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, 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 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 ___
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___
Total number of pages: 9
1
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TABLE OF CONTENTS
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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 7
PART II - Other Information
6 Exhibits and Reports on Form 8-K 8
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2
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PART I
Item 1. Financial Statements
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
----------------------------------
(Unaudited)
<S> <C> <C>
Assets
Investments in shopping centers:
Land $ 2,094,634 $ 2,094,634
Buildings and improvements 5,899,466 5,795,381
Personal property 32,181 32,181
----------------------------------
8,026,281 7,922,196
Less accumulated depreciation (1,830,598) (1,697,749)
----------------------------------
6,195,683 6,224,447
Cash and cash equivalents 79,674 119,440
Restricted cash - tenant security deposits 22,106 25,407
Accounts receivable, net 39,918 63,925
Prepaids and other assets 72,798 28,625
Deferred financing costs, net 14,585 28,994
==================================
Total assets $ 6,424,764 $ 6,490,838
==================================
Liabilities and Partners' Deficit
Mortgage notes payable $ 6,828,552 $ 6,874,644
Trade accounts payable and accrued expenses 97,748 52,992
Escrowed security deposits and deferred revenue 19,782 23,417
----------------------------------
Total liabilities 6,946,082 6,951,053
Partners' deficit:
Limited partners (453,361) (392,869)
General partner (67,957) (67,346)
----------------------------------
Total partners' deficit (521,318) (460,215)
==================================
Total liabilities and partners' deficit $ 6,424,764 $ 6,490,838
==================================
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental revenue $ 256,159 $ 254,626 $ 773,426 $ 825,278
Interest and other income 1,574 3,211 5,988 10,363
-------------------------------------------------------------
257,733 257,837 779,414 835,641
Expenses
Property operations 19,580 27,485 68,608 121,264
General and administrative expense 12,149 10,974 53,501 46,127
Property taxes and insurance 22,555 24,912 71,747 81,240
Property management fees 7,453 7,253 23,878 27,194
Depreciation 44,283 44,259 132,849 132,789
Amortization 4,803 4,803 14,409 15,997
Interest 158,153 159,537 475,525 537,405
Provision for loss on sale of New Market Square - - - (11,457)
-------------------------------------------------------------
268,976 279,223 840,517 950,559
-------------------------------------------------------------
Loss before extraordinary item (11,243) (21,386) (61,103) (114,918)
Extraordinary item - loss on
extinguishment of debt - - - (30,163)
-------------------------------------------------------------
Net loss $ (11,243) $ (21,386) $ (61,103) $(145,081)
=============================================================
Net loss allocated to limited partners (99%) $ (11,131) $ (21,172) $ (60,492) $(143,630)
=============================================================
Net loss allocated to general partner (1%) $ (112) $ (214) $ (611) $ (1,451)
=============================================================
Net loss per limited partnership unit $ (0.03) $ (0.06) $ (0.18) $ (0.43)
=============================================================
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
- -------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30
1997 1996
----------------------------------
<S> <C> <C>
Operating activities
Net loss $ (61,103) $ (145,081)
Adjustments to reconcile net loss to
net cash provided by operations:
Depreciation and amortization 147,258 148,786
Extraordinary item - loss on early extinguishment
of debt - 30,163
Provision for loss on sale of New Market Square - (11,457)
Changes in operating assets and liabilities:
Rent and other receivables 24,007 70,010
Prepaid expenses and other assets (44,173) (31,833)
Accounts payable and accrued expenses 44,756 (6,988)
Escrowed security deposits and deferred revenue (334) (3,564)
----------------------------------
Net cash provided by operating activities 110,411 50,036
Investing activities
Proceeds of sale of New Market Square Shopping Center - 6,363,530
Additions to properties (104,085) (25,730)
----------------------------------
Net cash provided by (used in) investing activities (104,085) 6,337,800
Financing activities
Repayment of advances from general partner - (80,846)
Principal payments on notes payable (46,092) (5,907,797)
Distribution to limited partners - (297,985)
----------------------------------
Cash used in financing activities (46,092) (6,286,628)
----------------------------------
Net increase (decrease) in cash and cash equivalents (39,766) 101,208
Cash and cash equivalents at beginning of period 119,440 16,467
----------------------------------
Cash and cash equivalents at end of period $ 79,674 $ 117,675
==================================
</TABLE>
5
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Notes to Financial Statements - September 30, 1997
(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, 1996. 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 1996 Annual Report on Form 10-K.
Certain amounts in the Statements of Operations and Cash Flows for the nine
months ended September 30, 1996, have been reclassified to conform to the
presentation in the Partnership's 1996 Annual Report on Form 10-K. These
reclassifications had no effect on net income or partners' deficit as previously
reported.
The results for the third quarter of 1997 are not necessarily indicative of
future financial results.
Note 2. New Market Square Shopping Center
The statements of operations for the nine months ended September 30, 1996
include the operations of New Market Square through February 7, 1996, which was
sold to an unrelated party effective February 8, 1996. New Market Square Limited
Partnership, which was 99.99% owned by the Partnership, was subsequently
dissolved effective July 31, 1996. Results of operations of New Market Square
for the nine months ended September 30, 1996, were as follows:
Rental revenue $63,430
Interest and other income 4,407
---------
67,837
Property operations, taxes and insurance 25,727
General and administrative expense 1,665
Property management fees 3,831
Depreciation -
Amortization 1,588
Interest 57,822
Provision for loss on sale of shopping center (11,457)
---------
79,176
---------
Loss before extraordinary item (13,339)
Extraordinary item - loss on extinguishment of debt (30,163)
---------
Net loss $(41,502)
=========
The Partnership had previously recorded a $510,000 reserve for writedown to
estimated net realizable value and provision for estimated loss on the sale of
New Market Square based on estimated proceeds pursuant to the sale contract
received in December 1995.
The Partnership adopted Statement of Financial Accounting Standard No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, effective January 1, 1996. Adoption of this standard had no
significant effect on the financial position, operating results, or cash flows
of the Partnership.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains forward-looking statements within the meaning
of Federal securities law. Such statements can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. 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. This discussion should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report on Form 10-Q and
the Partnership's audited financial statements and notes thereto included in the
Partnership's 1996 Annual Report on Form 10-K.
Overview
Retail Equity Partners Limited Partnership is a North Carolina limited
partnership formed in 1987 to acquire, hold, operate and manage three
neighborhood shopping centers. In February 1996, one of the three shopping
centers was sold to an unrelated party.
The Partnership received aggregate subscription funds of $6,671,543 for 333,577
beneficial assignment certificates ("BACs") from approximately 480 investors.
There is currently no established public trading market for the BACs. The
Partnership is unaware of any secondary market for its securities. There is
currently no established fair market value for the BACs.
Results of Operations
Effective February 8, 1996, the Partnership sold New Market Square Shopping
Center ("NMS") to an unrelated party. The consolidated statements of operations
for the nine months ended September 30, 1996, include the operations of New
Market Square through February 7, 1996. Decreases in property operations and
interest expenses in 1997 compared to 1996 generally reflect the effect of sale
of NMS in early February 1996. Summary operating results of properties held
throughout the entire first nine months of 1997 and 1996 are as follows:
Nine months ended September 30,
1997 1996
Revenues $ 779,414 $ 767,804
Expenses:
Property expenses 164,233 200,140
General and administrative 53,501 44,462
Depreciation and amortization 147,258 147,198
Interest 475,525 479,583
--------- ---------
840,517 871,383
--------- ---------
Net loss $ (61,103) $(103,579)
========= =========
Plaza West was 100% occupied throughout the first nine months of 1997. Occupancy
at Cape Henry Plaza was 100% through May, 1997, and 97% in June through
September, 1997. As of November 7, 1997, the vacant space at Cape Henry Plaza
had not been leased. Both centers were 100% occupied throughout the first nine
months of 1996. Rental revenues were consistent in third quarter of 1997
compared to 1996 due to a nominal increase in rental rates. The increase in
revenues for the nine months ended September 30, 1997, compared to the same
period in 1996 is primarily attributable to the timing of recovery of common
area costs in first quarter of 1997. The decrease in property expenses in third
quarter and through nine months of 1997 compared to 1996 is primarily
attributable to non-routine repairs and maintenance costs incurred in second and
third quarters of 1996.
7
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Liquidity and Capital Resources. 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, virtually any adverse development, such as the loss
of a major tenant, the loss of multiple smaller tenants, or 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 may not
generate sufficient cash flow to make significant repairs, improvements or
modifications to the centers should such needs arise.
The general partner continues to evaluate the possible sale of the Partnership's
properties and termination of the Partnership. In the event the properties were
sold, the general partner does not believe that the sale would result in
sufficient funds, after repayment of the first mortgage loans, to allow for more
than nominal distributions to investors.
The Partnership's two mortgage loans mature in 1998. In the event the
Partnership's properties have not been sold prior to that date, the Partnership
will be required to refinance these loans. The general partner can offer no
assurance that, at that time, replacement financing will be obtainable.
The Partnership made no capital expenditures during the first six months of
1997. During the third quarter of 1997 the Partnership made capital repairs to
Plaza West totaling approximately $104,000. The Partnership has made no
distributions in 1997. 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)
Reports on Form 8-K:
None
8
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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 13, 1997 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized agent)
9
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<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, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 79,674
<SECURITIES> 0
<RECEIVABLES> 39,918
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 214,496
<PP&E> 8,026,281
<DEPRECIATION> (1,830,598)
<TOTAL-ASSETS> 6,424,764
<CURRENT-LIABILITIES> 117,530
<BONDS> 6,828,552
<COMMON> 0
0
0
<OTHER-SE> (521,318)
<TOTAL-LIABILITY-AND-EQUITY> 6,424,764
<SALES> 0
<TOTAL-REVENUES> 779,414
<CGS> 0
<TOTAL-COSTS> 297,082
<OTHER-EXPENSES> 67,910
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475,525
<INCOME-PRETAX> (61,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> (61,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,103)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> 0
</TABLE>
