United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
or
Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 1-9419
SHOPCO LAUREL CENTRE, L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3392074
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Consolidated Balance Sheets At June 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 5,304,011 $ 5,304,011
Building 61,374,368 61,062,234
Improvements 3,706,731 3,668,110
70,385,110 70,034,355
Less accumulated depreciation
and amortization (15,078,437) (14,100,499)
55,306,673 55,933,856
Cash and cash equivalents 15,504,870 13,427,085
Accounts receivable, net of
allowance of $480,424 in
1996 and $254,927 in 1995 169,344 242,818
Deferred rent receivable 523,356 482,624
Deferred charges, net of
accumulated amortization of
$302,528 in 1996 and
$273,442 in 1995 109,415 133,295
Prepaid expenses 14,285 553,034
Total Assets $ 71,627,943 $ 70,772,712
Liabilities, Minority Interest
and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 193,092 $ 285,035
Zero coupon first mortgage
note payable 56,251,466 53,525,503
Second mortgage note payable 2,000,000 2,000,000
Second mortgage note accrued
interest payable 19,167 19,167
Due to affiliates 8,808 8,851
Security deposits payable 10,648 14,633
Deferred income 645,388 804,171
Distribution payable 8,237,374 588,384
Total Liabilities 67,365,943 57,245,744
Minority interest (600,949) (583,239)
Partners' Capital:
General Partner 825,282 917,755
Limited Partners (4,660,000 limited
partnership units authorized,
issued and outstanding) 4,037,667 13,192,452
Total Partners' Capital 4,862,949 14,110,207
Total Liabilities, Minority
Interest and Partners' Capital $ 71,627,943 $ 70,772,712
Consolidated Statement of Partners' Capital
For the six months ended June 30, 1996 Limited General
Partners Partner Total
Balance at December 31, 1995 $ 13,192,452 $ 917,755 $ 14,110,207
Net loss (417,285) (4,215) (421,500)
Distributions (8,737,500) (88,258) (8,825,758)
Balance at June 30, 1996 $ 4,037,667 $ 825,282 $ 4,862,949
Consolidated Statements of Operations
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
Income
Rental income $ 1,514,534 $ 1,431,158 $ 3,021,963 $ 2,843,517
Escalation income 1,107,090 1,277,327 2,497,263 2,636,801
Miscellaneous income 149,761 120,265 266,071 174,884
Interest income 172,866 144,467 346,093 278,323
Total Income 2,944,251 2,973,217 6,131,390 5,933,525
Expenses
Interest expense 1,444,862 1,315,387 2,840,963 2,582,826
Property operating
expenses 973,325 931,237 1,989,004 1,847,061
Depreciation and
amortization 551,864 494,133 1,057,024 977,051
Real estate taxes 255,665 255,983 511,330 511,967
General and
administrative 111,272 67,325 160,272 106,846
Total Expenses 3,336,988 3,064,065 6,558,593 6,025,751
Loss before minority
interest (392,737) (90,848) (427,203) (92,226)
Minority interest 4,379 531 5,703 (174)
Net Loss $ (388,358) $ (90,317) $ (421,500) $ (92,400)
Net Loss Allocated:
To the General
Partner $ (3,884) $ (903) $ (4,215) $ (924)
To the Limited
Partners (384,474) (89,414) (417,285) (91,476)
$ (388,358) $ (90,317) $ (421,500) $ (92,400)
Per limited
partnership unit
(4,660,000 outstanding) $(.08) $(.02) $(.09) $(.02)
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (421,500) $ (92,400)
Adjustments to reconcile net
loss to net cash provided
by operating activities:
Minority interest (5,703) 174
Depreciation and amortization 1,057,024 977,051
Increase in interest on zero coupon
first mortgage note payable 2,725,963 2,467,826
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Accounts receivable 73,474 88,322
Deferred rent receivable (40,732) (78,267)
Deferred charges (5,206) (29,584)
Prepaid expenses 538,749 499,871
Accounts payable and accrued expenses (91,943) (31,431)
Due to affiliates (43) 878
Security deposits payable (3,985) --
Deferred income (158,783) (63,841)
Net cash provided by operating activities 3,667,315 3,738,599
Cash Flows From Investing Activities:
Additions to real estate (400,755) (1,457,845)
Net cash used for investing activities (400,755) (1,457,845)
Cash Flows From Financing Activities:
Cash distributions to partners (1,176,768) (1,176,768)
Cash distributions-minority interest (12,007) (24,016)
Net cash used for financing activities (1,188,775) (1,200,784)
Net increase in cash and cash equivalents 2,077,785 1,079,970
Cash and cash equivalents,
beginning of period 13,427,085 10,431,820
Cash and cash equivalents,
end of period $ 15,504,870 $ 11,511,790
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 115,000 $ 115,000
Notes to the Consolidated Financial Statements
The unaudited consolidated financial statements should be read in conjunction
with the Partnership's annual 1995 audited consolidated financial statements
within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of June 30, 1996 and the results of operations and cash
flows for the six months ended June 30, 1996 and 1995 and the consolidated
statement of partner's capital for the six months ended June 30, 1996. Results
of operations for the periods are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1995 and no
material contingencies exist, which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part 1. Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
At June 30, 1996, the Partnership had cash and cash equivalents totaling
$15,504,870, compared with $13,427,085 at December 31, 1995. 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 has declared a second quarter 1996 cash distribution totaling
$1.75 per unit, payable on August 15, 1996. This distribution included a
regular quarterly distribution of $.125 per Unit and a special distribution,
representing a disbursement from the Partnership's cash reserves, in the amount
of $1.625 per Unit. As a result of the special distribution, distribution
payable increased from $588,384 at December 31, 1995 to $8,237,374 at June 30,
1996. Future distributions, including regular quarterly distributions, will be
evaluated on a quarterly basis, taking into consideration the upcoming maturity
of the Partnership's two mortgage loans.
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 Laurel Centre (the "Mall") or (ii) an extension or
refinancing of the mortgages, in whole or in part. Either option may be
hindered by the current limited availability of financing for retail 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 increased
competition in the area and the status of the anchor tenants' operating
covenants. During 1993, Kemper Investors Life Insurance Company sold its 76%
participating interest in the first mortgage loan and its entire interest in
the second mortgage loan to CBA Associates, Inc. ("CBA Associates"), which
placed the loans into a pool of mortgages to be held by a real estate mortgage
investment conduit (the "REMIC 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 REMIC Lender and CBA Associates in the event
that refinancing is not available elsewhere. 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. The Partnership has
engaged Eastdil Realty Company to market Laurel Centre for sale and Fowler,
Goedecke, Ellis & O'Connor to investigate and solicit refinancing
opportunities. As of June 30, 1996, the Partnership's efforts to sell Laurel
Centre and pursue refinancing opportunities have not resulted in any proposals
that the Partnership has determined to be attractive and would fully and timely
pay the Partnership's outstanding debt. The Amended and Restated Agreement of
Limited Partnership of the Partnership generally provides that the Partnership
shall be dissolved upon, among other things, the sale of all or substantially
all of the Partnership's equity interest in Laurel Owner Partners Limited
Partnership (the "Owner Partnership") or of the Mall by the Owner Partnership.
In the event that the Partnership is unable to obtain an acceptable proposal to
purchase Laurel Centre or obtain refinancing or an extension of existing debt,
the Partnership will continue to evaluate all other strategic options available
to it and best protect its assets, including the possibility of filing for
protection under the bankruptcy laws.
As of June 30, 1996, the following tenants, or their parent corporations,
currently at the Mall have filed for protection under the U.S. Bankruptcy Code.
Tenant Square Footage Leased
Marianne & Marianne Plus 11,033
J Riggings 2,700
Royal Formalwear 2,198
Time Out Amusement Center 1,635
These tenants occupy 17,566 square feet, or approximately 7% 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 a negative 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.
Herman's Sporting Goods refiled for bankruptcy protection on April 26, 1996 and
vacated its 11,274 square feet in the Mall during the second quarter.
Following an examination by an independent engineer, it was determined that the
Mall's roof required 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. Approximately $135,000 of roof repairs were
performed in the second and third quarters of 1996. The costs of such repairs
will be funded from operating cash flow and Partnership cash reserves.
Accounts receivable decreased from $242,818 at December 31, 1995 to $169,344 at
June 30, 1996 reflecting an increase in the allowance for doubtful accounts
related to several current and vacated tenants at the Mall. The decrease in
accounts receivable is partially offset by the continued billing of base rents
to bankrupt tenants which have vacated the mall. Billings of base rents to
bankrupt tenants which have vacated the mall continue until a settlement is
reached between the parties involved in such bankruptcy proceedings.
At June 30, 1996, prepaid expenses totaled $14,285 compared with $553,034 at
December 31, 1995. The decrease reflects the recognition of real estate tax
expense during the first and second quarters of 1996.
Accounts payable and accrued expenses decreased from $285,035 at December 31,
1995 to $193,092 at June 30, 1996 due to a lower accrual for utility expenses
at Laurel Centre and the payment of the Partnership's 1995 audit fee, partially
offset by an accrual for Partnership administrative fees.
The zero coupon first mortgage note payable increased from $53,525,503 at
December 31, 1995 to $56,251,466 at June 30, 1996, reflecting the accrual of
interest on the zero coupon first mortgage note.
Deferred income decreased from $804,171 at December 31, 1995 to $645,388 at
June 30, 1996 due to recognition of prior period tenant receipts for their
portion of real estate taxes.
Results of Operations
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. The Partnership reported net losses of $388,358 and $421,500 for
the three and six months ended June 30, 1996, compared to net losses of $90,317
and $92,400 for the corresponding periods in 1995. The higher net loss during
the 1996 periods are primarily the result of increased interest expense,
property operating expense and depreciation and amortization expenses,
partially offset by increases in most income categories. Net cash flow
provided by operating activities totaled $3,667,315 for the six months ended
June 30, 1996, compared with $3,738,599 for the corresponding period in 1995.
The decrease is primarily attributable to the larger net loss in the 1996
period.
Rental income increased modestly from the 1995 periods to the 1996 periods due
to step increases in existing base rents and higher temporary tenant income.
Escalation income represents billings to tenants for their proportional share
of common area maintenance, operating and real estate tax expenses. Escalation
income for the three and six months ended June 30, 1996 totaled $1,107,090 and
$2,497,263, respectively, compared to $1,277,327 and $2,636,801 for the same
periods in 1995. The decrease reflects a lower anticipated recovery rate from
the mall tenants for operating expenses during the 1996 periods as a result of
a decline in occupancy.
Miscellaneous income for the three and six months ended June 30, 1996 totaled
$149,761 and $266,071, respectively, compared to $120,265 and $174,884 for the
same periods in 1995. The increases are due to higher late charges billed to
tenants and interest on overdue percentage rent payments to the Partnership.
Interest income totaled $172,866 and $346,093 for the three and six months
ended June 30, 1996 compared with $144,467 and $278,323 during the
corresponding periods in 1995. The increases are due to the Partnership's
increased cash balance.
Total expenses for the three and six months ended June 30, 1996 were $3,336,988
and $6,558,593 compared to $3,064,065 and $6,025,751 for the corresponding
periods in 1995. The increases reflect increases in most expense categories.
Interest expense totaled $1,444,862 and $2,840,963 for the three and six months
ended June 30, 1996 compared to $1,315,387 and $2,582,826 for the same periods
in 1995. The increases reflect the compounding of interest on the zero coupon
loan.
Property operating expenses for the three and six months ended June 30, 1996
totaled $973,325 and $1,989,004, respectively, compared to $931,237 and
$1,847,061 during the corresponding periods in 1995. The increase in property
operating expenses reflects an increase in bad debt expense related to tenants
which have either filed for bankruptcy protection or are in legal proceedings
and, for the six month period, higher snow removal costs as a result of the
harsh winter weather.
Depreciation and amortization for the three and six months ended June 30, 1996
totaled $551,864 and $1,057,024, respectively, compared to $494,133 and
$977,051 for the same periods in 1995. The increases are due to depreciation of
ongoing additions made to the Mall for tenant improvements and leasing
commissions.
General and administrative expenses for the three and six months ended June 30,
1996 totaled $111,272 and $160,272, respectively, compared to $67,325 and
$106,846 for the same periods in 1995. The increases are primarily due to
higher legal fees in the 1996 periods incurred for work related to counsel
regarding the upcoming loan maturities.
Mall tenant sales (exclusive of anchor tenants) for the five months ended May
31, 1996 and 1995 were $19,685,000 and $20,341,000, respectively, a decline of
approximately 3%. Mature tenant sales for the five months ended May 31, 1996
and 1995 were $16,639,000 and $17,186,000, respectively, a decline of
approximately 3%. 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 retail complexes, particularly discounters
and value-priced retailers. At June 30, 1996 and 1995, the Mall was 80.6% and
90.1% occupied, respectively, exclusive of anchor tenants.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended June 30,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHOPCO LAUREL CENTRE, L.P.
BY: LAUREL CENTRE INC.
General Partner
Date: August 14, 1996 BY: /s/ Paul L. Abbott
Director, President, and
Chief Executive Officer
Date: August 14, 1996 BY: /s/ Robert J. Hellman
Director, Vice President and
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 15,504,870
<SECURITIES> 0
<RECEIVABLES> 1,173,124
<ALLOWANCES> (480,424)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 70,385,110
<DEPRECIATION> 15,078,437
<TOTAL-ASSETS> 71,627,943
<CURRENT-LIABILITIES> 9,114,477
<BONDS> 58,251,466
<COMMON> 0
0
0
<OTHER-SE> 4,862,949
<TOTAL-LIABILITY-AND-EQUITY> 71,627,943
<SALES> 0
<TOTAL-REVENUES> 6,131,390
<CGS> 0
<TOTAL-COSTS> 2,500,334
<OTHER-EXPENSES> 1,217,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,840,963
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421,500)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
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