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 March 31, 1999
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or
Transition Report Pursuant to Section 13 or 15(d) of
- - ---------- the Securities Exchange Act of 1934
For the Transition period from to
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Commission File Number: 33-20614
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SHOPCO REGIONAL MALLS, L.P.
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Exact Name of Registrant as Specified in its Charter
Delaware 13-3217028
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State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
- - -------------------------------------- -----
Address of Principal Executive Offices Zip code
(212) 526-3183
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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
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<PAGE>
2
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
At March 31, At December 31,
1999 1998
(unaudited) (audited)
- - -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate assets held for disposition $35,280,000 $35,280,000
Cash and cash equivalents 6,943,944 5,952,659
Construction escrows 477,746 473,246
Accounts receivable, net of allowance of
$131,910 in 1999 and 1998 163,196 390,768
Other receivable -- 300,000
Deferred charges, net of accumulated
amortization of $3,975 in 1999 and 1998 995 995
Prepaid expenses 205,933 419,878
- - -------------------------------------------------------------------------------
Total Assets $43,071,814 $42,817,546
===============================================================================
Liabilities, Minority Interest and
Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 211,199 $ 202,161
Other liabilities 10,327 20,577
Mortgage payable 31,025,000 31,025,000
Due to affiliates 16,700 25,549
Security deposits payable 5,271 10,271
Deferred income 451,198 525,051
-----------------------------
Total Liabilities 31,719,695 31,808,609
-----------------------------
Minority Interest (109,357) (118,121)
-----------------------------
Partners' Capital (Deficit):
General Partner (66,844) (70,188)
Limited Partners (70,250 limited partnership
units authorized, issued and outstanding) 11,528,320 11,197,246
-----------------------------
Total Partners' Capital 11,461,476 11,127,058
- - -------------------------------------------------------------------------------
Total Liabilities, Minority Interest
and Partners' Capital $43,071,814 $42,817,546
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the three months ended March 31, 1999
General Limited
Partner Partners Total
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $(70,188) $11,197,246 $11,127,058
Net Income 3,344 331,074 334,418
- - -------------------------------------------------------------------------------
Balance at March 31, 1999 $(66,844) $11,528,320 $11,461,476
===============================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
3
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended March 31,
1999 1998
- - -------------------------------------------------------------------------------
<S> <C> <C>
Income
Rental income $ 924,899 $1,191,460
Escalation income 632,449 701,661
Interest income 83,373 135,317
Miscellaneous income 26,318 19,294
-------------------------
Total Income 1,667,039 2,047,732
- - -------------------------------------------------------------------------------
Expenses
Interest expense 562,328 562,328
Property operating expenses 446,762 433,212
Depreciation and amortization -- 343,762
Real estate taxes 189,907 186,569
General and administrative 124,860 76,159
-------------------------
Total Expenses 1,323,857 1,602,030
- - -------------------------------------------------------------------------------
Income before minority interest 343,182 445,702
Minority interest (8,764) (8,370)
- - -------------------------------------------------------------------------------
Net Income $ 334,418 $ 437,332
===============================================================================
Net Income Allocated:
To the General Partner $ 3,344 $ 4,373
To the Limited Partners 331,074 432,959
- - -------------------------------------------------------------------------------
$ 334,418 $ 437,332
===============================================================================
Per limited partnership unit
(70,250 outstanding) $ 4.71 $ 6.16
- - -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
4
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31,
1999 1998
- - -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 334,418 $ 437,332
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest 8,764 8,370
Depreciation and amortization -- 343,762
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable 227,572 11,443
Other receivable 300,000 --
Deferred rent receivable -- (30,690)
Prepaid expenses 213,945 209,231
Accounts payable and accrued expenses 9,038 (28,943)
Other liabilities (10,250) --
Due to affiliates (8,849) 252
Deferred income (73,853) (62,298)
Security deposit (5,000) --
--------------------------
Net cash provided by operating activities 995,785 888,459
- - -------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Construction escrows (4,500) (4,500)
--------------------------
Net cash used for investing activities (4,500) (4,500)
- - -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 991,285 883,959
Cash and cash equivalents, beginning of period 5,952,659 9,600,824
- - -------------------------------------------------------------------------------
Cash and cash equivalents, end of period $6,943,944 $10,484,783
===============================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 562,328 $ 562,328
- - -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
5
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1998 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all normal and
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of March 31, 1999 and the
results of operations for the three months ended March 31, 1999 and 1998, cash
flows for the three months ended March 31, 1999 and 1998 and the consolidated
statement of partners' capital (deficit) for the three months ended March 31,
1999. 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 1998, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
<PAGE>
6
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
Part 1, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- - -------------------------------
On September 18, 1995, Caldor, an anchor tenant at Cranberry Mall, filed for
protection under the U.S. Bankruptcy Code. In February 1998, Caldor announced
that it would close its store at Cranberry, and did so on May 10, 1998. In July
1998, Caldor rejected its lease with bankruptcy court approval and the
Partnership's claims for unpaid rent and rejection damages under Caldor's lease
in the amount of $833,920.83 were filed shortly thereafter. It is not known at
this time the extent to which these claims will be paid. Although the General
Partner continues working to secure a new anchor tenant for Caldor's space,
attracting a replacement anchor is likely to take time and require substantial
capital outlays by the Partnership to fund alterations necessary to accommodate
another tenant. Given the fact that the Mall is actively being marketed for
sale, it is likely that a replacement for Caldor will not be found prior to a
sale of the Mall.
On July 7, 1997, Montgomery Ward, an anchor tenant at Cranberry Mall filed for
protection under Chapter 11 of the Bankruptcy Code. On October 10, 1997, as part
of its bankruptcy reorganization process, Montgomery Ward announced the closing
of 48 stores. Although the Cranberry Mall store was not among those scheduled to
be closed, Montgomery Ward may in the future, with court approval, choose to
reject or accept the terms of its lease.
During 1998, the Partnership engaged a broker to market Cranberry Mall for sale.
In view of the anticipated sale of the Mall, the Partnership's real estate has
been recorded on the Partnership's balance sheet as "Real estate assets held for
disposition." Real estate assets held for disposition at March 31, 1999 totaled
$35,280,000. Efforts to sell the Mall, however, are likely to be impacted by the
uncertain status of Caldor's space and Montgomery Ward's store. While it is
expected that a contract for a sale of the Mall will be executed in 1999, there
can be no assurance that the Mall will be sold within this time frame or that
such a sale will result in a particular price.
The first and second mortgage notes secured by Cranberry Mall, which totaled
$31,025,000 at March 31, 1999 and December 31, 1998, were scheduled to mature on
April 1, 1999. The General Partner and the mortgage lender, Metropolitan Life
Insurance Company, agreed to allow the Partnership to defer the payment of the
principal balance of the loan to April 1, 2000, provided that the Partnership
continues to pay interest at the same rate and times set forth in the mortgage
notes.
At March 31, 1999, the Partnership had cash and cash equivalents totaling
$6,943,944, compared with $5,952,659 at December 31, 1998. The increase is
primarily due to net cash provided by operating activities, including the
collection of the other receivable as discussed below.
At March 31, 1999, the Partnership's accounts receivable, net of allowance for
doubtful accounts, decreased to $163,196 from $390,768 at December 31, 1998,
primarily due to timing of rental payments.
Other receivable totaled $300,000 at December 31, 1998, representing amounts due
to the Partnership from a prior owner of Assembly Square, pursuant to an
agreement regarding settlement costs associated with environmental remediation
at Assembly Square. This receivable was collected in the first quarter of 1999.
Prepaid expenses decreased to $205,933 at March 31, 1999 from $419,878 at
December 31, 1998, primarily due to the timing of real estate tax payments.
Accounts payable and accrued expenses increased to $211,199 at March 31, 1999
from $202,161 at December 31, 1998, primarily due to an accrual for co-tenancy
provisions for rental income.
<PAGE>
7
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
Deferred income decreased from $525,051 at December 31, 1998 to $451,198 at
March 31, 1999, primarily due to differences in the timing of billing tenants
for their share of real estate taxes.
Results of Operations
- - ---------------------
For the three months ended March 31, 1999, the Partnership generated net income
of $334,418, compared to net income of $437,332, for the corresponding period in
1998. The decrease in net income is primarily due to lower rental income and
higher general and administrative expenses, offset by lower depreciation and
amortization which was suspended beginning in July 1998 in accordance with the
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(FASB No. 121).
For the three months ended March 31, 1999, the Partnership's rental income
totaled $924,899, compared to rental income of $1,191,460, for the corresponding
period in 1998. The decrease in rental income is primarily due to Caldor's
rejection of its lease in July 1998.
Escalation income represents the income received from Mall tenants for their
proportionate share of common area maintenance and real estate tax expenses.
Escalation income totaled $632,449 for the three months ended March 31, 1999,
compared to $701,661 for the corresponding period in 1998. The decrease in
escalation income is primarily due to Caldor's rejection of its lease in July
1998.
Interest income totaled $83,373 for the three months ended March 31, 1999,
compared with $135,317 for the same period in 1998. The decrease is attributed
to a lower average cash balance due to a special cash distribution paid to
partners in the fourth quarter of 1998.
Property operating expenses totaled $446,762 for the three months ended March
31, 1999, compared with $433,212 for the corresponding period in 1998. The
increase is primarily due to higher snow removal costs.
Depreciation and amortization expense totaled $-0- for the three months ended
March 31, 1999, compared with $343,762 for the corresponding period in 1998. The
Partnership suspended depreciation and amortization on July 1, 1998, in
accordance with FASB No. 121.
General and administrative expenses for the three months ended March 31, 1999
were $124,860, compared with $76,159 for the same period in 1998. The increase
reflects higher legal and partnership administrative expenses.
Mall tenant sales at Cranberry for the two months ended February 28, 1999 were
$4,211,000, compared with sales of $4,673,000 for the two months ended February
28, 1998. Mature tenant sales for the two months ended February 28, 1999 were
$4,057,000, compared with sales of $4,234,000 for the two months ended February
28, 1998. As of March 31, 1999 and 1998, Cranberry was 78% and 81% occupied,
respectively (exclusive of anchor and outparcel tenants).
<PAGE>
8
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
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
March 31, 1999.
<PAGE>
9
SHOPCO REGIONAL MALLS, L.P.
AND CONSOLIDATED PARTNERSHIP
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: May 17, 1999 BY: /s/Michael T. Marron
-------------------------------------
Name: Michael T. Marron
Title: President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 6,943,944
<SECURITIES> 000
<RECEIVABLES> 295,106
<ALLOWANCES> 131,910
<INVENTORY> 000
<CURRENT-ASSETS> 7,791,814
<PP&E> 35,280,000
<DEPRECIATION> 000
<TOTAL-ASSETS> 43,071,814
<CURRENT-LIABILITIES> 694,695
<BONDS> 31,025,000
000
000
<COMMON> 000
<OTHER-SE> 11,461,476
<TOTAL-LIABILITY-AND-EQUITY> 43,071,814
<SALES> 924,899
<TOTAL-REVENUES> 1,667,039
<CGS> 000
<TOTAL-COSTS> 446,762
<OTHER-EXPENSES> 314,767
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 562,328
<INCOME-PRETAX> 334,418
<INCOME-TAX> 000
<INCOME-CONTINUING> 334,418
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 334,418
<EPS-PRIMARY> 4.71
<EPS-DILUTED> 4.71
</TABLE>
