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, 1997
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 March 31, At December 31,
1997 1996
Assets
Property held for disposition $ -- $ 55,973,759
Cash and cash equivalents 1,995,947 7,906,335
Total Assets $ 1,995,947 $ 63,880,094
Liabilities, Minority Interest
and Partners' Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $ 1,185,348 $ 657,759
Zero coupon first mortgage
note payable -- 58,580,564
Second mortgage note payable -- 2,000,000
Second mortgage note accrued
interest payable -- 74,167
Due to affiliates 6,025 7,768
Distribution payable 63,545 6,354,545
Total Liabilities 1,254,918 67,674,803
Minority interest (57,178) (783,875)
Partners' Capital (Deficit):
General Partner 7,982 746,545
Limited Partners (4,660,000 limited
partnership units authorized, issued
and outstanding) 790,225 (3,757,379)
Total Partners' Capital (Deficit) 798,207 (3,010,834)
Total Liabilities, Minority
Interest and Partners' Capital $ 1,995,947 $ 63,880,094
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $ 746,545 $ (3,757,379) $ (3,010,834)
Net income (loss) (738,563) 4,547,604 3,809,041
Balance at March 31, 1997 $ 7,982 $ 790,225 $ 798,207
Consolidated Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rental income $ -- $ 1,507,429
Escalation income -- 1,390,173
Interest income 85,045 173,227
Miscellaneous income 1,910 116,310
Total Income 86,955 3,187,139
Expenses
Interest expense -- 1,396,101
Property operating expenses -- 1,015,679
Depreciation and amortization -- 505,160
Real estate taxes -- 255,665
General and administrative 56,712 49,000
Total Expenses 56,712 3,221,605
Income (Loss) before discontinued
operations, extraordinary item
and minority interest 30,243 (34,466)
Loss from discontinued operations (366,442) --
Loss before extraordinary item
and minority interest (336,199) (34,466)
Extraordinary Item
Gain on foreclosure of property 5,001,621 --
Income (Loss) before minority interest 4,665,422 (34,466)
Minority interest (856,381) 1,324
Net Income (Loss) $ 3,809,041 $ (33,142)
Net Income (Loss) Allocated:
To the General Partner $ (738,563) $ (331)
To the Limited Partners 4,547,604 (32,811)
$ 3,809,041 $ (33,142)
Per limited partnership unit
(4,660,000 outstanding):
Income (Loss) before discontinued
operations, extraordinary item
and minority interest $ .01 $ (.01)
Loss from discontinued operations (.08) --
Gain on foreclosure of property 1.05 --
$ .98 $ (.01)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities:
Net income (loss) $ 3,809,041 $ (33,142)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Minority interest 856,381 (1,324)
Extraordinary gain on foreclosure
of property (5,001,621) --
Depreciation and amortization -- 505,160
Increase in interest expense on
zero coupon first mortgage
note payable 350,266 1,338,601
Increase in interest expense on second
mortgage note accrued interest
payable 20,383 --
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Accounts receivable -- (64,968)
Deferred rent receivable -- (38,724)
Deferred charges -- (2,534)
Prepaid expenses -- 271,431
Accounts payable and
accrued expenses (85,751) (106,599)
Due to affiliates (1,743) (1,386)
Deferred income -- (42,771)
Net cash provided by (used for)
operating activities (53,044) 1,823,744
Cash Flows From Investing Activities:
Additions to real estate -- (62,251)
Net cash used for investing activities -- (62,251)
Cash Flows From Financing Activities:
Income tax withholdings to limited partners 433,656 --
Cash distributions to partners (6,291,000) (588,384)
Net cash used for financing activities (5,857,344) (588,384)
Net increase (decrease) in cash and
cash equivalents (5,910,388) 1,173,109
Cash and cash equivalents,
beginning of period 7,906,335 13,427,085
Cash and cash equivalents,
end of period $ 1,995,947 $ 14,600,194
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 439,491 $ 57,500
Supplemental Disclosure of Non-Cash Financing Activities:
Deferred charges of $50,000 and $488,000 were funded through accounts payable
and accrued expenses at March 31, 1997 and December 31, 1996, respectively.
Minority interest distributions of $129,684 and income tax withholdings to
limited partners of $433,656 were funded through accounts payable and accrued
expenses at March 31, 1997. In connection with the foreclosure sale of the
property, the mortgage lenders released the Owner Partnership from the related
$61,025,380 mortgage obligations.
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1996 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all normal and
reoccurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of March 31, 1997 and the
results of operations and cash flows for the three months ended March 31, 1997
and 1996 and the statement of partner's capital (deficit) for the three months
ended March 31, 1997. Results of operations for the periods are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.
The following significant events have occurred subsequent to fiscal year 1996,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
On January 24, 1997, the foreclosure sale of Laurel Centre (the "Mall" or the
"Property") was ratified by the Circuit Court for Prince George's County,
Maryland (the "Court"), and the Mall was acquired by the mortgage lenders. The
non-recourse mortgage notes payable, with accrued interest thereon, totaled
$61,025,380. The transaction resulted in an extraordinary gain on foreclosure
of $5,001,621, which is reflected in the consolidated statements of operations
for the three months ended March 31, 1997.
The Partnership and Laurel Owner Partners Limited Partnership (the "Owner
Partnership") were subject to a temporary restraining order of the Court (the
"TRO"), preventing the Partnership, among other things, from paying a $1.35 per
unit cash distribution declared on September 20, 1996. The TRO related to
litigation commenced by the mortgage lenders against the Owner Partnership, the
Partnership and Laurel Centre Inc. (the "General Partner"), in which the
mortgage lenders claimed rights, among other things, to the declared
distribution (the "Litigation").
On March 3, 1997, the TRO was vacated subsequent to the dismissal of the
Litigation. Accordingly, on March 17, 1997, the Partnership paid the
previously declared distribution of $6,291,000 ($1.35 per unit) to Unitholders.
The General Partner intends to wind up the affairs of the Partnership and
liquidate the Partnership in accordance with the terms of the Partnership
Agreement in 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
Settlement Agreement and Disposition of Laurel Centre
The Owner Partnership's two non-recourse mortgage loans secured by the
Owner Partnership's interest in the Mall, matured on October 15, 1996. The
accreted value of the mortgages as of the maturity date totaled approximately
$59.9 million. In anticipation of the maturity of the loans, the Partnership
pursued both a sale of the Mall and a refinancing or extension of the mortgage
debt. Such efforts did not result in any sales or refinancing proposals which
would have sufficiently allowed the Owner Partnership to meet its debt
obligations, and, although the Partnership pursued possible extensions of the
existing loans, the mortgage lenders did not grant an extension of the loans.
As a result, the Owner Partnership did not pay the mortgage loans when due
at maturity.
On September 20, 1996, The State Street Bank and Trust Company ("State
Street"), one of the mortgage lenders to the Owner Partnership of which the
Partnership is the sole general partner and which owns an interest in the Mall,
obtained the TRO in the Court, enjoining the payment of a cash distribution of
$1.35 per Unit declared by the Partnership on September 20, 1996, and scheduled
to be paid on October 10, 1996, to Unitholders of record as of September 30,
1996. The TRO also enjoined the Owner Partnership, the Partnership and the
General Partner, from taking any act to disseminate, distribute or convey cash
and cash equivalents except, subject to State Street's approval, to pay normal
operating expenses incurred in the operation of the Mall. The TRO was issued
pursuant to a lawsuit commenced against the Owner Partnership, the Partnership
and the General Partner by State Street alleging, among other things, that the
distribution declared on September 20, 1996, would constitute a fraudulent
conveyance and a conversion of the lenders' interest in the rents from the
Property and that there had been a waste of State Street's collateral. The
Owner Partnership filed a memorandum of law with the Court taking the position
that no waste had occurred, State Street's remedy was solely to the Property
because of the non-recourse nature of the mortgage loan, and that the TRO
should be vacated.
On October 9, 1996, the Owner Partnership entered into the Settlement Agreement
with the lenders who held the mortgage debt of the Owner Partnership. The
terms of the non-recourse mortgage loans, which were secured by the Property
and had a maturity date of October 15, 1996 (the accreted amount of which was
approximately $59.9 million on such date), permitted the lenders to exercise
certain remedies upon a default in the payment of principal or interest on the
loans, including foreclosure of the mortgages on the Property and the
appointment of a receiver. The Owner Partnership did not pay the mortgage
loans when due at maturity. In accordance with the terms of the Settlement
Agreement and the mortgage loan documents, Capital Growth Mortgage Investors,
L.P., one of the mortgage lenders, docketed a foreclosure action with the Court
on October 16, 1996, and pursuant to the Consent Order, had a receiver (the
"Receiver") appointed for the Mall. Pursuant to the Consent Order, the
Receiver took possession of the Mall and was authorized, among other things: to
manage the Mall; to collect all rent proceeds from Mall tenants paid on or
after October 16, 1996; and to apply such proceeds to the payment of, among
other things, the Mall's management and operating expenses, capital
improvements and leasing expenses, with any remaining funds to be paid to the
mortgage lenders; in each case, in accordance with the terms of the Settlement
Agreement. The Partnership and the Owner Partnership therefore no longer
received cash flow from, or managed, the Mall from and after October 16, 1996.
The TRO, as modified by the Settlement Agreement, was expected to terminate on
the earlier of the date upon which the lenders completed the foreclosure of the
Property or March 15, 1997 (such earlier date being the "Release Date").
In the Settlement Agreement, the lenders agreed, among other things, after
satisfaction of the conditions set forth in the Settlement Agreement, to
release the Partnership, the Owner Partnership and the General Partner and
their respective Unitholders, partners, stockholders and directors on the
Release Date from any claims the lenders may have against such parties with
respect to the Settlement Agreement, the mortgage loans, the Mall, and the cash
held by the Partnership, the Owner Partnership and the General Partner for
periods prior to October 16, 1996 (other than $260,000, which was used for
October 1996 expenses of the Mall), including the cash needed for the payment
of the Partnership's previously declared distribution. Similarly, the
Partnership, the Owner Partnership and the General Partner agreed to release
the mortgage lenders on the Release Date from any claims they may have with
respect to the Settlement Agreement, the mortgage loans, and the Mall.
The Settlement Agreement provided for the continued effectiveness of the TRO
pending the completion of the foreclosure process. State Street consented in
advance to the Partnership's use of cash during this period for the payment of
certain ordinary expenses, including accounting and financial reporting
expenses and legal fees, up to certain dollar thresholds. Additionally, the
Owner Partnership was required pursuant to the Settlement Agreement to pay all
of its payables that were due and payable as of October 15, 1996, or before.
All other expenses of the Mall were to be paid by the Receiver.
On December 10, 1996, the Mall was purchased by the Lenders pursuant to a
foreclosure sale as contemplated by the terms of the Settlement Agreement. The
foreclosure sale was subsequently ratified by the Court and the Lenders
obtained title to the Mall on January 24, 1997.
The General Partner caused the TRO to be vacated, pursuant to the terms of the
Settlement Agreement, on March 3, 1997 subsequent to the withdrawal of the
lawsuit previously commenced by State Street. On March 17, 1997, the
Partnership paid its previously declared distribution of $1.35 per Unit to
Unitholders of record as of September 30, 1996. The Partnership is in the
process of winding up its activities and liquidating in accordance with the
terms of the Limited Partnership Agreement. Any remaining cash available for
distribution, after provision for expenses, will be distributed to the partners
at such time.
At March 31, 1997 the Partnership had cash and cash equivalents totaling
$1,995,947, compared with $7,906,335 at December 31, 1996. The decrease is
primarily a result of cash distributions to Unitholders and net cash used for
operating activities.
Accounts payable and accrued expenses increased from $657,759 at December 31,
1996 to $1,185,348 at March 31, 1997 primarily due to an accrual for Maryland
state nonresident withholding taxes on the distribution paid to Unitholders on
March 17, 1997.
As a result of the Lenders obtaining title to the Mall on January 24, 1997,
each of property held for disposition, zero coupon first mortgage note payable,
second mortgage note payable and second mortgage note accrued interest payable
decreased from its respective balance at December 31, 1996 to $0 at March 31,
1997.
Distribution payable decreased from $6,354,545 at December 31, 1996 to $63,545
at March 31, 1997 due to the March 17, 1997 payment to Limited Partners of
their portion of the Partnership's previously declared cash distribution of
$1.35 per Unit described above.
Results of Operations
For the three months ended March 31, 1997, the Partnership reported net income
of $3,809,041 compared to a net loss of $33,142 during the same period in 1996.
The change from net loss to net income is primarily due to the extraordinary
gain recognized on the foreclosure of the Mall, which was ratified by the Court
on January 24, 1997. Net cash flow used for operating activities totaled
$53,044 for the three months ended March 31, 1997 compared to net cash flow
provided by operating activities of $1,823,744 for the same period in 1996. The
decrease reflects the absence of net cash flow from the Mall due to the
receivership and foreclosure sale discussed above.
Due to the default on the mortgage loans on October 15, 1996 and transfer of
control of the Mall to the Receiver, all revenue and expenses generated by the
Mall subsequent to October 15, 1996 are shown on the Statement of Operations as
"Loss from discontinued operations". Primarily as a result of this
classification, the following income and expense categories decreased from the
three month period ended March 31, 1996 in comparison to the same period in
1997: rental income; escalation income; miscellaneous income; property
operating expenses; interest expense; depreciation and amortization; and real
estate taxes.
Interest income decreased from $173,227 for the three months ended March 31,
1996 to $85,045 for the same period in 1997 reflecting lower cash balances
maintained by the Partnership during the 1997 period.
General and administrative expenses for the three months ended March 31, 1997
were $56,712, compared to $49,000 for the same period in 1996. During the 1997
period, certain expenses incurred by an unaffiliated third party service
provider servicing the Partnership, which were voluntarily absorbed by
affiliates of the General Partner in prior periods, were reimbursed to the
General Partner and its affiliates.
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 - On February 7, 1997, the Partnership filed
a Form 8-K reporting the foreclosure sale of the Mall.
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 14, 1997 BY: /s/ Paul L. Abbott
Director, President, and
Chief Executive Officer
Date: May 14, 1997 BY: /s/ Robert J. Hellman
Director, Vice President and
Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1997
<CASH> 1,995,947
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 1,995,947
<CURRENT-LIABILITIES> 1,254,918
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 798,207
<TOTAL-LIABILITY-AND-EQUITY> 1,995,947
<SALES> 000
<TOTAL-REVENUES> 86,955
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 56,712
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> (366,442)
<EXTRAORDINARY> 5,001,621
<CHANGES> 000
<NET-INCOME> 3,809,041
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
