United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 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. AND CONSOLIDATED PARTNERSHIP
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 March 31, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 5,304,011 $ 5,304,011
Building 61,100,628 61,062,234
Improvements 3,691,967 3,668,110
70,096,606 70,034,355
Less accumulated depreciation
and amortization (14,591,169) (14,100,499)
55,505,437 55,933,856
Cash and cash equivalents 14,600,194 13,427,085
Accounts receivable, net of allowance
of $334,822 in 1996 and $254,927
in 1995 307,786 242,818
Deferred rent receivable 521,348 482,624
Deferred charges, net of
accumulated amortization of $287,932
in 1996 and $273,442 in 1995 121,339 133,295
Prepaid expenses 281,603 553,034
Total Assets $ 71,337,707 $ 70,772,712
Liabilities, Minority Interest and Partners' Capital
Liabilities:
Accounts payable and
accrued expenses $ 178,561 $ 285,035
Zero coupon first mortgage
note payable 54,864,104 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 7,340 8,851
Security deposits payable 14,633 14,633
Deferred income 761,400 804,171
Distribution payable 588,384 588,384
Total Liabilities 58,433,589 57,245,744
Minority interest (584,563) (583,239)
Partners' Capital:
General Partner 911,540 917,755
Limited Partners (4,660,000 limited
partnership units authorized,
issued and outstanding) 12,577,141 13,192,452
Total Partners' Capital 13,488,681 14,110,207
Total Liabilities, Minority
Interest and Partners' Capital $ 71,337,707 $ 70,772,712
Consolidated Statement of Partners' Capital
For the three months ended March 31, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 13,192,452 $ 917,755 $ 14,110,207
Net loss (32,811) (331) (33,142)
Distributions (582,500) (5,884) (588,384)
Balance at March 31, 1996 $ 12,577,141 $ 911,540 $ 13,488,681
Consolidated Statements of Operations
For the three months ended March 31, 1996 1995
Income
Rental income $ 1,507,429 $ 1,412,359
Escalation income 1,390,173 1,359,474
Interest income 173,227 133,856
Miscellaneous income 116,310 54,619
Total Income 3,187,139 2,960,308
Expenses
Interest expense 1,396,101 1,267,439
Property operating expenses 1,015,679 915,824
Depreciation and amortization 505,160 482,918
Real estate taxes 255,665 255,984
General and administrative 49,000 39,521
Total Expenses 3,221,605 2,961,686
Loss before minority interest (34,466) (1,378)
Minority interest 1,324 (705)
Net Loss $ (33,142) $ (2,083)
Net Loss Allocated:
To the General Partner $ (331) $ (21)
To the Limited Partners (32,811) (2,062)
$ (33,142) $ (2,083)
Per limited partnership unit
(4,660,000 outstanding) $ (.01) $ (.00)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (33,142) $ (2,083)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Minority interest (1,324) 705
Depreciation and amortization 505,160 482,918
Increase in interest expense on
zero coupon first mortgage
note payable 1,338,601 1,209,939
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Accounts receivable (64,968) 108,057
Deferred rent receivable (38,724) (41,980)
Deferred charges (2,534) (24,672)
Prepaid expenses 271,431 254,291
Accounts payable and
accrued expenses (106,474) (61,441)
Due to affiliates (1,511) (1,050)
Deferred income (42,771) (20,009)
Net cash provided by operating activities 1,823,744 1,904,675
Cash Flows From Investing Activities:
Additions to real estate (62,251) (697,176)
Net cash used for investing activities (62,251) (697,176)
Cash Flows From Financing Activities:
Cash distributions to partners (588,384) (588,384)
Cash distributions - minority interest -- (12,007)
Net cash used for financing activities (588,384) (600,391)
Net increase in cash and cash equivalents 1,173,109 607,108
Cash and cash equivalents,
beginning of period 13,427,085 10,431,820
Cash and cash equivalents,
end of period $ 14,600,194 $ 11,038,928
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 57,500 $ 57,500
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/A.
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 March 31, 1996 and the results of operations and cash
flows for the three months ended March 31, 1996 and 1995 and the statement of
partner's capital for the three months ended March 31, 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).
Item 1. Part 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
At March 31, 1996, the Partnership had cash and cash equivalents totaling
$14,600,194, 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 paid a first quarter 1996 cash distribution of $.125 per unit
on May 15, 1996. Such distribution constituted a return of capital. 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 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. 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.
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 March 31, 1996, the following tenants, or their parent corporations, 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 7.0% 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. In addition, Herman's Sporting Goods refiled
for bankruptcy protection on April 26, 1996. According to published reports,
Herman's will seek permission from bankruptcy court to liquidate its assets and
close its stores. Herman's occupies 11,274 square feet at the Mall. Altogether,
tenants in bankruptcy occupy 28,840 square feet or approximately 11.6% of the
Mall's gross leasable area. 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. A former
tenant at the Mall, Merry Go 'Round, filed for bankruptcy and closed its store
in February 1996.
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 March 31, 1996, prepaid expenses totaled $281,603 compared with $553,034 at
December 31, 1995. The decrease reflects the recognition of real estate tax
expense during the first quarter of 1996.
The zero coupon first mortgage note payable increased from $53,525,503 at
December 31, 1995 to $54,864,104 at March 31, 1996, reflecting the accrual of
interest on the zero coupon first mortgage note.
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. For the three months ended March 31, 1996, the Partnership
reported a net loss of $33,142 compared with a net loss of $2,083 for the
comparable period in 1995. The higher net loss in the 1996 period is primarily
the result of increased property operating expense. Net cash flow from
operating activities totaled $1,823,744 for the three months ended March 31,
1996, compared with $1,904,675 for the corresponding period in 1995. The
decrease is primarily attributable to the larger net loss in the 1996 period
and an increase in accounts receivable.
Rental income totaled $1,507,429 for the three months ended March 31, 1996
compared with $1,412,359 in the 1995 period. 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 totaled
$1,390,173 in the 1996 first quarter, an approximate $30,000 increase from
$1,359,474 in the first quarter of 1995, representing an increase in
reimbursable property operating expenses. Escalation income represents
billings to tenants for their proportional share of common area maintenance,
operating and real estate tax expenses.
Interest income totaled $173,227 for the three months ended March 31, 1996
compared with $133,856 in the 1995 period. The increase is due to the
Partnership's increased cash balance. Miscellaneous income increased to
$116,310 for the first quarter of 1996 compared with $54,619 in the first
quarter of 1995 due to increased promotional expense billed back to tenants.
Total expenses for the three months ended March 31, 1996 were $3,221,605
compared with $2,961,686 in the 1995 period. The increase is primarily due to
higher interest expense and property operating expense. The increase in
interest expense reflects the compounding of interest on the zero coupon loan.
The increase in property operating expenses was due primarily to higher snow
removal costs as a result of the harsh winter weather. Also contributing to
the increase in property operating expense were increased promotional expenses.
Mall tenant sales (exclusive of anchor tenants) for the two months ended
February 29, 1996 and February 28, 1995 were $6,928,000 and $7,500,000
respectively. Mature tenant sales for the two months ended February 29, 1996
and February 28, 1995 were $5,837,000 and $6,213,000 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 March 31, 1996 and 1995, the Mall was 84.6% and
90.2% 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 March 31, 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: May 15, 1996 BY: /s/ Paul L. Abbott
Director, President, and
Chief Executive Officer
Date: May 15, 1996 BY: /s/ Robert J. Hellman
Director, Vice President and
Chief Financial Officer
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<PERIOD-END> Mar-31-1996
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<RECEIVABLES> 1,163,956
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