United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 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: 33-20614
SHOPCO REGIONAL MALLS, L.P.
-------------------------------
Exact Name of Registrant as Specified in its Charter
Delaware
------------ 13-3217028
State or Other Jurisdiction of --------------
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson
- - -------------------------------------- 10285
Address of Principal Executive Offices -------
Zip Code
(212) 526-3237
-------------------
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 ____
Consolidated Balance Sheets
At June 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 11,329,547 $ 11,329,547
Building 69,261,581 69,255,697
Improvements 2,727,609 2,706,206
83,318,737 83,291,450
Less accumulated depreciation and amortization (11,192,486) (10,129,658)
72,126,251 73,161,792
Cash and cash equivalents 7,580,865 6,315,688
Construction escrows 427,637 416,568
Accounts receivable, net of allowance of
$975,198 in 1996 and $797,783 in 1995 369,204 708,687
Deferred rent receivable 284,350 193,387
Deferred charges, net of accumulated
amortization of $164,407 in 1996 and $122,757
in 1995 367,963 404,321
Prepaid expenses 76,037 454,533
Total Assets $ 81,232,307 $ 81,654,976
Liabilities, Minority Interest and Partners'
Capital
Liabilities:
Accounts payable and accrued expenses $ 551,062 $ 198,949
Mortgage payable 54,940,294 55,323,013
Accrued interest payable - 172,111
Due to affiliates 23,383 17,007
Security deposits payable 13,771 13,771
Deferred income 326,562 454,667
Distributions payable - 265,603
Total Liabilities 55,855,072 56,445,121
Minority interest (405,374) (397,677)
Partners' Capital (Deficit):
General Partner (227,468) (218,681)
Limited Partners(70,250 limited partnership
units authorized issued and outstanding) 26,010,077 25,826,213
Total Partners' Capital 25,782,609 25,607,532
Total Liabilities, Minority Interest
and Partners' Capital $ 81,232,307 $ 81,654,976
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $25,826,213 $(218,681) $25,607,532
Net income 183,864 1,857 185,721
Distributions - (10,644) (10,644)
Balance at June 30, 1996 $26,010,077 $(227,468) $25,782,609
Consolidated statements of Operations
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
Income
Rental income $2,048,923 $2,005,248 $4,095,625 $4,063,687
Escalation income 929,673 1,348,286 2,270,066 2,780,469
Interest income 100,043 96,328 196,151 183,588
Miscellaneous income 52,955 53,418 84,678 101,676
Total Income 3,131,594 3,503,280 6,646,520 7,129,420
Expenses
Interest expense $1,072,889 $1,086,398 $2,149,264 $2,176,141
Property operating expenses 1,112,264 1,265,859 2,323,501 2,463,471
Depreciation and amortization 549,661 640,664 1,104,478 1,277,594
Real estate taxes 372,220 322,255 745,010 694,841
General and administrative 67,049 68,180 134,482 120,980
Total Expenses 3,174,083 3,383,356 6,456,735 6,733,027
Income before minority
interest (42,489) 119,924 189,785 396,393
Minority interest 717 (1,862) (4,064) (5,159)
Net Income(Loss) $ (41,772) $ 118,062 $ 185,721 $ 391,234
Net Income (Loss) Allocated:
To the General Partner $ (418) $ 1,180 $ 1,857 $ 3,912
To the Limited Partners (41,354) 116,882 183,864 387,322
$ (41,772) $ 118,062 $ 185,721 $ 391,234
Per limited partnership unit
(70,250 outstanding) $(.59) $1.66 $2.62 $5.51
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities:
Net income $ 185,721 $ 391,234
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 4,064 5,159
Depreciation and amortization 1,104,478 1,277,594
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Accounts receivable 339,483 51,897
Deferred rent receivable (90,963) (37,980)
Deferred charges (5,292) -
Prepaid expenses 378,496 300,834
Accounts payable and accrued expenses 352,113 (64,169)
Accrued interest payable (172,111) -
Due to affiliates 6,376 5,247
Deferred income (128,105) (90,204)
Net cash provided by operating activities 1,974,260 1,839,612
Cash Flows From Investing Activities:
Additions to real estate (27,287) (284,766)
Construction escrows (11,069) -
Net cash used for investing activities (38,356) (284,766)
Cash Flows From Financing Activities:
Payment of mortgage principal (382,719) (302,461)
Distributions paid - minority interest (11,761) (2,040)
Distributions paid - general partner (10,644) -
Distributions paid - limited partners (265,603) (259,829)
Net cash used for financing activities (670,727) (564,330)
Net increase in cash and cash equivalents 1,265,177 990,516
Cash and cash equivalents, beginning of period 6,315,688 5,514,426
Cash and cash equivalents, end of period $ 7,580,865 $ 6,504,942
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 2,321,375 $ 2,176,141
Notes to the Consolidated Financial Statements
The unaudited consolidated interim financial statements should be read in
conjunction with the Partnership's annual 1995 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of June 30, 1996 and the results of operations and cash
flows for the six months ended June 30, 1996 and 1995 and the consolidated
statement of partner's capital (deficit) for the six months ended June 30,
1996. Results of operations for the period are not necessarily indicative of
the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1995 and no
material contingencies exist, which require disclosure in this interim report
per Regulation S-X, Rule 10- 01, Paragraph (a)(5).
Part 1, Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, the Partnership had cash and cash equivalents totaling
$7,580,865, compared with $6,315,688 at December 31, 1995. The increase is
primarily due to net cash provided by operating activities exceeding net cash
used for investing activities and principal payments made on the Assembly
mortgage note.
Accounts receivable decreased from $708,687 at December 31, 1995 to $369,204 at
June 30, 1996 primarily due to the collection of real estate tax reimbursements
from tenants at both Assembly Square and Cranberry Mall in 1996 and increases
in the allowance for doubtful accounts with respect to several tenants at
Assembly Square.
Deferred rent receivable increased from $193,387 at December 31, 1995 to
$284,350 at June 30, 1996. Deferred rent receivable represents rental income
which is recognized on a straight-line basis over the lease terms which will
not be received until later periods.
Prepaid expenses decreased from $454,533 at December 31, 1995 to $76,037 at
June 30, 1996. The decrease is primarily due to recognition of 1996 first and
second quarter real estate taxes for Cranberry Mall prepaid at December 31,
1995.
Accounts payable and accrued expenses increased from $198,949 at December 31,
1995 to $551,062 at June 30, 1996 primarily due to the accrual for 1996 first
and second quarter real estate taxes for Assembly Square.
Accrued interest payable decreased from $172,111 at December 31, 1995 to $0 at
June 30, 1996. At year-end 1995, one month of interest payable was accrued
whereas the Partnership's accrued interest payable balances were paid in full
as of June 30, 1996.
Deferred income decreased from $454,667 at December 31, 1995 to $326,562 at
June 30, 1996 primarily due to the recognition of previously billed amounts to
tenants for real estate taxes.
Distributions payable decreased to $0 at June 30, 1996 from $265,603 at
December 31, 1995, which represents an accrual for the Partnership's 1995
fourth quarter cash distribution which was paid on February 9, 1996 in the
amount of $3.78 per Limited Partnership Unit. As of May 1, 1996, cash flow
from Assembly Square was not sufficient to meet all of the property's
obligations and only a partial payment of real estate taxes due was made,
thereby constituting a default under the mortgage encumbering the property. The
remainder of the outstanding real estate taxes were paid on July 24, 1996,
thereby curing the default. Based on current estimates of future cash flow
from Assembly Square, the General Partner believes that all of the obligations
under the mortgage loan agreement, including payments of interest and
principal, may not be met in full.
In addition to pursuing a variety of possible leasing alternatives to increase
cash flow at Assembly Square, the General Partner has had preliminary
discussions with the mortgage lender regarding a modification of debt service
payments. There can be no assurances that such discussions ultimately will
result in an agreement which would improve the property's cash flow position.
In addition, the General Partner has begun exploring various redevelopment
strategies for Assembly Square. Therefore, the General Partner suspended cash
distributions to the limited partners beginning with the first quarter of 1996
in order to facilitate payment of the Partnership's debt and other property
obligations as well as to preserve capital which might be required for capital
expenditures at the Mall.
As of the filing date of this report, the following tenants, or their parent
corporations, at Assembly Square have filed for protection under the U.S.
Bankruptcy Code.
Tenant Square Footage Leased Open/Closed
All For A Dollar 3,464 Open
Marianne 6,630 Open
Marianne Plus 6,375 Open
G & G 1,474 Open
Bakers 2,214 Open
Jeans West 1,620 Open
Coda 2,139 Open
These tenants occupy 23,916 square feet, or approximately 15% of Assembly
Square's leasable area (exclusive of anchor tenants), and at this point their
plans to remain at Assembly Square remain uncertain. Pursuant to the
provisions of the U.S. Federal Bankruptcy Code, these tenants may, with court
approval, choose to reject or accept the terms of their leases. Should any of
these tenants exercise the right to reject their leases, this could have an
adverse impact on cash flow generated by Assembly Square and revenues received
by the Partnership. Certain of these tenants have requested rent relief.
On September 18, 1995, Caldor, an anchor tenant at Cranberry Mall, filed for
protection under the U.S. Federal Bankruptcy Code. Caldor has been current
with its rental payments to the Partnership since the bankruptcy filing.
Pursuant to the provisions of the Federal Bankruptcy Code, Caldor may, with
court approval, choose to reject or accept the terms of its lease. Should
Caldor exercise its right to reject the lease, this would have an adverse
impact on cash flow generated by Cranberry Mall and revenues received by the
Partnership. Until Caldor files a plan of reorganization, it is uncertain what
effect this situation will have on the Caldor department store located at
Cranberry Mall or on Cranberry Mall itself, although Caldor could affirm or
reject its lease prior to filing a plan. Caldor has requested that the
Partnership grant it rent relief, which is under negotiation. As of June 30,
1996, no other current tenant at Cranberry Mall had filed for bankruptcy
protection.
Results of Operations
For the three and six months ended June 30, 1996, the Partnership generated a
net loss of $41,772 and net income of $185,721 compared to net income of
$118,062 and $391,234 for the corresponding periods in 1995. The change from
net income to net loss in the three month period and the decrease in net income
for the six month period is primarily due to a decrease in escalation income.
Escalation income, which represents billings to tenants for their proportional
share of common area maintenance, operating and real estate tax expenses,
totaled $929,673 and $2,270,066 for the three and six months ended June 30,
1996 compared to $1,348,286 and $2,780,469 during the same periods in 1995. The
decrease in escalation income is primarily due to a lower anticipated recovery
rate from the Assembly Square tenants for operating expenses during the 1996
periods as a result of a decline in occupancy.
Depreciation and amortization for the three and six months ended June 30, 1996
totaled $549,661 and $1,104,478 compared to $640,664 and $1,277,594 during the
same periods in 1995. The decrease is primarily due to the write-down of the
carrying value of Assembly Square to its estimated fair market value at
December 31, 1995.
General and administrative expenses totaled $67,049 and $134,482 for the three
and six months ended June 30, 1996 compared to $68,180 and $120,980 for the
same periods in 1995. The increase for the six month period is primarily due to
an increase in Partnership administrative expenses and consulting fees related
to Assembly Square.
Assembly Square - Mall tenant sales (exclusive of anchor tenants) for the five
months ended May 31, 1996 and 1995 totaled $7,150,000 and $8,732,000,
respectively, representing an 18% decrease. Mature tenant sales (exclusive on
anchor tenants) for the five months ended June 30, 1996 and 1995 totaled
$6,406,000 and $6,832,000, respectively, representing a 6% decrease. A mature
tenant is defined as a tenant that has been open for business and operating out
of the same store for twelve months or more. Sales results reflect lower
occupancy at the property. In addition, the General Partner attributes the
decrease in sales to a decline in consumer spending on softgoods, particularly
apparel, a trend experienced by retailers across the country, especially in the
Northeast region, and increased competition in the trade area. As of June 30,
1996, Assembly Square was 74% occupied (exclusive of anchor tenants) compared
with a 92% occupancy rate at June 30, 1995.
Cranberry Mall - Mall tenant sales (exclusive of anchor tenants) for the five
months ended May 31, 1996 and 1995 totaled $11,762,000 and $11,596,000,
respectively, representing a 1% increase. Mature tenant sales (exclusive of
anchor tenants) for the five months ended May 31, 1996 and 1995 totaled
$10,666,000 and $10,925,000, respectively, representing a 2% decrease. As of
June 30, 1996 and 1995, Cranberry was 82% and 79% occupied, respectively
(exclusive of anchor and outparcel tenants).
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended June 30, 1996.
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.
SHOPCO REGIONAL MALLS, L.P.
BY: REGIONAL MALLS INC.
General Partner
Date: August 14, 1996
BY: /s/ Paul L. Abbott
Director and Chief
Executive Officer
Date: August 14, 1996 BY: /s/ Robert Hellman
President
Date: August 14, 1996 BY: /s/ Joan Berkowitz
Vice President and Chief
Financial Officer
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 8,008,502
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<RECEIVABLES> 1,344,402
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