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 June 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: 8
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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 7
PART II - Other Information
6 Exhibits and Reports on Form 8-K 8
</TABLE>
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PART I
Item 1. Financial Statements
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
----------------------------------
(Unaudited)
<S> <C> <C>
Assets
Investments in shopping centers:
Land $ 2,094,634 $ 2,094,634
Buildings and improvements 5,795,381 5,795,381
Personal property 32,181 32,181
----------------------------------
7,922,196 7,922,196
Less accumulated depreciation (1,786,315) (1,697,749)
----------------------------------
6,135,881 6,224,447
Cash and cash equivalents 169,655 119,440
Restricted cash - tenant security deposits 24,419 25,407
Accounts receivable, net 31,809 63,925
Prepaids and other assets 50,771 28,625
Deferred financing costs, net 19,388 28,994
==================================
Total assets $ 6,431,923 $ 6,490,838
==================================
Liabilities and Partners' Deficit
Mortgage notes payable $ 6,844,271 $ 6,874,644
Trade accounts payable and accrued expenses 78,472 52,992
Prepaid rents and tenant security deposits 19,255 23,417
----------------------------------
Total liabilities 6,941,998 6,951,053
Partners' deficit:
Limited partners (442,230) (392,869)
General partner (67,845) (67,346)
----------------------------------
Total partners' deficit (510,075) (460,215)
==================================
Total liabilities and partners' deficit $ 6,431,923 $ 6,490,838
==================================
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30 ended June 30
1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental revenue $ 251,374 $ 253,358 $ 517,267 $ 570,652
Interest and other income 2,614 5,275 4,414 7,152
-------------------------------------------------------------
253,988 258,633 521,681 577,804
Expenses
Property operations 22,265 40,407 49,028 93,779
General and administrative expense 19,286 18,007 41,352 35,153
Property taxes and insurance 24,106 24,277 49,192 56,328
Property management fees 8,331 7,523 16,425 19,941
Depreciation 44,283 44,259 88,566 88,530
Amortization 4,803 4,803 9,606 11,194
Interest 158,511 159,863 317,372 377,868
Provision for loss on sale of New Market Square - - - (11,457)
-------------------------------------------------------------
281,585 299,139 571,541 671,336
-------------------------------------------------------------
Loss before extraordinary item (27,597) (40,506) (49,860) (93,532)
Extraordinary item - loss on extinguishment of debt
- - - (30,163)
-------------------------------------------------------------
Net loss $ (27,597) $ (40,506) $ (49,860) $(123,695)
=============================================================
Net loss allocated to limited partners (99%) $ (27,321) $ (40,101) $ (49,361) $(122,458)
=============================================================
Net loss allocated to general partner (1%) $ (276) $ (405) $ (499) $ (1,237)
=============================================================
Net loss per limited partnership unit $ (0.08) $ (0.12) $ (0.15) $ (0.37)
=============================================================
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>
Six months
ended June 30,
1997 1996
----------------------------------
<S> <C> <C>
Operating activities
Net loss $ (49,860) $ (123,695)
Adjustments to reconcile net loss to
net cash provided by operations:
Depreciation and amortization 98,172 99,724
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 32,116 78,352
Prepaid expenses and other assets (22,146) 12,809
Accounts payable and accrued expenses 25,480 3,769
Accrued interest payable - (43,993)
Prepaid rents and tenant security deposits (3,174) (759)
----------------------------------
Net cash provided by operating activities 80,588 44,913
Investing activities
Proceeds of sale of New Market Square Shopping Center - 6,363,400
Financing activities
Repayment of advances from general partner - (80,846)
Principal payments on notes payable (30,373) (5,893,462)
Distribution to limited partners - (297,985)
----------------------------------
Cash used in financing activities (30,373) (6,272,293)
----------------------------------
Net increase in cash and cash equivalents 50,215 136,020
Cash and cash equivalents at beginning of period 119,440 16,467
----------------------------------
Cash and cash equivalents at end of period $ 169,655 $ 152,487
==================================
</TABLE>
5
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Notes to Financial Statements - June 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 Consolidated Statements of Operations and Cash Flows for
the six months ended June 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 second quarter of 1997 are not necessarily indicative of
future financial results.
Note 2. New Market Square Shopping Center
The consolidated statements of operations for the six months ended June 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 percent owned by the Partnership, was subsequently
dissolved effective July 31, 1996. Results of operations of New Market Square
for the six months ended June 30, 1996, were as follows:
Rental revenue $61,180
Interest and other income 4,322
---------
65,502
Property operations 18,572
General and administrative expense 1,625
Property taxes and insurance 7,155
Property management fees 3,831
Depreciation -
Amortization 1,588
Interest 57,822
Provision for loss on sale of shopping center (11,457)
----------
79,136
----------
Loss before extraordinary item (13,634)
Extraordinary item - loss on extinguishment of debt (30,163)
----------
Net loss $(43,797)
==========
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 the 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 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.
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
the Partnership's audited financial statements and notes thereto included in the
Partnership's 1996 Annual Report on Form 10-K.
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 six months ended June 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 six months of 1997 and 1996 are as follows:
Six months ended June 30,
1997 1996
---- ----
Revenues $521,681 $512,302
Expenses:
Property expenses 114,645 140,490
General and administrative 41,352 33,528
Depreciation and amortization 98,172 98,136
Interest 317,372 320,046
-------- ---------
571,541 592,200
--------- ---------
Net loss $ (49,860) $ (79,898)
========= =========
Plaza West was 100 percent occupied throughout second quarter 1997 and 1996.
Occupancy at Cape Henry Plaza was 100% in April and May, and 97% in June 1997 ,
as compared to 100% occupancy throughout the second quarter of 1996. Rental
revenues at the two properties were consistent in second quarter of 1997
compared to 1996. The increase in revenues for the six months ended June 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. For the two
properties, the decrease in property expenses in second quarter and through six
months of 1997 compared to 1996 is primarily attributable to non-routine repairs
and maintenance costs incurred in second quarter of 1996.
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
7
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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 does 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 or distributions during the first
six months of 1997. At June 30, 1997, the Partnership has made commitments for
capital repairs to Plaza West totaling approximately $110,000.
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
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
August 12, 1997 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized agent)
8
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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 SIX MONTHS
ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 169,655
<SECURITIES> 0
<RECEIVABLES> 31,809
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 276,654
<PP&E> 7,922,196
<DEPRECIATION> (1,786,315)
<TOTAL-ASSETS> 6,431,923
<CURRENT-LIABILITIES> 97,727
<BONDS> 6,844,271
<COMMON> 0
0
0
<OTHER-SE> (510,075)
<TOTAL-LIABILITY-AND-EQUITY> 6,431,923
<SALES> 0
<TOTAL-REVENUES> 521,681
<CGS> 0
<TOTAL-COSTS> 203,211
<OTHER-EXPENSES> 50,958
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 317,372
<INCOME-PRETAX> (49,860)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,860)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
