
interest (53,641) (53,134) (52,113)
Net cash used for
financing activities (2,407,177) (2,406,670) (2,405,649)
Net increase in cash and
cash equivalents 2,995,265 2,746,810 2,923,598
Cash and cash equivalents
at beginning of period 10,431,820 7,685,010 4,761,412
Cash and cash equivalents
at end of period $ 13,427,085 $ 10,431,820 $ 7,685,010
Supplemental Disclosure of Cash Flow Information:
Cash paid during the
period for interest $ 230,000 $ 234,077 $ 230,000
Notes to the Consolidated Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
Shopco Laurel Centre, L.P. ("SLC") was formed as a limited partnership on
December 22, 1986 under the laws of the State of Delaware. The Partnership is
the general partner of Laurel Owner Partners Limited Partnership (the "Owner
Partnership"), a Maryland limited partnership, which owns Laurel Centre (the
"Mall").
The general partner of SLC is Laurel Centre Inc. (the "General Partner")
formerly Shearson Laurel Inc., an affiliate of Lehman Brothers Inc., formerly
Shearson Lehman Brothers Inc. (see below).
On April 16, 1987, the Partnership commenced investment operations with the
acceptance of subscriptions of 4,660,000 depositary units of limited
partnership units, the maximum authorized by the limited partnership agreement
("Limited Partnership Agreement"). Upon the admittance of the additional
limited partners, the Assignor Limited Partner withdrew from the Partnership.
Registered holders ("Unit Holders") received an assignment of the economic,
voting and other rights attributable to the limited partnership units held by
the Assignor Limited Partner.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. The transaction did not
affect the ownership of the general partner. However, the assets acquired by
Smith Barney included the name "Shearson". Consequently, effective November
12, 1993, the general partner changed its name to Laurel Centre Inc. to delete
any references to "Shearson".
2. Summary of Significant Accounting Policies
Basis of Accounting The consolidated financial statements of SLC have been
prepared on the accrual basis of accounting and include the accounts of SLC and
the Owner Partnership. All significant intercompany accounts and transactions
have been eliminated.
Real Estate
The real estate, which consists of building, land and improvements, are
recorded at cost less accumulated depreciation and amortization. Cost includes
the initial purchase price of the property plus closing costs, acquisition and
legal fees and capital improvements. Depreciation is computed using the
straight-line method based on an estimated useful life of 40 years.
Depreciation of fixtures and equipment is computed using the straight-line
method over an estimated useful life of 12 years. Amortization of tenant
leasehold improvements is computed using the straight-line method over the
lease term.
Accounting for Impairment
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"),
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Partnership has adopted FAS 121 in
the fourth quarter of 1995. Based on current circumstances, the adoption had
no impact on the consolidated financial statements.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("FAS 107"), requires that the Partnership
disclose the estimated fair values of its financial instruments. Fair values
generally represent estimates of amounts at which a financial instrument could
be exchanged between willing parties in a current transaction other than in
forced liquidation.
Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgement regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
Organization Costs and Deferred Charges
Costs and charges are amortized using the straight-line method over the
following periods:
Fee for negotiating the acquisition
of the ownership of the Mall 40 years
Zero coupon loan legal fee 9.5 years
Refinancing fees 5.8 years
Fees paid in connection with the acquisition of the property have been included
in the purchase price of the property. Accordingly, such fees have been
allocated to the basis of the land, building and improvements and are being
depreciated over the estimated useful lives of those assets. Leasing
commissions are amortized using the straight-line method over the lease term.
Offering Costs
Offering costs are non-amortizable and are deducted from limited partners'
capital.
Transfer of Units and Distributions
Net income or net loss from operations is allocated to the Unit Holders. Upon
the transfer of a unit, net income or net loss from operations attributable to
such unit generally is allocated between the transferor and the transferee
based on the number of days during the year of transfer that each is deemed to
have owned the unit. The Unit Holder of record on the first day of a calendar
month is deemed to have transferred their interest on the first day of such
month.
Distributions of operating cash flow, as defined in the Partnership Agreement,
are paid on a quarterly basis to Unit Holders on record dates established by
the Partnership, which generally fall on the last day of each quarter.
Income Taxes
No provision is made for income taxes since such liability is the liability of
the individual partners.
Net Income (Loss) Per Limited Partnership Unit
Net income (loss) per limited partnership unit is calculated based upon the
number of limited partnership units outstanding during the year.
Rental Income and Deferred Rent
The Partnership rents its property to tenants under operating leases with
various terms. Deferred rent receivable consists of rental income which is
recognized on the straight-line basis over the lease terms, but will not be
received until later periods as a result of scheduled rent increases.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid short-term investments with
maturities of three months or less from the date of issuance. The carrying
amount approximates fair value because of the short maturity of these
instruments.
Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to a
concentration of credit risk principally consist of cash and cash equivalents
in excess of the financial institutions' insurance limits. The Partnership
invests available cash with high credit quality financial institutions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Real Estate
SLC's real estate, which was purchased on December 1, 1986, consists of an
enclosed regional shopping mall containing a total of 100 retail stores and
three attached anchor stores, J.C. Penney, Inc. ("J.C. Penney"), Montgomery
Ward and Hecht's located on approximately 12.28 acres of land known as Laurel
Centre, located in Laurel, Maryland. The retail tenant portion of the Mall is
contained on two levels, and parking is provided at Laurel Centre for
approximately 3,400 cars.
J.C. Penney leases 136,864 square feet of the gross leasable building area
located at the northern end of the Mall. The lease with J.C. Penney contains
an operating covenant pursuant to which J.C. Penney was obligated to operate a
department store until October 10, 1994, under the name "J.C. Penney", or
"Penney", or such other name as is used at a majority of its stores in the
Baltimore/Washington area.
Montgomery Ward leases its store, the land on which the store is constructed
and an adjacent parking area totalling approximately twelve acres, from an
independent third party with which the Owner Partnership is neither affiliated
nor related. The lease with Montgomery Ward contains an operating covenant
pursuant to which Montgomery Ward was obligated to operate a department store
until October 10, 1994, at the Mall under the name of Montgomery Ward or such
other name as is used by Montgomery Ward by the majority of its department
stores in the eastern part of the United States.
Hecht's leases a parcel of land pursuant to a ground lease on which it has
constructed a store. Hecht's is obligated to operate a department store at the
Mall until May 6, 1996 under the name of "Hecht's" or "The Hecht Co." or such
other name as is used by Hecht's in the Baltimore/Washington area. If, upon
the expiration of its operating covenant, Hecht's notifies the Owner
Partnership that it intends to sublet the premises or assign its lease, the
Owner Partnership will have an option to purchase the Hecht's leasehold and
building.
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.
The following is a schedule of the remaining minimum lease payments as called
for under the lease agreements with Mall tenants:
Year Ending
December 31,
1996 $ 5,443,172
1997 5,298,609
1998 4,983,818
1999 4,751,416
2000 4,122,389
Thereafter 14,914,116
$ 39,513,520
In addition to the minimum lease amounts, the leases provide for percentage
rents and escalation charges to tenants for common area maintenance and real
estate taxes. For the years ended December 31, 1995, 1994 and 1993, percentage
rents amounted to $80,906, $343,061 and $338,712, respectively, and are
included in rental income. For the years ended 1995, 1994 and 1993 temporary
tenant income amounted to $338,147, $307,035 and $272,589, respectively and are
included in rental income.
The appraised fair market value of the mall at January 1, 1996, as determined
by an independent, third-party appraisal firm, was $77,000,000, compared with
$81,000,000 at January 1, 1995.
4. Partnership Agreement
The SLC Partnership Agreement provides that, prior to the admission of the
Assignor Limited Partner, profits and losses were allocated 1% to the initial
limited partners and 99% to the General Partner. Thereafter, all income,
profits, losses and cash distributions from operations are allocated 1% to the
General Partner and 99% to the Unit Holders. Proceeds of sale and interim
capital transactions will be allocated 99.5% to the Unit Holders until the Unit
Holders receive their Unrecovered Capital and their Preferred Return Arrearage,
as defined. Thereafter, net proceeds will generally be distributed 89% to the
Unit Holders and 11% to the General Partner.
With respect to the Owner Partnership, SLC has a 98% interest and NAT Limited
Partnership has a 2% interest in the income, profits and cash distributions of
the Mall. Losses will be allocated 99% to SLC and 1% to NAT Limited
Partnership. Upon sale or an interim capital transaction, SLC will receive
99.5% and NAT Limited Partnership will receive .5% of the net proceeds thereof
until SLC receives an amount equal to its Unrecovered Capital and Preferred
Return Arrearage, as defined. Thereafter, any remaining proceeds will be
allocated 90% to SLC (11% to the General Partner and 89% to the Unit Holders)
and 10% to NAT Limited Partnership.
5. Zero Coupon First Mortgage Note Payable
Financing for the purchase of the Mall was provided by a Zero Coupon Loan from
Lending, Inc., formerly Shearson California Commercial Lending Inc., an
affiliate of the General Partner (together with its successors and assignees,
the "Zero Coupon Lender"), in the total amount of $22,500,000.
The nonrecourse Zero Coupon Loan accrues interest at an annual implicit rate of
10.2% per annum, compounded semi-annually. At maturity, defeasance or
prepayment in connection with a major casualty, the Partnership will pay
additional supplemental interest equal to 5% of any appreciation in value of
the Mall occurring during the term of the Zero Coupon Loan in excess of
$72,500,000 (the appraised value of the Mall as of January 1, 1987). The Zero
Coupon Loan does not require the payment of any principal or interest currently
and matures on October 15, 1996. It is secured by a first deed of trust on the
Mall and an assignment of leases. The accreted amount of the Zero Coupon Loan
at maturity will be $57,894,075.
During 1987, the Zero Coupon Lender sold a 76% participation interest in its
right under the Zero Coupon Loan to Kemper Investors Life Insurance Company
("Kemper") in the amount of $17,100,000. Subsequently, in 1993, Kemper sold
its participation interest to CBA Associates, Inc., ("CBA Associates"), a
conduit entity which placed the loan into a pool of mortgages to be held by a
Real Estate Mortgage Investment Conduit (the "REMIC Lender"). The
participation interest sold did not include the additional supplemental
interest obligation of the note of which 76% was subsequently acquired by
Laurel Capital Growth Investors Corp.
Additionally in 1987, the Zero Coupon Lender sold its remaining 24%
participation interest in its right under the Zero Coupon Loan to Capital
Growth Mortgage Investors, L.P., an affiliate of the General Partner, in the
amount of $5,400,000. The 24% participation sold to Capital Growth Mortgage
Investors, L.P. included the additional supplemental interest obligation of the
note.
The mortgage agreement specifically provides for an annual covenant with which
the Owner Partnership must comply. The covenant provides that the accrued
value of the zero coupon loan at the end of each year shall not exceed 70% of
the most recent appraised value of the Mall. Based upon the appraised value of
the Property on January 1, 1996 of $77,000,000 this covenant was met at
December 31, 1995.
Currently, it is the General Partner's intent to either sell Laurel Centre or
to seek an extension or refinancing of the mortgage loan. If a sale of Laurel
Centre is not feasible, an extension or refinancing of the mortgage is the
other recourse. Should the Partnership request an extension of the mortgage,
such extension would ultimately be subject to the approval of the body of
investors which the REMIC Lender represents. Given this variable, the ability
to obtain an extension of the mortgage is highly uncertain. Although the
General Partners intend to bring about a timely resolution to the Partnership's
approaching loan maturity, there can be no assurance that either a sale of
Laurel Centre or a refinancing of the debt will be consummated prior to the
maturity of the mortgage loan.
Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities and the current appraised value
of Laurel Centre, the fair value of long-term debt approximates its current
carrying value.
6. Second Mortgage Note Payable
On December 12, 1990, the Partnership obtained a $2,000,000 note from Kemper.
The note bears interest at 11.5% and is secured by a second mortgage lien on
the real estate. Monthly payments of interest only are required until maturity
on October 15, 1996, at which time the principal balance is due.
During 1993, Kemper sold its note to CBA Associates which placed the loan into
a pool of mortgages to be held by the REMIC Lender.
Currently, it is the General Partner's intent to either sell Laurel Centre or
to seek an extension or refinancing of the second mortgage note. If a sale of
Laurel Centre is not feasible, an extension or refinancing of the second
mortgage is the other recourse. Although the General Partners intend to bring
about a timely resolution to the Partnership's approaching loan maturity, there
can be no assurance that either a sale of Laurel Centre or a refinancing of the
debt will be consummated prior to the maturity of the second mortgage note.
7. Transactions with Related Parties
The General Partner or its affiliates earned fees and compensation during 1986
in connection with the acquisition, management, organization and administrative
services rendered to SLC of $2,491,000, representing $400,000 in organization
fees, $300,000 in a property management negotiations and supervision fee,
$500,000 in prepaid asset management fees and $1,291,000 in acquisition fees,
of which $5,625 was unpaid at December 31, 1995 and 1994.
As of December 31, 1995 and 1994, $3,226 and $4,266, respectively, is due to
affiliates for expenditures paid on behalf of the Partnership. For the years
ended December 31, 1995, 1994, and 1993, $92,519, $56,290, and $55,113,
respectively, was earned by the affiliates.
Cash and Cash Equivalents Certain cash and cash equivalent amounts reflected on
the Partnership's consolidated balance sheet at December 31, 1995 and 1994 were
on deposit with an affiliate of the General Partner.
8. Management Agreement
On December 1, 1986, the Partnership entered into an agreement with Shopco
Management Corporation, an affiliate of NAT Limited Partnership, for the
management of the Mall. The agreement, which expired on December 31, 1992,
provided for an annual fee equal to 3% of the gross rents collected from the
Mall, as defined, payable monthly. On September 1, 1993, the Partnership and
Shopco Management Corporation executed a new management agreement which
provides for an annual fee equal to 4.5% of the fixed minimum and percentage
rents effective January 1, 1993. The new management agreement initially
expired on December 31, 1995, but allows for automatic renewal at one year
intervals thereafter. The management agreement has been renewed through
December 31, 1996. For the years ended December 31, 1995, 1994 and 1993,
management fee expense amounted to $311,601, $276,795 and $296,618,
respectively.
9. Distributions to Limited Partners
Distributions to limited partners for each of 1995, 1994 and 1993 were
$2,330,000 ($.50 per limited partnership unit). Cash distributions declared
payable to limited partners at December 31, 1995 and 1994 were $582,500 ($.125
per limited partnership unit).
10. Reconciliation of Consolidated Financial Statement Net Loss and Partners'
Capital to Federal Income Tax Basis Net Loss and Partners' Capital
Reconciliations of consolidated financial statement net loss and partners'
capital to federal income tax basis net loss and partners' capital at December
31, follow:
1995 1994 1993
Consolidated financial
statement net loss $ (315,269) $ (457,345) $ (244,452)
Tax basis depreciation over
financial statement
depreciation (156,364) (272,504) (279,294)
Tax basis rental income
under financial statement
rental income (134,345) (213,434) (114,790)
Tax basis minority
interest under financial
statement minority interest (9,190) (9,296) (9,271)
Other 1,636 10,612 5,263
Federal income tax
basis net loss $ (613,532) $ (941,967) $ (642,544)
1995 1994 1993
Financial statement basis
partners' capital $ 14,110,207 $ 16,779,012 $ 19,589,893
Current year financial
statement net loss over
federal income tax basis
net loss (298,263) (484,622) (398,092)
Cumulative financial
statement net income
over cumulative federal
income tax basis net loss (5,154,007) (4,669,385) (4,271,293)
Federal income tax
basis partners' capital $ 8,657,937 $ 11,625,005 $ 14,920,508
Because many types of transactions are susceptible to varying interpretations
under Federal and State income tax laws and regulations, the amounts determined
above may be subject to change at a later date upon final determination by the
respective taxing authorities.
Schedule II Valuation and Qualifying Accounts
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Period
Allowance for doubtful
accounts:
Year ended December 31, 1993: $ 92,704 $ 32,267 $ 3,250 $ 121,721
Year ended December 31, 1994: 121,721 81,610 71,572 131,759
Year ended December 31, 1995: $ 131,759 $ 147,608 $ 24,440 $ 254,927
SHOPCO LAUREL CENTRE, L.P. AND CONSOLIDATED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Costs Capitalized
Initial Cost to Subsequent
Partnership (A) To Acquisition
Building and
Description Encumbrances Land Improvements Land
Shopping Center
Laurel, MD $ 55,525,503 $ 5,058,967 $ 56,039,671 $ 245,044
SHOPCO LAUREL CENTRE, L.P. AND CONSOLIDATED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Gross Amount at Which Carried at Close of Period (B)
Building and Building and
Description Improvements Land Improvements Total
Shopping Center
Laurel, MD $ 8,690,673 $ 5,304,011 $ 64,730,344 $ 70,034,355
SHOPCO LAUREL CENTRE, L.P. AND CONSOLIDATED PARTNERSHIP
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Life on Which
Depreciation
in Latest
Accumulated Date of Date Income Statements
Description Depreciation Construction Acquired is Computed
Shopping Center
Laurel, MD $14,100,499 1979 12/86 Building 40 years
Improvements 12 years
(A) The initial cost to the Partnership represents the original purchase price
of the property.
(B) For Federal income tax purposes, the cost basis of land, building and
improvements at December 31, 1995 is $70,006,517.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1995, 1994 and 1993 follows:
Real Estate Investments: 1995 1994 1993
Beginning of year $ 68,515,382 $ 68,106,262 $ 67,664,377
Additions 1,518,973 409,120 441,885
End of year $ 70,034,355 $ 68,515,382 $ 68,106,262
Accumulated Depreciation:
Beginning of year $ 12,170,608 $ 10,346,073 $ 8,550,988
Depreciation expense 1,929,891 1,824,535 1,795,085
End of year $ 14,100,499 $ 12,170,608 $ 10,346,073
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,427,085
<SECURITIES> 0
<RECEIVABLES> 980,369
<ALLOWANCES> (254,927)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 70,034,355
<DEPRECIATION> (14,100,499)
<TOTAL-ASSETS> 70,772,712
<CURRENT-LIABILITIES> 0
<BONDS> 55,525,503
<COMMON> 0
0
0
<OTHER-SE> 14,110,207
<TOTAL-LIABILITY-AND-EQUITY> 70,772,712
<SALES> 0
<TOTAL-REVENUES> 11,949,820
<CGS> 0
<TOTAL-COSTS> 4,760,658
<OTHER-EXPENSES> 2,208,603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,298,639
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (315,269)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
