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, 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 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 ___
Total number of pages: 11
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Page No.
<S> <C> <C>
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - Other Information
6 Exhibits and Reports on Form 8-K 9
</TABLE>
2
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PART I
Item 1. Financial Statements
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------------- ----------------
(Unaudited)
<S> <C> <C>
Assets
Investments in shopping centers:
Land $ 2,094,634 $ 2,094,634
Buildings and improvements 5,795,381 5,769,651
Personal property 32,181 32,181
---------------- ----------------
7,922,196 7,896,466
Less accumulated depreciation (1,653,138) (1,520,349)
---------------- ----------------
6,269,058 6,376,117
New Market Square Shopping Center - 6,363,530
Cash and cash equivalents 117,675 16,467
Restricted cash - tenant security deposits 25,305 32,695
Accounts receivable, net 43,130 113,140
Prepaids and other assets 67,926 47,507
Deferred financing costs, net 33,779 79,938
---------------- ----------------
Total assets $ 6,556,873 $ 13,029,394
================ ================
Liabilities and Partners' Equity
Mortgage notes payable $ 6,889,314 $ 6,931,348
Mortgage loan and accrued interest payable - New Market
Square Shopping Center - 5,909,756
Trade accounts payable and accrued expenses 46,040 31,905
Amounts due to general partner - -
Accrued interest payable 53,429 53,429
Escrowed security deposits and deferred revenue 22,898 33,852
Advances and accrued interest due to affiliates - 80,846
---------------- ----------------
Total liabilities 7,011,681 13,041,136
---------------- ----------------
Partners' equity (deficit):
Limited partners (387,516) 54,099
General partner (67,292) (65,841)
---------------- ----------------
Total partners' equity (454,808) (11,742)
---------------- ----------------
Total liabilities and partners' equity $ 6,556,873 $ 13,029,394
================ ================
</TABLE>
3
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue
Rental revenue $ 254,626 $ 387,072 $ 825,278 $ 1,182,913
Interest and other income 3,211 2,755 10,363 90,881
--------------- ---------------- ---------------- ----------------
257,837 389,827 835,641 1,273,794
--------------- ---------------- ---------------- ----------------
Expenses
Property operations 27,485 58,658 121,263 156,997
General and administrative expense 10,974 4,593 46,127 51,626
Property taxes and insurance 24,912 41,082 81,240 123,090
Property management fees 7,253 11,686 27,194 39,461
Depreciation 44,259 97,810 132,789 294,102
Amortization 4,803 7,972 15,997 23,916
Interest 159,537 294,718 537,405 856,337
Provision for estimated loss on sale
of New Market Square - - 18,707 -
--------------- ---------------- ---------------- ----------------
279,223 516,519 980,722 1,545,529
--------------- ---------------- ---------------- ----------------
Net loss $ (21,386) $ (126,692) $ (145,081) $ (271,735)
=============== ================ ================ ================
Net loss allocated to
limited partners (99%) $ (21,172) $ (125,425) $ (143,630) $ (269,018)
=============== ================ ================ ================
Net loss allocated to
general partner (1%) $ (214) $ (1,267) $ (1,451) $ (2,717)
=============== ================ ================ ================
Net loss per limited
partnership unit $ (0.06) $ (0.38) $ (0.43) $ (0.81)
=============== ================ ================ ================
Weighted average number of
limited partnership units outstanding 333,577 333,577 333,577 333,577
=============== ================ ================ ================
</TABLE>
4
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (145,081) $ (271,735)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 148,786 318,018
Write-off of deferred costs at sale of New Market Square 18,576 -
Changes in operating assets and liabilities:
Rent and other receivables 70,010 60,759
Prepaid expenses and other assets (31,833) (59,924)
Accounts payable and accrued expenses (6,858) 21,321
Escrowed security deposits and deferred revenue (3,564) (7,338)
---------------- ----------------
Net cash provided by operating activities 50,036 61,101
---------------- ----------------
Cash flows from investing activities
Proceeds from sale of New Market Square 6,363,530 -
Additions to properties (25,730) -
---------------- ----------------
Net cash provided by investing activities 6,337,800 -
---------------- ----------------
Cash flows from financing activities
Advances from (repayments to) general partner (80,846) 42,000
Principal payments on notes payable (5,907,797) (208,687)
Distribution to limited partners (297,985) -
---------------- ----------------
Net cash used in financing activities (6,286,628) (166,687)
---------------- ----------------
Increase (decrease) in cash and cash equivalents 101,208 (105,586)
Cash and cash equivalents at beginning of period 16,467 149,639
---------------- ----------------
Cash and cash equivalents at end of period $ 117,675 $ 44,053
================ ================
</TABLE>
5
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
Notes to Financial Statements - September 30, 1996
(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, 1995, which was
derived from the financial statements included in the Partnership's 1995 Annual
Report on Form 10-K. 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 1995 Annual Report on Form 10-K and Current Report on Form 8-K
dated February 8, 1996.
The results for the first three quarters of 1996 are not necessarily indicative
of future financial results.
Note 2. New Market Square Shopping Center
The New Market Square Shopping Center property was sold to an unrelated third
party on February 8, 1996, for a contract price of $6,558,000. Estimated direct
costs of the sale total approximately $214,000. Carrying value of these assets
at December 31, 1995, was as follows:
<TABLE>
<S> <C>
Land $1,459,445
Buildings and improvements 7,018,876
Personal property 33,134
-------------
8,511,455
Less - Accumulated depreciation (1,637,925)
Reserve for writedown to net realizable value (510,000)
------------
$6,363,530
</TABLE>
New Market Square Limited Partnership was dissolved effective July 31, 1996. The
consolidated statements of operations for the three and nine months ended
September 30, 1996 and 1995, include the operations of New Market Square Limited
Partnership and its shopping center, New Market Square Shopping Center.
Results of operations of New Market Square Limited Partnership for these periods
were as follows:
6
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<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Rental Revenue $ 2,250 $ 149,869 $ 63,430 $ 461,005
Interest and other income 85 830 4,407 85,590
------------- ------------------ ---------------- -----------------
Total revenue 2,335 150,699 67,837 546,595
------------- ------------------ ---------------- -----------------
Property operations, taxes, and insurance - 37,853 25,726 118,754
General and administrative expense 40 569 1,665 22,722
Property management fees - 4,495 3,831 17,143
Depreciation - 53,529 - 160,949
Amortization - 3,175 1,588 9,525
Interest - 133,919 57,822 373,053
Provision for loss on sale of shopping center - - 18,707 -
------------- ------------------ ---------------- -----------------
Total expenses 40 233,540 109,339 702,146
------------- ------------------ ---------------- -----------------
Net income (loss) $ 2,295 $ (82,841) $ (41,502) $ (155,551)
============= ================== ================ =================
</TABLE>
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion contains forward-looking statements including, without
limitation, statements relating to development activities of the Partnership
within the meaning of federal securities laws. Although management believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there are certain factors such as general economic
conditions, local real estate conditions, or weather conditions that might cause
a difference between actual results and those forward-looking statements.
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 has been the sole general
partner and held a 99.99 percent interest in NMSLP. In February 1996 New Market
Square Shopping Center was sold to an unaffiliated party.
The following discussion should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report on Form 10-Q, the
Partnership's Current Report on Form 8-K dated February 8, 1996, and the
Partnership's audited financial statements and notes thereto included in the
Partnership's 1995 Annual Report on Form 10-K.
Results of Operations
Effective February 8, 1996, the Partnership sold New Market Square Shopping
Center ("NMS") to an unaffiliated party for a contract price of $6,558,000. At
December 31, 1995, the Partnership had recorded a reserve of $510,000 for
writedown of NMS to estimated net realizable value. During first quarter of 1996
the Partnership recorded an additional provision for loss on the sale of
approximately $19,000. NMSLP was dissolved effective July 31, 1996.
The consolidated statements of operations for the three and nine months ended
September 30, 1996 include the operations of NMSLP. Decreases in revenues and
expenses in 1996 compared to 1995 generally reflect the effect of sale of NMS in
early February. Summary operating results of Cape Henry Plaza and Plaza West
shopping centers are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
------------- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 255,502 $ 239,128 $ 767,804 $ 727,199
------------- ------------------ ---------------- ----------------
Expenses:
Property Operations 59,650 69,078 200,140 183,651
General and administrative expense 10,934 4,024 44,462 28,904
Depreciation and amortization 49,062 49,078 147,198 147,544
Interest 159,537 160,799 479,583 483,284
------------- ------------------ ---------------- ----------------
279,183 282,979 871,383 843,383
============= ================== ================ ================
Net loss $ (23,681) $ (43,851) $ (103,579) $ (116,184)
============= ================== ================ ================
</TABLE>
Both Plaza West and Cape Henry Plaza shopping centers were 100 percent occupied
throughout third quarter 1996, compared to 100 percent and approximately 94
percent, respectively, in third quarter 1995. Fluctuations in property
operations expense are primarily attributable to timing of planned exterior
repairs and maintenance. The increase in general and administrative costs is
primarily attributable to partnership administration fees ($1,500 per month)
charged and recorded in 1996.
8
<PAGE>
The Partnership experienced a net loss of $21,000 in third quarter 1996 compared
to net loss of $127,000 for the same period in 1995. The decrease is primarily
attributable to the sale of NMS, which generated significant operating losses in
1995 (see notes to financial statements included in this report) along with
improved occupancy and related rental revenue at Cape Henry Plaza.
Liquidity and Capital Resources. The Partnership has long-term financing on both
remaining shopping centers. These first mortgage loans mature in 1998 and
require monthly principal reduction.
The two remaining shopping centers continue to generate nominal positive cash
flow from operations. 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. Although the Partnership currently
generates sufficient cash flow to meet its immediate operating and capital
needs, certain adverse developments, such as the failure of a significant tenant
to pay rent, could create a material deficiency in the Partnership's short-term
liquidity. In addition, the Partnership currently does not generate sufficient
cash flow to make significant improvements or modifications to the centers
should such needs arise.
During third quarter 1996 the Partnership expended approximately $26,000 for
capitalized roof replacement at Cape Henry Plaza.
During second quarter 1996, the Partnership made a distribution in the amount of
$297,985 to the limited partners from net proceeds of the sale of NMS. However,
other distributions have been suspended until property operations allow.
PART II
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K:
The Partnership filed a Current Report on Form 8-K dated October 15, 1996,
relating to the change in its certifying accountant as of that date.
9
<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 12, 1996 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized agent)
10
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS FUMMARY FINANCIAL INFORMATION EXTRACTED FROM RETAIL EQUITY
PARTNERS LIMITED PARTNERSHIP FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 117,675
<SECURITIES> 0
<RECEIVABLES> 43,130
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 254,036
<PP&E> 7,922,196
<DEPRECIATION> (1,653,138)
<TOTAL-ASSETS> 6,556,873
<CURRENT-LIABILITIES> 122,367
<BONDS> 6,889,314
<COMMON> 0
0
0
<OTHER-SE> (454,808)
<TOTAL-LIABILITY-AND-EQUITY> 6,556,873
<SALES> 0
<TOTAL-REVENUES> 835,641
<CGS> 0
<TOTAL-COSTS> 362,486
<OTHER-EXPENSES> 80,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 537,405
<INCOME-PRETAX> (145,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (145,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,081)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> 0
</TABLE>
