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 QUARTERLY PERIOD ENDED MAY 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number: 0-18247
RETAIL PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
Virginia 04-3060233
(State of organization) (I.R.S.Employer
Identification No.)
1285 Avenue of the Americas, New York, New York 10019
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 713-4264
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Shares of Common Stocks None
Securities registered pursuant to Section 12(g) of the Act:
SHARES OF COMMON STOCK
(Title of class)
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 ____
Shares of common stock outstanding as of May 31, 1996: 5,010,050. The
aggregate sales price of the shares sold was $100,201,000. This does not
reflect market value. There is no current market for these shares.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
BALANCE SHEETS
May 31, 1996 and August 31, 1995 (Unaudited)
(In thousands)
ASSETS
May 31 August 31
------ ---------
Operating investment properties
held for sale, net (Note 5) $ 187,601 $ 192,311
Cash and cash equivalents 7,057 5,943
Escrowed cash 1,167 1,067
Accounts receivable, net 985 170
Other assets 45 77
Prepaid expenses 121 308
Capital improvement reserve 1,331 1,201
Deferred expenses, net 1,100 1,467
---------- ----------
$ 199,407 $ 202,544
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable - affiliates $ 16 $ 4
Accounts payable and accrued expenses 1,743 1,316
Mortgage interest payable 316 358
Security deposits and other liabilities 153 768
Note payable - affiliate 1,136 1,168
Mortgage notes payable, net 155,749 156,508
Shareholders' equity 40,294 42,422
---------- ----------
$ 199,407 $ 202,544
========== ==========
See accompanying notes.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF OPERATIONS
For the three and nine months ended May 31, 1996 and 1995 (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
May 31, May 31,
--------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rental income and expense
reimbursements $ 6,521 $ 6,501 $18,960 $19,108
Interest income 118 89 363 217
-------- -------- ------- -------
6,639 6,590 19,323 19,325
Expenses:
Interest expense and
related fees 3,661 3,654 11,093 11,240
Depreciation and amortization 1,598 1,590 4,837 4,775
Property operating expenses 648 675 1,933 1,759
Real estate taxes 376 327 1,084 979
Portfolio sale expenses 551 - 1,282 -
General and administrative
expenses 290 352 676 1,237
Loss on impairment of assets
held for sale 128 - 510 -
Bad debt expense 3 10 15 30
Cash management fees 10 2 21 6
Financial and investor
servicing expenses - - - 111
REIT management fees - - - 125
Investment analysis expense - - - 101
--------- --------- -------- ---------
7,265 6,610 21,451 20,363
--------- --------- -------- ---------
Net loss $ (626) $ (20) $ (2,128) $ (1,038)
========= ========= ======== =========
Net loss per share of
common stock $(0.12) $(0.01) $(0.42) $ (0.21)
====== ====== ====== =======
The above net loss per share of common stock is based upon the 5,010,050
shares outstanding during each period.
See accompanying notes.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the nine months ended May 31, 1996 and 1995 (Unaudited)
(In thousands)
Common Stock Additional
$.01 Par Value Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- --------- -----
Shareholders' equity
at August 31, 1994 5,010 $ 50 $87,181 $(38,445) $ 48,786
Net loss - - - (1,038) (1,038)
----- ----- ------- -------- --------
Shareholders' equity
at May 31, 1995 5,010 $ 50 $87,181 $(39,483) $ 47,748
===== ===== ======= ========= ========
Shareholders' equity
at August 31, 1995 5,010 $ 50 $87,181 $(44,809) $ 42,422
Net loss - - - (2,128) (2,128)
----- ----- ------- -------- --------
Shareholders' equity
at May 31, 1996 5,010 $ 50 $87,181 $(46,937) $ 40,294
===== ===== ======= ======== ========
See accompanying notes.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ (2,128) $(1,038)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 4,837 4,775
Amortization of loan buydown fees 732 1,169
Amortization of deferred financing costs 286 9
Loss on impairment of assets held for sale 510 -
Changes in assets and liabilities:
Accounts receivable (815) (722)
Other assets 32 (125)
Prepaid expenses 187 177
Deferred expenses (172) (128)
Accounts payable - affiliates 12 (65)
Accounts payable and accrued expenses 427 (200)
Mortgage interest payable (42) 190
Security deposits and other liabilities (615) (667)
-------- -------
Total adjustments 5,379 4,413
-------- -------
Net cash provided by operating activities 3,251 3,375
-------- -------
Cash flows from investing activities:
Additions to operating investment properties (384) (190)
Net (additions to) withdrawals from escrowed cash (100) 130
Additions to capital improvement reserve (130) (2)
Master lease payments refunded - (3)
-------- -------
Net cash used in investing activities (614) (65)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of mortgage notes payable - 37,300
Deferred loan costs - (1,309)
Principal repayments on mortgage notes payable (1,491) (38,096)
Principal repayments on note payable - affiliate (32) -
-------- -------
Net cash used in financing activities (1,523) (2,105)
-------- -------
Net increase in cash and cash equivalents 1,114 1,205
Cash and cash equivalents, beginning of period 5,943 3,282
-------- -------
Cash and cash equivalents, end of period $ 7,057 $ 4,487
======== =======
Cash paid during the period for interest
and related fees $ 10,117 $ 9,872
======== =======
See accompanying notes.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
Notes to Financial Statements
(Unaudited)
1. General and Recent Business Developments
The accompanying financial statements, footnotes, and discussion should
be read in conjunction with the financial statements and footnotes contained
in the Company's Annual Report for the year ended August 31, 1995. In the
opinion of management, the accompanying financial statements, which have not
been audited, reflect all adjustments necessary to present fairly the
results of the interim period. All of the accounting adjustments reflected
in the accompanying interim financial statements are of a normal recurring
nature.
As reported in the Special Update to Shareholders dated March 15, 1996,
the Company announced the execution of a definitive agreement for the sale
of its assets to Glimcher Realty Trust ("GRT"). Under the original terms of
the agreement, GRT was to have purchased the properties of the Company
subject to certain indebtedness for an aggregate purchase price of $203
million plus prepayment penalties on debt to be prepaid and assumption fees
on debt to be assumed, subject to certain adjustments. As of May 14, 1996,
the terms of the purchase contract were amended to reduce the aggregate
purchase price to $197 million plus prepayment penalties and assumption
fees. The sale transaction closed into escrow on June 27, 1996 with GRT
depositing the net proceeds required to close the transaction in the form of
bank letters of credit. Consummation of the sale remains subject to approval
by the shareholders of the Company and may also be terminated by the Company
in accordance with the fiduciary obligations of its Board of Directors.
During the escrow period in which the Company will seek to obtain the
required shareholder approval, the Company's operating properties will be
managed by GRT pursuant to a management agreement which is cancellable in
the event that the sale is not completed. Under the terms of the management
agreement, GRT will receive a base fee of 3% of the gross operating revenues
of the properties. In addition, in the event that the sale is successfully
consummated, GRT would earn an incentive management fee equal to the net
cash flow of the properties attributable to the period commencing on May 14,
1996 and ending on the date of the final closing of the sale transaction. If
the sale is completed, the Company will be entitled to interest earnings
during the escrow period on net proceeds of approximately $37,401,000 at a
rate equivalent to the published market rate on 6-month U.S. Treasury Bills
as of June 20, 1996. The sale agreement with GRT calls for GRT to receive
certain compensatory payments in the event that the sale is not consummated
for certain specified reasons. A proxy statement regarding the sale
transaction is currently being prepared, and it is expected that the Board
will distribute it to the Company's shareholders for approval during the
fourth quarter of fiscal 1996. A Special Meeting of the shareholders is
expected to be held in October 1996 to vote on the transaction and the
complete liquidation and dissolution of the Company. Pursuant to the
Company's Articles of Incorporation and Virginia law, the sale of all, or
substantially all, of the Company's real estate assets requires shareholder
approval. Approval by two-thirds of the Company's outstanding shares would
be required in order to proceed with the sale transaction. In the event that
the sale transaction is approved and completed, the Company is expected to
be liquidated within a reasonable time period following the closing of the
transaction.
Because the sale of the Company's real estate assets remains contingent
upon the required shareholder approval, there can be no assurances that such
a transaction will be completed. Nonetheless, since the Board has committed
to pursue this course of action, the Company's financial statements as of
May 31, 1996 and August 31, 1995 reflect the reclassification of operating
investment properties and certain related assets as operating investment
properties held for sale and the writedown of the individual operating
properties to the lower of adjusted cost or net realizable value. The
Company recorded a loss for financial reporting purposes of $3,850,000 for
the year ended August 31, 1995 in connection with this accounting treatment.
An additional loss of $510,000 was recognized for the nine months ended May
31, 1996 to reserve for certain additional capitalized costs related to
specific properties for which impairment losses were recorded in fiscal
1995. See Note 5 for a further discussion. The Company would adopt the
liquidation basis of accounting, whereby all assets and liabilities would be
carried at their estimated settlement amounts, upon approval of the sale
transaction by the requisite vote of the shareholders.
<PAGE>
2. Escrowed Cash
Escrowed cash consists of various lender escrows and real estate tax and
insurance premium escrows. The lender escrows are amounts held by one
mortgage lender to be released upon the completion of certain construction
projects and other events relating to the loan secured by Cross Creek Plaza,
Cypress Bay Plaza and Walterboro Plaza (see Note 6). The balance at both May
31, 1996 and August 31, 1995 of the lender escrows amounted to $75,000. The
Company maintains separate real estate tax and insurance premium escrows for
each property. The balance of these escrows was $1,092,000 and $992,000 at
May 31, 1996 and August 31, 1995, respectively. Real estate tax and
insurance premium escrows for Cross Creek Plaza, Cypress Bay Plaza, Marion
Towne Center, Southside Plaza and Walterboro Plaza are controlled by the
respective mortgage lenders. The remainder of the funds segregated for the
payment of real estate taxes and insurance premiums are not restricted by
third parties.
3. Capital Improvement Reserve
The Company maintains a capital improvement reserve to cover the cost of
potential future capital improvement expenditures related to the operating
investment properties. The balance of the capital improvement reserve at May
31, 1996 and August 31, 1995 was $1,331,000 and $1,201,000, respectively.
The Company funded $.06 per square foot of leasable space owned
(approximately 4.4 million square feet) to the capital improvement reserve
on an annual basis through February 29, 1996. The Company discontinued
funding this reserve account in the third quarter of fiscal 1996 as a result
of the proposed sale of the Company's assets as discussed in Note 1. As of
May 31, 1996, in accordance with the terms of the sale agreement discussed
in Note 1, the Company remains obligated to fund approximately $500,000 in
capital items prior to the final closing of the sale transaction and to
establish a repair program for two roofs for which the Company is proceeding
on claims against the manufacturer. In the event that the sale transaction
is completed, the capital improvement reserve would be used for these two
purposes and any remaining funds would be available for distribution to the
shareholders. The capital improvement reserve is not restricted by any third
parties.
4. Related Party Transactions
For the six months ended February 28, 1995, the Advisor earned
management fees equal to .25% per annum of the capital contributions of the
Company, or $125,000, in accordance with the Advisory Agreement. In
addition, an affiliate of the Advisor was reimbursed for $111,000 for
providing certain financial, accounting and investor communication services
to the Company for the six months ended February 28, 1995. Effective March
1, 1995, the Advisor agreed to waive its management fees and agreed that it
will not be reimbursed for providing certain financial, accounting and
investor communication services to the Company through the earlier to occur
of March 1, 1997 or the date of the annual meeting of the Board of
Directors.
Mitchell Hutchins Institutional Investors, Inc. ("Mitchell Hutchins")
provides cash management services with respect to the Company's cash assets.
Mitchell Hutchins is a subsidiary of Mitchell Hutchins Assets Management,
Inc., an independently operated subsidiary of PaineWebber. For the
nine-month periods ended May 31, 1996 and 1995, Mitchell Hutchins earned
fees totalling $21,000 and $6,000, respectively, for managing the Company's
cash assets. Accounts payable - affiliates at May 31, 1996 and August 31,
1995 consist of $16,000 and $4,000, respectively, payable to Mitchell
Hutchins.
In September 1993, in order to take advantage of a negotiated
prepayment right which was due to expire, PaineWebber Properties
Incorporated (PWP), a general partner of the Advisor, purchased the mortgage
note secured by Applewood Village from the original lender at par for
$5,175,000. The Applewood Village mortgage loan was refinanced in June 1995
for $4,000,000 leaving a balance of $1,175,000 which PWP agreed to hold as
an unsecured note payable. Subsequent to the quarter ended May 31, 1996, PWP
agreed to release the Company from its remaining obligation under this
promissory note. Effective June 1, 1996, the outstanding balance of this
note payable to affiliate, of $1,136,000, was forgiven. The gain on
forgiveness of indebtedness resulting from this transaction will be
recognized in the Company's statement of operations in the fourth quarter of
fiscal 1996.
5. Operating Investment Properties
The Company invested its initial net offering proceeds through the
acquisition of 22 Wal-Mart anchored shopping centers. The name, location and
size of the acquired properties, along with information related to the
respective purchase prices and carrying values as of May 31, 1996, are as
follows (in thousands):
<TABLE>
<CAPTION>
Costs
Name Acquisition Capitalized Master Adjusted
Location Date Purchase Fees and Subsequent to Lease Cost at
Size Acquired Price Expenses (1) Acquisition Payments (2) 5/31/96
- - -------- -------- ------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Village Plaza 8/16/89 $23,975 $394 $ 826 $618 $ 24,577
Augusta, GA
490,970
square feet
Logan Place 1/18/90 4,917 189 16 232 4,890
Russellville, KY
114,748
square feet
Piedmont Plaza 1/19/90 13,500 263 29 107 13,685
Greenwood, SC
249,052
square feet
Artesian Square 1/30/90 6,990 203 989 392 7,790
Martinsville, IN
177,428
square feet
Sycamore Square 4/26/90 4,970 172 23 130 5,035
Ashland City, TN
93,304
square feet
Audubon Village 5/22/90 6,350 215 30 - 6,595
Henderson, KY
124,592
square feet
Crossroads Centre 6/15/90 9,914 246 42 - 10,202
Knoxville, TN
242,430
square feet
<PAGE>
<CAPTION>
Costs
Name Acquisition Capitalized Master Adjusted
Location Date Purchase Fees and Subsequent to Lease Cost at
Size Acquired Price Expenses (1) Acquisition Payments (2) 5/31/96
<S> <C> <C> <C> <C> <C> <C>
- - -------- -------- ------- ------------ ------------ ------------ -------
(continued)
East Pointe Plaza 8/07/90 13,936 269 737 306 14,636
Columbia, SC
279,261
square feet
Walterboro Plaza - 12/19/90 6,645 284 22 136 6,815
Phases I and II
Walterboro, SC
132,130
square feet
Cypress Bay Plaza 12/19/90 12,235 215 94 522 12,022
Morehead City, NC
258,245
square feet
Cross Creek Plaza 12/19/90 13,565 302 20 525 13,362
Beaufort, SC
237,765
square feet
Lexington Parkway
Plaza 3/05/91 10,290 251 115 208 10,448
Lexington, NC
210,150
square feet
Roane County
Plaza 3/05/91 7,000 197 - 43 7,154
Rockwood, TN
160,198
square feet
Franklin Square 6/21/91 9,018 232 45 26 9,269
Spartanburg, SC
237,062
square feet
Barren River Plaza 8/09/91 11,788 412 49 57 12,192
Glasgow, KY
234,795
square feet
<PAGE>
<CAPTION>
Costs
Name Acquisition Capitalized Master Adjusted
Location Date Purchase Fees and Subsequent to Lease Cost at
Size Acquired Price Expenses (1) Acquisition Payments (2) 5/31/96
- - -------- -------- ------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
(continued)
Cumberland
Crossing 8/09/91 7,458 370 32 116 7,744
LaFollette, TN
144,734
square feet
Applewood Village 10/25/91 6,965 389 - 25 7,329
Fremont, OH
140,039
square feet
Aviation Plaza 8/31/92 8,349 337 - - 8,686
Oshkosh, WI
174,715
square feet
Crossing
Meadows Plaza 8/31/92 12,100 356 6 - 12,462
Onalaska, WI
233,984
square feet
Southside Plaza 10/21/92 9,200 356 7 - 9,563
Sanford, NC
172,293
square feet
College Plaza 4/29/93 9,900 461 - 2 10,359
Bluefield, VA
178,431
square feet
Marion Towne 6/23/93 7,907 624 12 - 8,543
Center
Marion, SC
156,543
square feet
-------- ------ ------ ------ --------
$216,972 $6,737 $3,094 $3,445 $223,358
======== ====== ====== ====== ========
</TABLE>
(1) Acquisition fees and expenses include a 3% fee paid to PWP and other
capitalized costs incurred in connection with the acquisition of the
properties (e.g. legal fees, appraisal fees, other closing costs,
etc.). Certain expenses incurred to investigate potential investments
were recorded as other assets pending the closing of a transaction and
were reclassified after acquisition to the cost basis of the related
property. Expenses incurred to review potential investments which were
subsequently not acquired by the Company were charged to investment
analysis expense once the Company stopped pursuing the acquisition.
(2) The Company originally entered into master lease agreements with the
sellers and certain of their affiliates (the "Guarantors") of each of
the operating properties acquired. The master lease agreements
generally provided that, for a period of up to 36 to 60 months
(depending on the credit status of the tenant in occupancy) from the
date of the acquisition of the operating property, the Guarantors
guaranteed that the aggregate cash flow from all non-anchor tenants
would not be less than the aggregate pro-forma net cash flow from
non-anchor tenants projected at the time of the purchase. In the event
that the actual aggregate net cash flow was less than the guaranteed
amount, the Guarantors were obligated to make cash payments to the
Company equal to any such deficit. All amounts earned under the master
lease agreements were treated as purchase price adjustments and
recorded as reductions to the carrying values of the related operating
property for financial reporting purposes. Subsequent to the quarter
ended May 31, 1996, the final master lease covering the Applewood
Village property was terminated. As a result, the Company has no
further rights or obligations under the master leases.
As discussed in Note 1, as a result of the decision by the Board to pursue
a sale of the Company's portfolio of properties, the Company's operating
investment properties and certain related assets have been classified as
investment properties held for sale on the accompanying balance sheets at
May 31, 1996 and August 31, 1995. The balances of investment properties held
for sale are net of an allowance for possible impairment loss of $4,360,000
and $3,850,000 at May 31, 1996 and August 31, 1995, respectively, which
reflect the writedown of such assets to the lower of adjusted cost or net
realizable value. Such allowance applies only to the properties for which
losses are expected based on their estimated fair values. The expected gains
on properties for which the estimated fair value less costs to sell exceeds
the adjusted cost basis would be recognized in the period in which a sale
transaction is completed. Based on the proposed aggregate purchase price for
the Company's assets discussed in Note 1, the Company would have recognized
a net gain of approximately $9 million for financial reporting purposes if
the potential sale transaction had been completed as of May 31, 1996. The
Company will continue to recognize depreciation on its assets held for sale
through the date of disposal which would increase the amount of the
aggregate gain recognized upon the completion of the transaction. Costs to
proxy the Company's shareholders and complete the potential sale transaction
will be expensed as incurred.
Operating investment properties held for sale on the accompanying balance
sheets as of May 31, 1996 and August 31, 1995 are comprised of the following
amounts (in thousands):
May 31 August 31
------ ---------
Land $ 37,845 $ 37,845
Buildings and improvements 175,837 175,453
Furniture and equipment 9,676 9,676
--------- ---------
223,358 222,974
Less: accumulated depreciation (32,131) (27,409)
--------- ---------
191,227 195,565
Deferred rent receivable 305 305
Deferred leasing commissions, net 429 291
--------- ---------
191,961 196,161
Less: Allowance for possible
impairment loss (4,360) (3,850)
--------- ---------
$ 187,601 $ 192,311
========= =========
<PAGE>
6. Mortgage Notes Payable
Mortgage notes payable, reduced by unamortized loan buydown fees (see
below), at May 31, 1996 and August 31, 1995 consist of the following (in
thousands):
May 31 August 31
------ ---------
Mortgage notes payable to a
financial institution which $ 49,005 $ 49,005
are secured by Village Plaza,
Piedmont Plaza, Artesian Square, (2,156) (2,504)
Logan Place, Sycamore Square and --------- --------
Crossroads Centre. These mortgage 46,849 46,501
notes require monthly payments of
interest only at 8% for the first
seven years and then principal and
interest at 8% until maturity which
ranges from November 1, 1999 to
July 1, 2000. These notes contain
certain cross default and cross
collateral provisions. See
discussion of effective interest
rates and loan buydown fees below.
Mortgage notes payable to a financial
institution which are secured by East 24,486 24,678
Pointe Plaza, Cumberland Crossing (918) (1,022)
and Barren River Plaza. The --------- --------
mortgage note on East Pointe Plaza, 23,568 23,656
in the principal amount of $11,150,
calls for monthly interest-only
payments at 8% per annum through
June 1996. The balance of these
mortgage notes require monthly
payments of principal and interest
at 8% through June 1996. Effective
June 10, 1996, all three notes
require monthly payments of
principal and interest at 8.75% per
annum through maturity on June 10,
2001. These notes contain certain
cross default and cross collateral
provisions. See discussion of
effective interest rates and loan
buydown fees below.
Mortgage note payable to a financial
institution secured by Franklin Square. 6,600 6,600
The note requires monthly interest- (10) (83)
only payments at 8% per annum until ------- ------
maturity, which is scheduled for 6,590 6,517
June 21, 1996. See discussion of
effective interest rates, loan
buydown fees and terms of extension
agreement below.
Mortgage note payable to a 23,057 23,680
financial institution secured by
Cross Creek Plaza, Cypress Bay
Plaza and Walterboro Plaza. The
loan bears interest at a variable
rate equal to 30-day LIBOR plus
3.50% per annum for the first
twelve months (9.19% as of May 31,
1996), 30-day LIBOR plus 3.75% for
the next twelve months and 30-day
LIBOR plus 4.25% for the final
twelve months. Monthly payments of
interest and principal (based on a
15-year amortization schedule) are
due until maturity on December 10,
1997.
<PAGE>
(continued) May 31 August 31
------ ---------
Mortgage notes payable to a financial
institution secured by Audubon Village, 17,207 17,487
Lexington Parkway Plaza and Roane
County Plaza. The notes secured by
the Lexington and Roane properties
bear interest at a fixed rate of
9.125% per annum and require
monthly payments of principal and
interest aggregating $119 through
maturity on March 1, 2015. The note
secured by Audubon Village bears
interest at 8.75% per annum and
requires monthly payments of
principal and interest of $43
through maturity on June 1, 2000.
Mortgage notes payable to a financial
institution which are secured by 16,179 16,321
Aviation Plaza and Crossing Meadows. (671) (815)
Monthly payment terms for the loan -------- --------
secured by Aviation Plaza, in the 15,508 15,506
principal amount of $6,800, call
for interest only payments at 8%
per annum through August 1, 1995
and principal and interest payments
at 8% thereafter until maturity.
The loan secured by Crossing
Meadows requires monthly payments,
including interest at 8% per annum,
of $71 until maturity. Both notes
are scheduled to mature on June 1,
1999. See discussion of effective
interest rates and loan buydown
fees below.
Mortgage note payable to a financial
institution which is secured by 6,610 6,686
Southside Plaza. The note requires (156) (219)
monthly payments, including interest -------- -----
at 6.83 % per annum, of $46 until 6,454 6,467
maturity on November 5, 1997. See
discussion of effective interest rates
and loan buydown fees below.
Mortgage note payable to a bank 6,862 6,898
which is secured by College Plaza.
Interest on the note accrued at
prime plus 0.75% per annum (9.0% as
of May 31, 1996). Monthly payments
equal to the greater of $58 or
accrued interest for such month
were payable until maturity, which
was originally scheduled for April
23, 1996. See discussion below
regarding extension agreement.
<PAGE>
Mortgage note payable to a 5,774 5,817
financial institution which is
secured by Marion Towne Center. The
note, which was issued on June 23,
1993, calls for monthly payments,
including interest at 8% per annum,
of $44 until maturity on July 1,
2002. The lender has the option,
upon 120 days' written notice, to
call the loan due at the end of
each of the third year and the
sixth year of the loan. If the loan
is not called at such time, the
lender may adjust the interest
rate.
Mortgage note payable to a 3,880 3,979
financial institution secured by
Applewood Village. The note bears
interest at 9% per annum and
requires monthly principal and
interest payments of $41 until
maturity on June 10, 2010.
Total mortgage notes payable, net $155,749 $156,508
======== ========
Summary of outstanding mortgage notes payable
Total outstanding mortgage principal
balances $159,660 $161,151
Aggregate unamortized loan buydown fees (3,911) (4,643)
-------- --------
Total mortgage notes payable, net $155,749 $156,508
======== ========
At the time of the original closing of certain of the mortgage notes
listed above, the Company paid fees to the lenders in return for the
lenders' agreement to reduce the stated interest rate on the loans to 8% per
annum (6.83% in the case of Southside Plaza) over the terms of the loans.
The fees have been recorded as reductions of the outstanding principal
amounts and are being amortized, using the effective interest method, over
the terms of the respective loans. The effective interest rates on these
outstanding loans ranged from 8.47% to 9.76% per annum as of May 31, 1996.
As discussed further in Note 1, the Company has entered into a contract
for the sale of the operating investment properties which serve as
collateral for the above mortgage loans. The obligation to repay the lenders
with respect to such loans at the time of any potential sale transaction
would be equal to the outstanding mortgage principal balance prior to
unamortized loan buydown fees. In conjunction with a sale transaction, the
amount of any remaining unamortized buydown fees would be written off as a
loss on the early extinguishment of debt. In addition, certain of the
Company's outstanding mortgage loans include substantial prepayment
penalties. Under the terms of the potential portfolio sale transaction, the
buyer has agreed to pay the penalties and fees associated with prepaying or
assuming the outstanding mortgage loans.
During the quarter ended May 31, 1996, the Company reached an agreement
with the lender of the College Plaza and Franklin Square notes on terms for
an extension of the two notes. The maturity date of both notes was extended
to March 31, 1997. Subsequent to the original maturity dates, the interest
rate for both mortgage notes will be a variable rate equal to either prime
plus 0.75% or LIBOR plus 2.75% as selected by the Company. Formal closing of
the College Plaza extension agreement occured in May 1996. Formal closing of
the Franklin Square extension agreement is expected to occur during the
fourth quarter of fiscal 1996.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As reported in the Special Update to Shareholders dated March 15, 1996,
the Company announced the execution of a definitive agreement for the sale of
its assets to Glimcher Realty Trust ("GRT"). Under the original terms of the
agreement, GRT was to have purchased the properties of the Company subject to
certain indebtedness for an aggregate purchase price of $203 million plus
prepayment penalties on debt to be prepaid and assumption fees on debt to be
assumed, subject to certain adjustments. As of May 14, 1996, the terms of the
purchase contract were amended to reduce the aggregate purchase price to $197
million plus prepayment penalties and assumption fees. The sale transaction
closed into escrow on June 27, 1996 with GRT depositing the net proceeds
required to close the transaction in the form of bank letters of credit.
Consummation of the sale remains subject to approval by the shareholders of
the Company and may also be terminated by the Company in accordance with the
fiduciary obligations of its Board of Directors. During the escrow period in
which the Company will seek to obtain the required shareholder approval, the
Company's operating properties will be managed by GRT pursuant to a management
agreement which is cancellable in the event that the sale is not completed.
Under the terms of the management agreement, GRT will receive a base fee of 3%
of the gross operating revenues of the properties. In addition, in the event
that the sale is successfully consummated, GRT would earn an incentive
management fee equal to the net cash flow of the properties attributable to
the period commencing on May 14, 1996 and ending on the date of the final
closing of the sale transaction. If the sale is completed, the Company will be
entitled to interest earnings during the escrow period on net proceeds of
approximately $37,401,000 at a rate equivalent to the published market rate on
6-month U.S. Treasury Bills as of June 20, 1996. The sale agreement with GRT
calls for GRT to receive certain compensatory payments in the event that the
sale is not consummated for certain specified reasons. A proxy statement
regarding the sale transaction is currently being prepared, and it is expected
that the Board will distribute it to the Company's shareholders for approval
during the fourth quarter of fiscal 1996. A Special Meeting of the
shareholders is expected to be held in October 1996 to vote on the transaction
and the complete liquidation and dissolution of the Company. Pursuant to the
Company's Articles of Incorporation and Virginia law, the sale of all, or
substantially all, of the Company's real estate assets requires shareholder
approval. Approval by two-thirds of the Company's outstanding shares would be
required in order to proceed with the sale transaction. In the event that the
sale transaction is approved and completed, the Company is expected to be
liquidated within a reasonable time period following the closing of the
transaction.
As discussed further in the Annual Report, the Company's Board of
Directors engaged the investment banking firm of Lehman Brothers Inc.
("Lehman") in June of 1995 to act as its financial adviser and to provide
financial and strategic advisory services to the Board regarding options
available to the Company in light of adverse changes in the market for REIT
stocks at that time which prohibited the Company from completing the final
phase of its restructuring plans. Such plans had included the conversion of the
Company to a self-administered REIT, the completion of a second equity offering
and the listing of the Company's common stock on a national securities
exchange. The strategic options which were considered included a
recapitalization of the Company, sales of the Company's assets and the
exploration of merger opportunities. Lehman's services have included the
solicitation and identification of potential transactions for the Company, the
evaluation of these transactions, and the provision of advice to the Board
regarding them. In November 1995, Lehman presented to the Board a summary of
the proposals received to date. All of the proposals were indications of
interest from third parties to buy the Company's real estate assets. In view of
the existing capital market conditions, the expectations that the Company's
restructuring plans might not be feasible in the near term, and the indications
of interest received, the Board concluded that it would be in the shareholders'
best interests to immediately initiate the process of soliciting offers to
purchase the Company's portfolio of operating investment properties. The Board
instructed Lehman to work with the various third parties that expressed an
interest in such a transaction to obtain transaction terms most favorable to
the Company and its shareholders. During the second quarter of fiscal 1996, the
Board received three offers and, after evaluation of the proposals, selected
the offer from GRT and negotiated a purchase and sale agreement. Subsequent to
the completion of due diligence by GRT and final negotiations, the sale
transaction was closed into escrow as described above.
<PAGE>
While the prospective selling price of the Company's assets
significantly exceeds the book value of the assets, net of accumulated
depreciation and the reserve for impairment loss discussed further below, the
amount is below the aggregate price at which the 22 properties were purchased
by the Company between August 1989 and June 1993. At the present time, real
estate values for retail shopping centers in many markets have been adversely
impacted by the effects of overbuilding and corporate restructurings and
consolidations among retailers which have resulted in an oversupply of space.
In addition, the conditions in the capital markets for public REIT stocks
referred to above have resulted in a drop off in acquisition demand from large
institutional buyers of retail properties. Furthermore, certain strategic
changes in Wal-Mart's corporate growth plans, which are discussed in more
detail in the Annual Report, appear to have resulted in potential buyers
attributing a higher leasing risk to the Company's portfolio of properties. In
light of such conditions, the Board believes that a bulk sale of the portfolio
of properties may result in higher net proceeds than if the properties were
sold on an individual basis, and therefore may represent the best available
course of action for the Company's shareholders. As previously reported, during
the first quarter of fiscal 1996 Wal-Mart announced plans to build a 200,000
square foot Supercenter on land secured by the Company adjacent to Audubon
Village, subject to various regulatory approvals. During the second quarter of
fiscal 1996, the Planning Board in Henderson, Kentucky rejected Wal-Mart's
proposal to construct the Supercenter adjacent to the Company's site. The
Company and Wal-Mart have been discussing potential options in light of this
development. During the third quarter, Wal-Mart decided to discontinue, for the
present time, its efforts to construct a Supercenter store and is currently
operating its existing store in Audubon Village. As discussed further in the
Annual Report, it was anticipated that Wal-Mart would vacate its store at
Applewood Village in Fremont, Ohio. During the second quarter of fiscal 1996,
Wal-Mart vacated, as expected, to relocate to a newly constructed Supercenter
several miles away. During the first quarter of fiscal 1996, the Company
learned that Wal-Mart is also expected to relocate from Piedmont Plaza in
Greenwood, South Carolina to a new Supercenter currently under construction in
that market. Wal-Mart will remain obligated to pay rent and its share of
expenses under the existing leases at Applewood Village and Piedmont Plaza
through the remainder of its lease terms, which run through January 2010 and
September 2009, respectively. Management will continue to work, in conjunction
with GRT during the escrow period, to establish a long-term strategy for these
assets.
At the present time, the leasing status of the Company's non-Wal-Mart
space remains strong. The Company's portfolio of 22 shopping centers was 98%
leased overall as of May 31, 1996, and leased shop space, excluding anchors,
was 91%. During the first quarter of fiscal 1996, Hamrick's, a regional
clothing manufacturer and retailer took occupancy of approximately 17,000
square feet of space at Lexington Parkway Plaza. The Company spent
approximately $87,000 on tenant improvements to prepare the space for this
tenant which opened for business in December 1995. During the second quarter,
an agreement with a third party developer to construct a JC Penney store and a
mini-anchor space on land adjacent to the Aviation Plaza shopping center was
reached. The construction of these stores, which is expected to be completed in
the Fall of 1996, should enhance the appeal of and customer traffic at the
property. During the third quarter, the new Hamrick's and Superpetz anchor
stores totalling 40,000 square feet at East Pointe Plaza opened for business.
The Company spent approximately $379,000 to re-configure this space to
accommodate these two tenants. The only property with any significant vacancy
is Sycamore Square, which was 89% leased as of May 31, 1996. This shopping
center, which is located in Ashland City, Tennessee, is the smallest of the
Company's properties with 93,000 square feet of leasable space.
In addition to the general retail market conditions and Wal-Mart
relocation risk discussed above, the decision by the Board to pursue a sale of
the Company's real estate assets at the present time is also partly based on
the refinancing risk to which the Company has been and would remain subject in
the event that it continues to hold the operating properties for long-term
investment purposes. The first mortgage loans secured by the College Plaza and
Franklin Square properties are held by the same lender and were scheduled to
mature during fiscal 1996. The principal balance of the College Plaza loan at
May 31, 1996 was $6,862,000 and the original maturity date was April 23, 1996.
The principal balance of the Franklin Square loan at May 31, 1996 was
$6,600,000 and the original maturity date was June 21, 1996. During the quarter
ended May 31, 1996, the Company reached an agreement with the lender of the
College Plaza and Franklin Square notes on terms for an extension of the two
notes. The maturity date of both notes was extended to March 31, 1997.
Subsequent to the original maturity dates, the interest rate for both mortgage
notes will be a variable rate equal to either prime plus 0.75% or LIBOR plus
2.75%, as selected by the Company. Formal closing of the College Plaza
extension agreement occured in May 1996. Formal closing of the Franklin Square
extension agreement is expected to occur during the fourth quarter of fiscal
1996. The next significant loan maturities are not scheduled until fiscal 1998.
The obligation to repay the lenders with respect to the outstanding mortgage
loans at the time of any potential sale transaction would be equal to the
outstanding mortgage principal balance prior to unamortized loan buydown fees.
In conjunction with a sale transaction, the amount of any remaining unamortized
loan buydown fees ($3.9 million as of May 31, 1996) would be written off as a
loss on the early extinguishment of debt. In addition, certain of the Company's
outstanding mortgage loans include substantial prepayment penalties. Under the
terms of the proposed portfolio sale transaction, GRT has agreed to pay the
penalties and fees associated with prepaying or assuming the outstanding
mortgage loans.
As a result of the Company's plans to pursue a course of action which is
expected to result in the sale of all of the operating investment properties
during calendar year 1996, the Company's financial statements as of May 31,
1996 and August 31, 1995 reflect the classification of the operating investment
properties and certain related assets as operating investment properties held
for sale and the writedown of the individual properties to the lower of
adjusted cost or net realizable value. The Company recorded an impairment loss
for financial reporting purposes of $3,850,000 for the year ended August 31,
1995 in connection with this accounting treatment. An additional loss of
$510,000 was recognized for the nine months ended May 31, 1996 to reserve for
certain additional capitalized costs related to specific properties for which
impairment losses were recorded in fiscal 1995. The resulting allowance for
possible impairment loss applies only to the properties for which losses are
expected based on their individual estimated fair values. The expected gains on
properties for which fair value less costs to sell exceeds the adjusted cost
basis would be recognized in the period in which a sale transaction is
completed. Based on the proposed aggregate purchase price for the Company's
assets discussed above, the Company would have recognized a net gain of
approximately $9 million for financial reporting purposes if the potential sale
transaction had been completed as of May 31, 1996. The Company will continue to
recognize depreciation on its assets held for sale through the date of disposal
which would increase the amount of the aggregate gain recognized upon the
completion of the transaction. Costs to proxy the Company's shareholders and
complete the potential sale transaction will be expensed as incurred.
As previously reported, in September 1993, in order to take advantage of
a negotiated prepayment right which was due to expire, PaineWebber Properties
Incorporated (PWP), a general partner of the Advisor, purchased the mortgage
note secured by Applewood Village from the original lender at par for
$5,175,000. The Applewood Village mortgage loan was refinanced in June 1995 for
$4,000,000 leaving a balance of $1,175,000 which PWP agreed to hold as an
unsecured note payable. Subsequent to the quarter ended May 31, 1996, PWP
agreed to release the Company from its remaining obligation under this
promissory note. Effective June 1, 1996, the outstanding balance of this note
payable to affiliate, of $1,136,000, was forgiven. The gain on forgiveness of
indebtedness resulting from this transaction will be recognized in the
Company's statement of operations in the fourth quarter of fiscal 1996.
Based on the potential sale of the portfolio, pending the outcome of the
shareholder vote regarding the transaction, the Board has determined that the
payment of regular quarterly dividends will remain suspended for the present
time. As of May 31, 1996, the Company had available cash and cash equivalents
of $7,057,000. In the event that the proposed sale transaction is approved and
completed, a portion of such amount will be used for the Company's working
capital requirements (including portfolio sale expenses), as necessary, through
the date of the Company's liquidation, which would be expected to occur in late
calendar year 1996. If the sale transaction is not completed and the Company
continues its operations as a going concern, such amount would also be used for
leasing costs, financing expenses and, potentially, for dividends to the
shareholders. In addition, as of May 31, 1996 the Company had a capital
improvement reserve of $1,331,000 which is available, in part, to pay for
potential costs of required future capital improvements to the operating
properties. As of May 31, 1996, in accordance with the terms of the sale
agreement discussed above, the Company remains obligated to fund approximately
$500,000 in capital items prior to the final closing of the sale transaction
and to establish a repair program for two roofs for which the Company is
proceeding on claims against the manufacturer. In the event that the sale
transaction is completed, the capital improvement reserve would be used for
these two purposes and any remaining funds would be available for distribution
to the shareholders. The amount of the Company's available cash assets, net of
all disposition-related expenses and after the possible establishment of a
reserve for contingent obligations, would be paid out to the shareholders
following the closing of the proposed sale transaction in the event that such
transaction is successfully completed. Management is currently working to
finalize its estimates of disposition-related expenses and required reserves,
if any, for contingent liabilities. Until such analysis is complete, it is not
possible to determine the amount of any potential liquidating distribution to
the shareholders. In addition, certain net assets and liabilities of the
Company that could not be settled in cash prior to the Company's planned
liquidation date in late calendar year 1996 might be transferred into a
liquidating trust for the benefit of the shareholders. Under such
circumstances, a nominal residual payment to the shareholders out of the
liquidating trust would be expected to be made in a subsequent year. The
Company is generally obligated to distribute annually at least 95% of its
taxable income to its shareholders in order to continue to qualify as a REIT
under the Internal Revenue Code. The Company incurred a loss for both book and
tax purposes in 1995 and, therefore, was not required to pay a cash dividend in
order to retain its REIT status. Due to the non-cash depreciation and
amortization charges which will continue to be recognized for both book and tax
purposes, losses are expected to be reported in 1996 as well, prior to any sale
of the Company's operating investment properties.
<PAGE>
Results of Operations
Three Months Ended May 31, 1996
The Company reported a net loss of $626,000 for the three months ended
May 31, 1996 as compared to a net loss of $20,000 for the same three-month
period in fiscal 1995. The increase in net loss for the third quarter of fiscal
1996 resulted primarily due to costs totalling $551,000 incurred in the current
three-month period in connection with the pending portfolio sale transaction
and the recognition of an impairment loss of $128,000 for the current
three-month period, as discussed further above. The portfolio sale expenses
include certain legal and accounting expenses directly associated with the
transaction and the related shareholder approval process. Such costs will
continue to be expensed as incurred in future quarters. The unfavorable changes
in the Company's net operating results were partially offset by slight
increases in both rental and interest income and a decrease in general and
administrative expenses. Interest income increased by $29,000 for the current
three-month period due to the higher average invested cash reserve balances
which have resulted from the suspension of the Company's dividend payments to
shareholders. General and administrative expenses decreased by $62,000 for the
current three-month period primarily due to a reduction in certain recurring
professional fees.
Nine Months Ended May 31, 1996
The Company reported a net loss of $2,128,000 for the nine months ended
May 31, 1996 as compared to a net loss of $1,038,000 for the same nine-month
period in fiscal 1995. This $1,090,000 increase in net loss resulted primarily
from the combined effect of expenditures totalling $1,282,000 incurred in the
current nine-month period in connection with the pending portfolio sale
transaction and the recognition of an impairment loss of $510,000 for the
current nine-month period, as discussed further above. In addition, rental
revenues decreased by $148,000 primarily due to a decrease in tenant
reimbursements during the nine-month period ended May 31, 1996 when compared to
the same period in fiscal 1995. The Company's portfolio of shopping center
properties was 98% leased overall for both nine-month periods ended May 31,
1996 and 1995. Leased shop space, excluding anchors, averaged 91% for the nine
months ended May 31, 1996, down from 92% for the same period in the prior year.
An increase in property operating expenses of $174,000, which resulted mainly
from an increase in snow removal costs at several properties from the record
breaking snowfall levels this winter, also contributed to the increase in the
Company's net loss for the current nine-month period. The unfavorable changes
in the Company's net operating results were partially offset by an increase in
interest income and decreases in the interest, general and administrative, REIT
management fee and financial and investor servicing expense categories.
Interest income increased by $146,000 due to the higher average invested cash
reserve balances which have resulted from the suspension of the Company's
dividend payments to shareholders. Interest expense decreased by $147,000
during the nine-month period ended May 31, 1996 primarily due to the reduction
in effective interest rates associated with certain loans refinanced in fiscal
1995. General and administrative expenses decreased by $561,000 mainly due to
costs incurred in the prior year related to an independent valuation of the
Company's operating properties which was commissioned in fiscal 1995 as part of
management's refinancing and portfolio management efforts. REIT management fees
and financial and investor servicing expenses declined by a total of $236,000
due to the Advisor's decision to waive collection of such amounts effective
March 1, 1995. As discussed further in the Annual Report, the Advisor agreed to
forego payments for its services as an accommodation to the Company in order to
maximize earnings and cash flow while the strategic plans regarding the
Company's future operations were evaluated and implemented.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously disclosed, an affiliate of the Advisor to the Company was
named as a defendant in a class action lawsuit against PaineWebber Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct investment offerings, including the offering of shares of the
Company's common stock. The Company is not a defendant in this action. In
January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in this class action outlining the terms under which the parties have
agreed to settle the case. Pursuant to that memorandum of understanding,
PaineWebber irrevocably deposited $125 million into an escrow fund under the
supervision of the United States District Court for the Southern District of New
York to be used to resolve the litigation in accordance with a definitive
settlement agreement and a plan of allocation which the parties expect to submit
to the court for its consideration and approval within the next several months.
Until a definitive settlement and plan of allocation is approved by the court,
there can be no assurance what, if any, payment or non-monetary benefits will be
made available to shareholders in Retail Property Investors, Inc.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests and REIT stocks,
including those offered by the Company. The complaint alleges, among other
things, that PaineWebber and its related entities committed fraud and
misrepresentation and breached fiduciary duties allegedly owed to the plaintiffs
by selling or promoting investments that were unsuitable for the plaintiffs and
by overstating the benefits, understating the risks and failing to state
material facts concerning the investments. The complaint seeks compensatory
damages of $15 million plus punitive damages. The eventual outcome of this
litigation and the potential impact, if any, on the Company's shareholders
cannot be determined at the present time.
In June 1996, approximately 50 plaintiffs filed an action entitled
Bandrowski v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests and REIT stocks,
including those offered by the Company. The complaint is substantially similar
to the complaint in the Abbate action described above, and seeks compensatory
damages of $3.4 million plus punitive damages.
In July 1996, approximately 15 plaintiffs filed an action entitled Barstad
v. PaineWebber Inc. in Maricopa County, Arizona Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests and REIT stocks,
including those offered by the Company. The complaint is substantially similar
to the complaint in the Abbate action described above, and seeks compensatory
damages of $752,000 plus punitive damages.
Under certain limited circumstances, pursuant to the Advisory Agreement and
other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with this litigation.
However, PaineWebber and its affiliates have formally waived all such rights
with regard to this litigation and any other similar litigation that has been or
may be threatened, asserted or filed by or on behalf of purchasers of the
Company's common stock. Thus, the Advisor believes that these matters will have
no material effect on the Company's financial statements, taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
A Current Report dated March 12, 1996 on Form 8-K was filed by the
registrant during the third quarter of fiscal 1996, reporting the proposed sale
of the Company's real estate portfolio.
<PAGE>
RETAIL PROPERTY INVESTORS, INC.
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 PROPERTY INVESTORS, INC.
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: July 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended May 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<PERIOD-END> MAY-31-1996
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