UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 33-15427
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
North Carolina 56-1590235
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3710 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices)
(Zip Code)
704/333-1367
(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 ___
<PAGE>
TABLE OF CONTENTS
ITEM NO. PAGE NO.
PART I - FINANCIAL INFORMATION
1 Financial Statements 1
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION
1 Legal Proceedings 8
3 Defaults Upon Senior Securities 8
6 Exhibits and Reports on Form 8-K 8
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
---------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments in shopping centers:
Land $ 3,554,079 $ 3,554,079
Buildings and improvements 12,788,527 12,788,527
Personal property 65,315 65,315
---------------- ---------------
16,407,921 16,407,921
Less accumulated depreciation (3,060,188) (2,766,086)
---------------- ---------------
13,347,733 13,641,835
Cash and cash equivalents
44,053 149,639
Restricted cash - tenant security
deposits 29,359 27,153
Accounts receivable, less allowance for
doubtful accounts of $7,400 in 1995 and $55,200
in 1994 62,676 123,435
Prepaids and other assets 122,694 62,770
Deferred costs, less amortization of $168,000 in 1995 and
$144,000 in 1994 87,906 111,822
---------------- ---------------
Total assets $13,694,421 $14,116,654
================ ===============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $12,851,888 $13,060,575
Trade accounts payable and accrued expenses 124,116 52,861
Amounts due to general partner 42,399 -
Accrued interest payable 98,435 148,768
Escrowed security deposits and deferred revenue 32,512 37,644
---------------- ---------------
Total liabilities 13,149,350 13,299,848
---------------- ---------------
Partners' equity (deficit):
Limited partners 605,344 874,362
General partner (60,273) (57,556)
---------------- ---------------
Total partners' equity 545,071 816,806
---------------- ---------------
Total liabilities and partners' equity $13,694,421 $14,116,654
================ ===============
1
</TABLE>
<PAGE>
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1995 1994 1995 1994
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Rental revenue $ 387,072 $ 393,641 $1,182,913 $1,362,015
Interest and other income 2,755 1,306 90,881 3,502
---------------- ---------------- ---------------- ---------------
389,827 394,947 1,273,794 1,365,517
---------------- ---------------- ---------------- ---------------
EXPENSES
Property operations 58,658 37,170 156,997 137,743
General and administrative expense 4,593 12,398 51,626 38,427
Property taxes and insurance 41,082 44,334 123,090 134,363
Property management fees 11,686 13,428 39,461 45,087
Depreciation 97,810 98,317 294,102 294,944
Amortization 7,972 7,975 23,916 23,957
Interest 294,718 288,346 856,337 868,732
---------------- ---------------- ---------------- ---------------
516,519 501,968 1,545,529 1,543,253
---------------- ---------------- ---------------- ---------------
NET LOSS $ (126,692) $ (107,021) $ (271,735) $ (177,736)
================ ================ ================ ===============
NET LOSS ALLOCATED TO
LIMITED PARTNERS (99%) $ (125,425) $ (105,951) $ (269,018) $ (175,959)
================ ================ ================ ===============
NET LOSS ALLOCATED TO
GENERAL PARTNER (1%) $ (1,267) $ (1,070) $ (2,717) $ (1,777)
================ ================ ================ ===============
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (0.38) $ (0.32) $ (0.81) $ (0.53)
================ ================ ================ ===============
</TABLE>
2
<PAGE>
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ---------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
1995 1994
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (271,735) $ (177,736)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization
318,018 318,901
Changes in operating assets and liabilities:
Rent and other receivables 60,759 69,760
Prepaid expenses and other assets (59,924) (113,350)
Accounts payable and accrued expenses 21,321 134,326
Escrowed security deposits and deferred revenue (7,338) 2,058
---------------- ---------------
Net cash provided by operating activities 61,101 233,959
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from general partner 42,000 -
Principal payments on notes payable (208,687) (158,910)
---------------- ---------------
Net cash provided by (used in) financing activities (166,687) (158,910)
---------------- ---------------
Increase (decrease) in cash and cash equivalents (105,586) 75,049
Cash and cash equivalents at beginning of period 149,639 89,334
---------------- ---------------
Cash and cash equivalents at end of period $ 44,053 $ 164,383
================ ===============
</TABLE>
3
<PAGE>
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1994 $ 874,362 $ (57,556) $ 816,806
Net loss, 1st quarter (48,887) (494) (49,381)
Net loss, 2nd quarter (94,706) (956) (95,662)
Net loss, 3rd quarter (125,425) (1,267) (126,692)
================ ================ ================
Balance at September 30, 1995 $ 605,344 $ (60,273) $ 545,071
================ ================ ================
</TABLE>
4
<PAGE>
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Retail Equity Partners Limited
Partnership (the Partnership) have not been audited by independent
accountants, except for the balance sheet at December 31, 1994. In the
opinion of the Partnership's management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the
financial position and results of operations for the periods presented
have been included.
Certain notes and other information have been condensed or omitted from
the interim financial statements presented in this Quarterly Report on
Form 10-Q. Therefore, these financial statements should be read in
conjunction with the Partnership's 1994 Annual Report on Form 10-K.
The results for the first three quarters of 1995 are not necessarily
indicative of future financial results.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Retail Equity Partners Limited Partnership ("the Partnership") is a
North Carolina limited partnership formed to acquire, hold, operate and
manage three neighborhood shopping centers. In October, 1991 the
ownership of one of the shopping centers was transferred to a newly
formed partnership, New Market Square Limited Partnership ("NMSLP"). The
Partnership is the sole general partner and holds a 99.99 percent
interest in NMSLP.
The following discussion should be read in conjunction with the
financial statements and notes thereto included in this Quarterly Report
on Form 10-Q and with the Partnership's audited financial statements and
notes thereto included in the Partnership's 1994 Annual Report on Form
10-K.
RESULTS OF OPERATIONS
REVENUES. Rental revenue totaled $387,000 in third quarter and
$1,183,000 through nine months of 1995, decreasing 2 percent and 13
percent, respectively, from the same periods in 1994, attributable
primarily to vacancy of anchor tenant space at New Market Square
shopping center ("NMS") since August, 1994. (On August 1, 1994 Rose's
Stores, Inc. renounced its lease as part of its Chapter 11 bankruptcy
filing and vacated its space at NMS.) 1995 interest and other income
includes $82,049 proceeds of the sale of a claim against Rose's in
March, 1995.
At September 30, 1995 Plaza West was 100 percent leased, Cape Henry
Plaza was 94 percent leased, and NMS was 55 percent leased, compared to
100 percent, 94 percent, and 43 percent, respectively at September 30,
1994.
EXPENSES. Property operations expense of $59,000 for the quarter and
$157,000 year-to-date in 1995 reflects an increase of approximately
$20,000 over the same periods in 1994, attributable primarily to planned
exterior repairs and maintenance at Cape Henry Plaza and Plaza West.
Fluctuations in general and administrative expense ($52,000 through
three quarters in 1995 compared to $38,000 in 1994) are due to the
timing of legal expenses associated with the Rose's lease in third
quarter, 1994 through second quarter, 1995. Decreases in property tax
and insurance expense of approximately 8 percent compared to 1994
reflect lower provisions for property tax based on prior year experience
and projections based on tax bills received at interim. Property
management fees (based on cash receipts) have decreased approximately 13
percent compared to 1994 as a direct result of decreased revenue stream
at NMS. Depreciation and amortization are consistent with prior year
quarter and year-to-date amounts. Interest expense increased
approximately 2 percent in third quarter, 1995 compared to 1994,
reflecting the 0.75 percent rate increase on the NMS mortgage effective
June, 1995. On a year-to-date basis, interest expense has decreased
approximately 1 percent as a result of amortization of principal
amounts.
SUMMARY RESULTS OF OPERATIONS. The Partnership experienced a net loss of
$127,000 in third quarter, 1995 compared to $107,000 for the same period
in 1994, with the variance attributable primarily to increased property
repairs and maintenance costs. Increased losses on a year-to-date basis
($272,000 in 1995 compared to $178,000 in 1994) are generally
attributable to the effect of the NMS Rose's vacancy which began August,
1994 and has continued throughout 1995 year-to-date, offset in part by
proceeds of a claim against the former tenant.
Depreciation and amortization of approximately $318,000 are significant
non-cash expenses which have a significant impact on reported results.
LIQUIDITY AND CAPITAL RESOURCES. The Partnership has long-term financing
on all three shopping centers. These first mortgage loans all mature in
1998 and require monthly principal reduction. During third quarter,
1995, the Partnership made all scheduled principal payments on these
first mortgage loans, and at September 30, 1995, the Partnership is
current on these obligations.
If not for the Rose's bankruptcy and resulting vacancy at NMS since
August, 1994, the Partnership would be operating reasonably well. Two of
the shopping centers continue to generate positive cash flow from
operations.
6
<PAGE>
Following the Rose's departure, the NMSLP has not generated sufficient
cash flow to pay the full payments required under its loan for NMS. The
lender and the Partnership entered into a forbearance agreement under
which NMSLP remitted to the lender net cash flow after payment of
operating expenses monthly. In June, 1995 the forbearance agreement was
terminated and the NMS loan was brought current by using substantially
all of the Partnership's cash reserves. Boddie Investment Company, the
general partner, is currently advancing the partnership sufficient funds
to cover any operating deficits.
On July 19, 1995 the Partnership entered a lease agreement with
Winn-Dixie Stores whereby Winn-Dixie will vacate its current location at
NMS (35,000 square feet) and move to the Rose's space at NMS (54,000
square feet). Management is in final negotiations with several possible
tenants to occupy the space being vacated by Winn-Dixie. If a
replacement tenant cannot be found, the revenue loss associated with the
vacant space would result in substantial negative cash flow and would
bring into question NMSLP's ability to continue in business without
restructuring its mortgage obligations.
The Partnership made no capital expenditures or distributions during the
first nine months of 1995. Future distributions have been suspended
until property operations allow.
The leases held by the Partnership are generally long-term, with
substantially all increases in operating expenses, taxes and insurance
passed through to and paid by tenants. Additionally, most leases include
built-in rent increases based on changes in the consumer price index or
percentage rents based on total sales.
The Partnership has retained Lat Purser and Associates to explore the
possible sale of New Market Square Shopping Center. Lat Purser has begun
discussions with several possible buyers, but at September 30, 1995, no
agreement has been reached as to the terms of a possible sale.
7
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Reference is hereby made to the discussion of legal proceedings with
respect to the NMS Rose's vacancy and disposition thereof during first
quarter, 1995, in the Quarterly Report on Form 10-Q for the period ended
March 31, 1995.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Partnership is the sole general partner and holds a 99.99 percent
interest in NMSLP, which owns NMS. NMS is held subject to a first
mortgage deed of trust held by Mutual Benefit Life. The mortgage has an
original principal amount of $6,400,000, carried an interest rate of
8.25 percent through May, 1995, and 9 percent effective June 1, 1995
through maturity in June, 1998, and has required monthly payments of
$58,000 including principal and interest.
In view of Rose's renunciation of its lease and subsequent failure to
pay its required lease payments (see Liquidity and Capital Resources
discussion above), NMSLP requested from its lender certain relief from
the required monthly payments. The lender agreed to accept payments
equal to operating cash flow of NMS pending attempts by NMSLP to locate
a replacement tenant or to restructure its debt. NMSLP made such "cash
flow payments" through May, 1995. In June, 1995 the forbearance
agreement was terminated and the NMS loan was brought current.
The NMS mortgage is secured solely by the NMS shopping center and is not
guaranteed by the Partnership. In the event a replacement tenant cannot
be found or the loan cannot be modified, the lender, at its election,
may begin foreclosure proceedings. The foreclosure of NMS shopping
center would not affect the Partnership's remaining two centers.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K: none
8
<PAGE>
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, hereunto duly authorized.
RETAIL EQUITY PARTNERS
LIMITED PARTNERSHIP
(Registrant)
By: Boddie Investment Company
General Partner
November 14, 1995 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized agent)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
retail equity partners limited partnership financial statements as of
and for the nine months ended September 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 44,053
<SECURITIES> 0
<RECEIVABLES> 70,076
<ALLOWANCES> (7,400)
<INVENTORY> 0
<CURRENT-ASSETS> 258,782
<PP&E> 16,407,921
<DEPRECIATION> (3,060,188)
<TOTAL-ASSETS> 13,694,421
<CURRENT-LIABILITIES> 297,462
<BONDS> 12,851,888
<COMMON> 0
0
0
<OTHER-SE> 545,071
<TOTAL-LIABILITY-AND-EQUITY> 13,694,421
<SALES> 0
<TOTAL-REVENUES> 1,278,225
<CGS> 0
<TOTAL-COSTS> 637,566
<OTHER-EXPENSES> 51,626
<LOSS-PROVISION> (4,431)
<INTEREST-EXPENSE> 856,337
<INCOME-PRETAX> (271,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (271,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (271,735)
<EPS-PRIMARY> (0.81)
<EPS-DILUTED> 0
</TABLE>
