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, 1998
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
incorporation or organization Identification No.)
3850 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices) (Zip Code)
704/944-0100
(Registrant's telephone number)
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: 11
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Page No.
<S> <C> <C>
PART I - Financial Information
1 Financial Statements 2
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - Other Information
4 Submission of Matters to a Vote of Security Holders 10
6 Exhibits and Reports on Form 8-K 10
</TABLE>
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PART I - Financial Information
Item 1. Financial Statements.
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
------------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 119,417 $ 76,863
Restricted cash - tenant security deposits 25,401 22,243
Accounts receivable, net 19,489 51,621
Prepaids and other assets 58,662 30,154
Deferred financing costs, net 194 9,800
Property held for sale 6,157,542 6,157,542
------------------- ------------------
Total assets $6,380,705 $6,348,223
=================== ==================
Liabilities and Partners' Deficit
Mortgage loans payable $6,779,162 $6,812,467
Trade accounts payable and accrued expenses 78,015 52,522
Prepaid rents and tenant security deposits 22,129 19,949
------------------- ------------------
Total liabilities 6,879,306 6,884,938
Partners' deficit:
Limited partners (430,871) (468,604)
General partner (67,730) (68,111)
------------------- ------------------
Total partners' deficit (498,601) (536,715)
------------------- ------------------
Total liabilities and partners' deficit $6,380,705 $6,348,223
=================== ==================
</TABLE>
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1998 1997 1998 1997
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues
Rental revenue $252,707 $251,374 $510,038 $517,267
Interest and other income 2,002 2,614 3,433 4,414
---------------- ----------------- ---------------- -----------------
254,709 253,988 513,471 521,681
Expenses
Property operations 16,227 22,265 38,898 49,028
General and administrative 23,974 13,286 32,735 29,352
Property taxes and insurance 25,311 24,106 51,453 49,192
Management fees 14,255 14,331 28,224 28,425
Depreciation - 44,283 - 88,566
Amortization 4,803 4,803 9,606 9,606
Interest 157,029 158,511 314,441 317,372
---------------- ----------------- ---------------- -----------------
241,599 281,585 475,357 571,541
---------------- ---------------- ----------------- -----------------
Net income (loss) $ 13,110 $(27,597) $ 38,114 $ (49,860)
================ ================= ================ =================
Allocation of
net income (loss):
Limited partners (99%) $ 12,979 $(27,321) $ 37,733 $ (49,361)
================ ================= ================ =================
General partner (1%) $ 131 $ (276) $ 381 $ (499)
================ ================= ================ =================
Net income (loss) per
limited partnership unit $ 0.04 $ (0.08) $ 0.11 $ (0.15)
================ ================= ================ =================
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
- -------------------------------------------------------------------------------
Statement of Changes in Partners' Deficit
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------- ---------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1997 $(468,604) $(68,111) $(536,715)
Net income 24,754 250 25,004
-------------- ---------------- ---------------
Balance at March 31, 1998 (443,850) (67,861) (511,711)
Net income 12,979 131 13,110
-------------- ---------------- ---------------
Balance at June 30, 1998 $(430,871) $(67,730) $(498,601)
============== ================ ===============
</TABLE>
5
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
1998 1997
---------------- -----------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 38,114 $(49,860)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 9,606 98,172
Changes in operating assets and liabilities:
Rent and other receivables 32,132 32,116
Prepaid expenses and other assets (28,508) (22,146)
Accounts payable and accrued expenses 25,493 25,480
Security deposits and deferred revenue (978) (3,174)
---------------- -----------------
Net cash provided by operating activities 75,859 80,588
Investing activities - none
Financing activities:
Principal payments on notes payable (33,305) (30,373)
---------------- -----------------
Net increase in cash and cash equivalents 42,554 50,215
Cash and cash equivalents at
beginning of period 76,863 119,440
---------------- -----------------
Cash and cash equivalents at end of period $119,417 $169,655
================ =================
</TABLE>
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Notes to Financial Statements - June 30, 1998
(Unaudited)
Note 1. Interim financial statements
Our independent accountants have not audited the accompanying financial
statements of Retail Equity Partners Limited Partnership (the "Partnership"),
except for the balance sheet at December 31, 1997. We derived the amounts in the
balance sheet at December 31, 1997, from the financial statements included in
our 1997 Annual Report on Form 10-K. We believe that 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.
We have condensed or omitted certain notes and other information from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
You should read these financial statements in conjunction with our 1997 Annual
Report on Form 10-K.
The results for the first six months of 1998 are not necessarily indicative of
future financial results.
Certain amounts in the 1997 comparative financial statements have been
reclassified to conform to the 1998 presentation.
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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 we believe 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. You
should read the following discussion in conjunction with the financial
statements and notes thereto included in this Quarterly Report and our Annual
Report on Form 10-K.
Partnership Profile
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.
We are not aware of any secondary market for the Partnership's securities. There
is currently no established fair market value for the BACs.
Results of Operations
Revenues
Rental revenue for the second quarter of 1998 was $253,000, an increase of
0.5% compared to the second quarter of 1997. For the first six months of 1998,
rental revenue was $510,000, a decrease of 1.4% compared to the first six months
of 1997. These comparisons reflect vacancy of approximately 3% of Cape Henry
Plaza since June 1997. Plaza West has been fully occupied except for a two-month
period in the first quarter of 1998.
Expenses
Total expenses for the second quarter of 1998 were $242,000, a decrease of
14.2% compared to the second quarter of 1997. For the first six months of 1998,
total expenses were $475,000, a decrease of 16.8% compared to the first six
months of 1997. The primary reason for these decreases is that no depreciation
has been recorded in 1998. Depreciation expense was $44,000 in the second
quarter of 1997 and $89,000 for the first six months of 1997. In January 1998,
both Cape Henry Plaza and Plaza West were listed for sale. In accordance with
generally accepted accounting principles, no depreciation is recorded on assets
held for sale.
Through the first six months of 1998, operating and administrative
expenses were generally consistent with management's expectations. Property
operations expense decreased for the second quarter of 1998 compared to 1997 and
on a year-to-date basis, primarily attributable to roof repairs performed in the
second quarter of 1997. General and administrative expense
8
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increased in the second quarter of 1998 compared to 1997 as a result of timing
of receipt and recording of annual audit and tax return preparation fees. For
the first six months of 1998, general and administrative expense was comparable
to the first six months of 1997.
Net income
Net income for the second quarter of 1998 was $13,000, compared to a loss
of $28,000 for the second quarter of 1997. For the first six months of 1998, net
income was $38,000, compared to a loss of $50,000 for the first six months of
1997. Again, the increase in net income is primarily due to the fact that no
depreciation was charged in 1998.
Capital Resources and Liquidity
Cape Henry Plaza and Plaza West 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. In addition, most leases
include built-in rent increases based on changes in the consumer price index or
percentage rents based on total sales.
The Partnership currently generates sufficient cash flow to meet its
immediate operating and capital needs. However, 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, if such needs arise.
In January 1998, both centers were listed for sale. The general partner
has entered into a contract for sale of Plaza West at $3.7 million, subject to
negotiated adjustments for the buyer's due diligence findings. The buyer is
currently performing due diligence. A contract for sale of Cape Henry was
terminated when the buyer failed to perform scheduled due diligence, and the
general partner is currently negotiating with another party.
The Partnership's two mortgage loans matured on August 1, 1998, but have
been extended with no penalty to August 31, 1998. The general partner can offer
no assurance that, at that date, additional extensions or replacement financing
will be obtainable.
9
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PART II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
In June 1998 the limited partners voted by proxy to authorize the sale of
substantially all of the assets of the Partnership for a minimum aggregate sales
price of $7.5 million. Results of the vote were as follows:
For 231,324.1
Against 9,307.6
No response 92,945.4
Withheld/abstained -
Broker non-votes -
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
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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, thereunto duly authorized.
RETAIL EQUITY PARTNERS
LIMITED PARTNERSHIP
(Registrant)
By: Boddie Investment Company
General Partner
August 12, 1998 /s/ Philip S. Payne
Philip S. Payne
(Duly authorized officer)
11
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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, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 119417
<SECURITIES> 0
<RECEIVABLES> 19489
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 222969
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6380705
<CURRENT-LIABILITIES> 100144
<BONDS> 6779162
0
0
<COMMON> 0
<OTHER-SE> (498601)
<TOTAL-LIABILITY-AND-EQUITY> 6380705
<SALES> 0
<TOTAL-REVENUES> 513471
<CGS> 0
<TOTAL-COSTS> 118575
<OTHER-EXPENSES> 42341
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314441
<INCOME-PRETAX> 38114
<INCOME-TAX> 0
<INCOME-CONTINUING> 38114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38114
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0
</TABLE>
