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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
$7,950,000 - sales price of assets to be sold by Registrant
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4) Proposed maximum aggregate value of transaction:
$7,950,000
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5) Total fee paid:
$1,590.00
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
A NORTH CAROLINA LIMITED PARTNERSHIP
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PROXY STATEMENT
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This Proxy Statement 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
conditions or state other "forward-looking" information. Although the General
Partner believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, there are certain factors, such
as general economic conditions, local real estate conditions, or weather
conditions, that might cause a difference between actual results and those
forward-looking statements.
SUMMARY OF THE PROPOSAL TO BE CONSIDERED
Retail Equity Partners Limited Partnership, a North Carolina limited
partnership (the "Partnership"), seeks consent, by the affirmative vote of
Limited Partners of record holding more than 50% of the Limited Partnership
Interests held by all Limited Partners of record ("Majority Interest"), to sell
substantially all of the assets of the Partnership for a minimum aggregate sales
price of $7,500,000. Boddie Investment Company, the General Partner of the
Partnership (the "General Partner"), has received, on behalf of the Partnership,
executed Purchase and Sales Agreements ("Purchase Agreement") from unrelated
entities relating to the purchase of substantially all of the Partnership's
assets for an aggregate price of $7,950,000. While the General Partner has every
reason to believe that the Partnership's assets will be sold pursuant to the
Purchase Agreements, each is subject to the satisfaction of certain conditions
prior to consummation of the sale. Accordingly, as is discussed in greater
detail herein, the General Partner believes that it is in the best interests of
the Partnership to sell substantially all of the Partnership's assets for a
minimum aggregate price of $7,500,000. Therefore, the General Partner seeks the
consent of the Limited Partners to sell the Partnership's assets for a minimum
aggregate price of $7,500,000. If the Partnership's assets are not sold pursuant
to the Purchase Agreements, or either of them, the General Partner will continue
to solicit offers to purchase the assets for a minimum aggregate price of
$7,500,000. If the General Partner does not receive a final offer to purchase
the Partnership's assets for an aggregate purchase price of at least $7,500,000,
it will not sell the Partnership's assets without resoliciting the consent of
the Limited Partners.
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The Partnership currently owns two shopping centers, Plaza West
Shopping Center in Raleigh, North Carolina ("Plaza West") and Cape Henry Plaza
in Virginia Beach, Virginia ("Cape Henry" and, together with Plaza West, the
"Shopping Centers" or the "Partnership Assets"). The Shopping Centers comprise
substantially all of the assets of the Partnership and, following the sale
thereof, the assets of the Partnership will consist solely of cash and accounts
receivable. Pursuant to the terms of the Agreement of Limited Partnership dated
June 15, 1987 (the "Partnership Agreement"), the sale of all or substantially
all of the Partnership Assets results in the automatic dissolution of the
Partnership. Following dissolution, the General Partner will liquidate all
liabilities of the Partnership and distribute the remaining cash assets to the
Limited Partners in accordance with the terms of the Partnership Agreement.
Thereafter, the Partnership will be terminated by the filing of a Certificate of
Cancellation with the Secretary of State of North Carolina.
The Shopping Centers are encumbered by mortgage loans from financial
institutions. At March 31, 1998, the end of the Partnership's most recent fiscal
quarter, the aggregate outstanding indebtedness to the mortgage lenders was
$6,796,006. The maturity date of each of the Partnership's outstanding mortgage
loans occurs in August 1998, and it is unlikely that the Partnership will have
the financial ability to meet its loan maturity obligations on such date.
Accordingly, in such event, it will be necessary for the Partnership to
refinance the Partnership's indebtedness upon the maturity of its currently
outstanding mortgage loans. There can be no assurance, however, that replacement
loans will be available with terms and conditions that will enable the
Partnership to refinance successfully. Given the historical results of operation
of the Partnership, the General Partner believes that it is in the best
interests of the Limited Partners to sell the Partnership Assets if a sale can
be effected for an aggregate purchase price of not less than $7,500,000, rather
than to attempt to refinance the indebtedness on the Partnership Assets.
Capitalized terms not otherwise defined in this Proxy Statement shall
have the meanings given them in the Partnership Agreement.
End of Summary
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THE PARTNERSHIP
History
The Partnership is a North Carolina limited partnership which was
organized in 1987 for the purpose of acquiring, holding, operating and managing
three neighborhood shopping centers. The General Partner of the Partnership is a
North Carolina corporation with its principal office in Rocky Mount, North
Carolina.
The Partnership offered a minimum of 50,000 and a maximum of 1,000,000
Beneficial Assignment Certificates ("BACs"), representing beneficial assignments
of limited partnership interests in the Partnership, at $20 per BAC, on a best
efforts basis through Planned Management Company, the dealer/manager. The
Partnership received aggregate subscription funds of $6,671,543 in such
offering, and the offering was closed on April 2, 1990.
The Partnership made cash and leveraged investments in three
neighborhood shopping centers located in Burlington, North Carolina (New Market
Square), Raleigh, North Carolina (Plaza West), and Virginia Beach, Virginia
(Cape Henry). In October 1991, the ownership of New Market Square was
transferred to New Market Square Limited Partnership ("NMS"), a newly formed
partnership. The Partnership was the sole general partner holding a 99.99
percent interest in NMS. In February 1992, NMS filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code. This action was
taken after negotiations to refinance NMS's outstanding mortgage loan in the
amount of $6,400,000 failed and alternative financing could not be obtained. NMS
received court approval to continue normal operations. In May 1993, NMS
successfully completed restructuring of its outstanding mortgage loan with the
lender and emerged from bankruptcy. The principal balance of the mortgage loan
was increased to $6,425,000, the additional $25,000 being attributed to legal
fees incurred in connection with restructuring the loan. In May 1993, a $100,000
principal payment was due and paid.
In August 1994, Rose's, Inc., an anchor tenant at New Market Square,
renounced its lease pursuant to a Chapter 11 bankruptcy filing, vacated the
rental space and ceased making rental payments. Rose's filed a post petition
rent claim against NMS that was settled in February 1995 for $20,000. NMS filed
a claim against Rose's for unpaid future rent. An agreement to fix the claim at
$512,808 was reached in January 1995 and the claim was sold by NMS in March 1995
to an unrelated party for an immediate cash payment of $82,049.
Due to the departure of Rose's, NMS was unable to generate sufficient
cash flow to make full payments required under the mortgage loan that was
restructured in May 1993. The lender and NMS entered into a forbearance
agreement under which NMS agreed to remit to the lender its net cash flow, after
payment of monthly operating expenses. In June 1995, the forbearance agreement
was terminated and the NMS mortgage loan was brought current by using
substantially all of NMS's cash reserves. During the last half of 1995, the
General Partner advanced NMS sufficient funds to cover operating shortfalls.
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In February 1996, the New Market Square land, building and personal
property were sold to an unrelated party for a contract price of $6,558,000,
resulting in a net loss of $499,000. (See discussion in Notes to Financial
Statements included in Item 14 of the Partnership's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "Annual Report"), which
accompanies this Proxy Statement and is incorporated by reference herein.)
Proceeds from the sale were used to retire the outstanding indebtedness on New
Market Square and, in July 1996, NMS was dissolved and a distribution in the
aggregate amount of $297,985 was made to the Limited Partners. In addition, the
Partnership recorded an extraordinary loss of $30,163 in connection with the
sale of the shopping center as a result of write-offs of deferred financing
costs related to the mortgage loan on the property.
As a result of the sale of New Market Square, the Partnership now
operates two neighborhood shopping centers, Plaza West, a 63,800 square foot
property in Raleigh, North Carolina, and Cape Henry, a 50,000 square foot
property in Virginia Beach, Virginia. The Shopping Centers are encumbered by
mortgage loans to financial institutions, having an aggregate indebtedness at
March 31, 1998 of $6,796,006. The Shopping Centers were constructed in 1986 and
acquired by the Partnership in May 1988. In 1997, rental revenue derived from
the Shopping Centers came from net leases of shopping center space to
approximately 24 tenants and from an out-parcel ground lease to a bank. The
Partnership is reimbursed for substantially all common area maintenance and
certain other costs incurred.
Historically, a significant portion of rental revenue from the Shopping
Centers has been derived from anchor tenants. During 1997, the Partnership
received lease payments (including common area maintenance charges) in the
amount of $12,346 from Harris Teeter, which leases 25,000 square feet at Plaza
West, and $15,467 from Food Lion, which leases 33,000 square feet at Cape Henry.
Harris Teeter and Food Lion are the partnership's only tenants that lease more
than 10,000 square feet, and their respective leases have terms extending until
2006.
Both Raleigh and Virginia Beach have strong economies and rapidly
growing populations. The Shopping Centers have been well maintained. Cape Henry
was painted in 1995 and roof repairs were completed in 1996. The parking lot at
Plaza West was repaired in 1996. As a result of these repairs, the Shopping
Centers are in reasonably good physical condition.
Occupancy remains high at both Shopping Centers. At December 31, 1997,
and December 31, 1996, occupancy rates at Cape Henry and Plaza West were 100
percent and 97 percent and 100 percent and 96 percent, respectively. At March
31, 1998, occupancy rates at Cape Henry and Plaza West were 97% and 98%,
respectively. Rental rates for local tenant renewals and new local tenant leases
improved during 1997 at both properties. This improvement is attributable to the
combined effect of an improving economy, good locations and a lack of new
construction of similar type centers.
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Results of Operations for the Year Ended December 31, 1997
The following discussion should be read in conjunction with the
Financial Statements and Notes thereto included in Item 14 of the Annual Report
which accompanies this Proxy Statement and is incorporated by reference herein.
Revenues. Rental revenues in 1997 decreased by 6% from 1996 and by 38%
in 1996 from 1995, primarily attributable, in each case, to the sale of New
Market Square in February 1996. Although total rental revenues decreased,
revenues derived from Cape Henry and Plaza West were consistent in 1997 compared
to 1996, and increased by 4% in 1996 compared to 1995. Occupancy levels at Cape
Henry and Plaza West have remained consistently high.
In 1995, the Partnership recognized approximately $82,000 in other
income related to the sale of its claim against Rose's for unpaid future rent.
There were no other significant income items in 1997, 1996 or 1995.
Expenses. Decreases in operating expenses in 1997 compared to 1996, and
in 1996 compared to 1995, generally reflect the impact of the sale of New Market
Square. For Cape Henry and Plaza West, operating expenses decreased by 10% in
1997 compared to 1996, primarily due to repairs at Plaza West in 1996. For these
two centers, 1996 operating expenses increased approximately 20% compared to
1995 (this increase also reflects repairs at Plaza West in 1996). Depreciation
and amortization were generally unchanged in 1997 compared to 1996. The decrease
in depreciation and amortization in 1996 compared to 1995 reflects the sale of
New Market Square. The decrease in interest expense in 1997 compared to 1996,
and the decrease in 1996 compared to 1995, was again attributable to the sale of
New Market Square.
In late December 1995, the Partnership entered into an agreement to
sell New Market Square Shopping Center, which sale was completed in February
1996. In conjunction with this sale, the Partnership recorded a provision of
$510,000 in 1995 (subsequently reduced by $11,000 in 1996) to reduce the
recorded net book value of New Market Square assets to estimated net realizable
value (contract sale price of $6,558,000 less direct costs of the sale totaling
approximately $214,000). (See discussion in Notes to Financial Statements
included in Item 14 of the Annual Report which accompanies this Proxy Statement
and is incorporated by reference herein.)
Results of Operations for the Period Ended March 31, 1998
Revenues. Rental revenue for the first quarter of 1998 was $257,000, a
decease of 3.2% compared to the first quarter of 1997. During the first quarter
of 1998, Plaza West was 98% occupied, and Cape Henry was 97% occupied. During
the first quarter of 1997, both centers were 100% occupied.
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Expenses. Total expenses for the first quarter of 1998 were $234,000, a
decrease of 19.4% compared to the first quarter of 1997. The primary reason for
this decrease is that no depreciation was recorded in the first quarter of 1998,
compared to a $44,000 depreciation charge in the first quarter of 1997. In
January 1998, both Cape Henry and Plaza West were listed for sale. In accordance
with generally accepted accounting principles, no depreciation is recorded on
assets held for sale. Operating and administrative expenses were generally in
line with management's expectations.
Net Income. Net income for the first quarter of 1998 was $25,000,
compared to a loss of $22,000 for the first quarter of 1997. Again, the increase
in net income is primarily due to the fact that no depreciation was charged in
the first quarter of 1998.
Liquidity and Capital Resources
Cape Henry 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 Shopping Centers, if such needs arise.
During 1997, the Partnership made capital repairs to Plaza West
totaling approximately $115,000. A distribution of approximately $298,000 was
made to the Limited Partners in 1996 from the net proceeds of the sale of New
Market Square. The Partnership made no distributions in 1997 or 1995.
Distributions have been suspended until property operations allow.
In January 1998, both Shopping Centers were listed for sale. As of
March 31, 1998, the General Partner had entered into a contract for sale of
Plaza West, subject to a vote by the Limited Partners. As of such date,
negotiations for the sale of Cape Henry were in final stages, again subject to a
vote by the Limited Partners.
The Partnership's two mortgage loans mature in August 1998. In the
event the Partnership's properties have not been sold prior to that date, it is
unlikely that the Partnership will have the financial ability to meet the loan
maturity obligations and, therefore, the Partnership will be required to
refinance these loans. The General Partner can offer no assurance that, at that
time, replacement financing will be obtainable.
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Recently Issued Accounting Standards
In 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures About Segments of an Enterprise and Related Information.
Statement 131 establishes standards for the way that public entities report
information about operating segments in annual financial statements and requires
that those entities report selected information about operating segments in
interim financial statements. The Partnership will be required to disclose
segment information in accordance with Statement 131 beginning in its 1998
annual report. The Partnership expects that adoption of Statement 131 will not
have a material impact on its financial statements.
Further information concerning the business and operations of the
Partnership is included in the Annual Report and the Partnership's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1998 (the
"Quarterly Report"), each of which is enclosed herewith and incorporated by
reference herein.
REASONS FOR THE PROPOSED TRANSACTION
The Partnership was formed in 1987 with the objectives of quarterly
cash distributions and capital appreciation. To date, the Partnership has not
achieved these objectives. Accordingly, the General Partner believes that now is
the time for the Limited Partners to determine the future of the Partnership.
The Partnership has two options: (i) sell the Shopping Centers, which
will result in the automatic dissolution of the Partnership, and distribute the
remaining assets to the Limited Partners, or (ii) continue to own and operate
the Shopping Centers in the hope that, in time, the performance and value of the
Shopping Centers will improve. For the reasons stated below, the General Partner
believes that the best course of action is for the Partnership to sell the
Shopping Centers, distribute the net proceeds and other assets of the
Partnership and terminate the Partnership.
Loan Maturity. The existing loans on the Shopping Centers mature in
August 1998, and it is unlikely that the Partnership will have the financial
ability to meet its loan maturity obligations on such date. The General Partner
currently is unaware of any loan program that would allow the Partnership to
refinance the current loans without a substantial contribution of new equity
capital. Because the Partnership has no available source of new equity capital,
the General Partner believes that the Partnership will be unable to refinance
the outstanding loans. As a result, the Partnership will be faced with default
when the current loans mature in August of this year. In such event, the
Partnership would be forced to seek the protection of the bankruptcy court to
avoid loss of the Shopping Centers through foreclosure, but there can be no
assurance that such a course of action would be successful. If it were
successful, the Partnership would be allowed to continue to operate the Shopping
Centers for some period of time. If it
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were not successful, the Partnership would lose the Shopping Centers and have
incurred significant expenses in the unsuccessful bankruptcy proceeding. The
General Partner believes that the costs and risks associated with a bankruptcy
proceeding, coupled with the slim prospects of ever refinancing the Shopping
Centers, are too high to justify this course of action.
Financial Condition. Even if the Partnership were able to continue to
operate the Shopping Centers, the partnership would be in a very precarious
financial position. The Partnership has minimal capital reserves and any
negative event, such as a loss of a major tenant in either Shopping Center or
the occurrence of a major maintenance expenditure, could result in the
Partnership being unable to meet its current financial obligations. In order to
reduce this risk, which exists today and will continue to get worse, the
Partnership would have to retain all available cash until sufficient capital
reserves have been established. This will result in no distributions to the
Limited Partners for the foreseeable future.
Current Market Conditions. The market values of the Shopping Centers,
as evidenced by the purchase prices set forth in the Purchase Agreements,
represent a significant improvement over the past several years. Even if the
Partnership were to continue to own and operate the Shopping Centers, there can
be no assurance that the market value of the Shopping Centers would improve
substantially above the current level. To achieve a substantial improvement in
the market value of the Shopping Centers, in the opinion of the General Partner,
would take a number of years of strong economic performance.
Duration of the Partnership, Lack of Liquidity and Availability of Tax
Benefits. The most fundamental reason for selling the Shopping Centers at this
time is that the Partnership has been in existence for ten years, is not making
cash distributions to the Limited Partners, all tax losses are treated as
passive losses, and there is no market for an investment in the Partnership. In
short, Limited Partners are unable to enjoy any current benefits from their
investment in the Partnership. Sale of the Shopping Centers and distribution of
the net assets of the Partnership, while resulting in a substantial loss, will
at least provide some cash to the Limited Partners. Additionally, the sale of
the Shopping Centers will enable the Limited Partners to offset current tax
liability with accrued passive losses.
Summary. As a result of the purchase prices set forth in the Purchase
Agreements, the General Partner believes that the benefits to be derived from
the sale of the Shopping Centers greatly outweigh the risks associated with the
continued ownership and operation of the Shopping Centers. The General Partner
also believes that such benefits outweigh such risks in the event the Shopping
Centers could be sold for a minimum of $7,500,000 were the sales contemplated by
the Purchase Agreements, or either of them, not to close. Accordingly, the
General Partner recommends that the Limited Partners vote FOR the sale of the
Shopping Centers.
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USE OF PROCEEDS AND
DISTRIBUTION TO LIMITED PARTNERS
The following table shows the projected use of proceeds and estimated
distribution for each unit of Limited Partnership Interests outstanding
("Units"). The exact amount of the proceeds available for distribution to the
Limited Partners may be more or less than the estimate set forth below,
depending on the outcome of the final accounting for the sale of the Partnership
Assets. Factors which may affect the distribution to the Limited Partners
include, but are not limited to, the final sales price for the Shopping Centers,
legal fees in connection with the sale of the Shopping Centers and this
solicitation, accounting fees, maintenance requirements of the Shopping Centers
and the operation of the Shopping Centers pending closing of the sale of the
Shopping Centers.
Use of Proceeds and Distribution
(Estimated)
Sales Price $ 7,950,000 $ 7,500,000
Cost of Sale (314,000) (300,000)
(including real estate commissions
payable to third parties, taxes
legal, accounting, partnership
termination expenses and contingency)
Payoff of Outstanding Property Loans (6,796,000) (6,796,000)
Other Assets, net of other Liabilities 122,000 122,000
Net Proceeds 962,000 526,000
Outstanding Units 333,577 333,577
Estimated Distribution per Unit $ 2.88 $ 1.57
The original cost of a Unit was $20.00. On average, Limited Partners
have already received $5.80 per Unit; however, the amount received varies among
Limited Partners based upon the time at which each Limited Partner made his or
her investment in the Partnership. To calculate the estimated amount of your
total distribution upon the sale of the Partnership Assets at an aggregate
purchase price of $7,950,000 and $7,500,000, respectively, divide your initial
investment by $20.00 and multiply the result by the Estimated Distribution per
Unit of $2.88 and $1.57. (Example: If you invested $10,000 in Units, your
estimated total distribution upon a sale of the Partnership Assets at an
aggregate purchase price of $7,950,000 would be $1,440, or $10,000/$20 = 500
Units x $2.88 = $1,440, and your estimated total distribution upon a sale of the
Partnership's Assets at an aggregate purchase price of $7,500,000 would be $785,
or $10,000/$20 = 500 Units x $1.57 = $785.)
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The above information constitutes only the best estimates of the
Partnership's management as to the results of the proposed sale of the
Partnership Assets and distribution to Limited Partners and, therefore, are
subject to change. Actual results of the proposed sale of the Partnership Assets
could differ substantially from such projections and there is no assurance that
Limited Partners will receive the distribution estimated above upon the sale of
the Partnership Assets.
EFFECT OF THE TRANSACTION ON LIMITED PARTNERS
Pursuant to the terms of the Purchase Agreements, the total proceeds
estimated to be received by the Partnership in connection with the sale of the
Shopping Centers is $7,950,000. After payment of the outstanding debt of the
Partnership and costs associated with the sale of the Shopping Centers, net
proceeds from the sale of the Shopping Centers are estimated to be $962,000. The
Partnership's adjusted basis in the Shopping Centers currently is estimated to
be $8,543,565. Thus, the Partnership is expected to recognize a loss of
approximately $593,565.00 as a result of the sale of the Shopping Centers. Since
the Partnership is a partnership for federal and state income tax purposes, the
Partnership will not be able to recognize the loss but such loss will be passed
through to the Limited Partners in proportion to their ownership of the units in
the Partnership. Thus, based on the foregoing estimates, each Unit will be
allocated approximately $1.78 of loss arising from the sale of the Shopping
Centers. The General Partner will provide further information as it becomes
available.
The General Partner is not in a position to advise the Limited Partners
as to the effect of the sale of the Shopping Centers on an individual Limited
Partner's federal, state, or local income tax liability, and each Limited
Partner is encouraged to consult with its own income tax advisors to determine
how the proposed transaction will affect it or its income tax liability.
INFORMATION CONCERNING THE OFFERS
In December, 1997, the General Partner engaged Berkeley Capital
Advisors, LLC, an independent real estate company, to solicit offers to purchase
the Shopping Centers. Based on the offers received, the General Partner selected
the highest offers for each property. As of the date of this Proxy Statement,
the Partnership has executed a Purchase Agreement for each of the Shopping
Centers with the offering parties, neither of whom is related to the
Partnership. The purchase prices established in the Purchase Agreements are
$3,850,000 for Plaza West and $4,100,000 for Cape Henry. Each of the prospective
Purchase Agreements provides for the payment to an Escrow Agent of escrow or
binder deposits, which deposits have been received and may be credited to the
respective purchase prices. In addition, each of the Purchase Agreements
provides for an inspection period during which time the prospective purchasers
have the right to inspect the Shopping Centers and analyze their operations, and
each Purchase Agreement requires the occurrence of certain events, including the
approval of a Majority Interest of the Limited Partners, and the delivery of
certain documents, in each case as conditions precedent to the closing of the
sales. As of the date hereof, the inspection periods
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have not expired; nevertheless, the General Partner has no reason to believe
that the conditions precedent to the sale of the Shopping Centers will not be
fulfilled or that the Shopping Centers will not be sold substantially in
accordance with the terms and conditions of the Purchase Agreements.
In the event either or both of the Shopping Centers are not sold
pursuant to the Purchase Agreements, the General Partner will solicit additional
offers to purchase the Partnership Assets. The General Partner, however, will
not accept an offer to purchase the Partnership Assets unless it, together with
any other offers to purchase the Partnership Assets, provides for the sale of
the Partnership Assets for cash consideration in the minimum aggregate amount of
$7,500,000.
CERTAIN CONDITIONS TO SALE OF THE PARTNERSHIP ASSETS
Section 10.03 of the Partnership Agreement provides that the Limited
Partners shall not exercise their voting rights to approve the sale of all or
substantially all of the assets of the Partnership unless and until the
Partnership has received an opinion of counsel, which counsel is satisfactory to
a majority in interest of the Limited Partners, to the effect that the sale (i)
is legal, (ii) may be effected without subjecting the Limited Partners to
liability as General Partners under the North Carolina Revised Uniform Limited
Partnership Act, and (iii) may be effected without changing the Partnership's
status for tax purposes. Section 10.03 further provides that, for purposes of
Section 10.03, counsel will be deemed satisfactory to the Limited Partners if
proposed by the General Partners and not disapproved in writing within 45 days
by a majority in interest of the Limited Partners.
The General Partner has engaged the services of Poyner & Spruill,
L.L.P., Rocky Mount, North Carolina ("Poyner & Spruill"), to assist in the
preparation of the proxy solicitation materials and to file the same, on behalf
of the Partnership, with the Securities and Exchange Commission. The General
Partner herein and hereby proposes to the Limited Partners that Poyner & Spruill
also be engaged by the Partnership to render the aforesaid legal opinion, and
the General Partner has engaged Poyner & Spruill, subject to disapproval by the
Limited Partners, to render said opinion. Attached as Appendix A to this Proxy
Statement is a copy of the opinion delivered by Poyner & Spruill to the
Partnership in accordance with the provisions of Section 10.03. The General
Partner does not intend to exercise the authority conferred by the Consents
returned pursuant to the solicitation contained herein until a period of 45 days
has expired from the date of this Proxy Statement. Unless the General Partner
receives the written disapproval of a Majority Interest, Poyner & Spruill shall
be deemed satisfactory to the Limited Partners and the General Partners shall
consider the provisions of Section 10.03 to have been satisfied.
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INFORMATION CONCERNING THE SOLICITATION
General
The enclosed Consent is solicited on behalf of the General Partners of
the Partnership. The Partnership's principal executive offices are located at
1021 Noell Lane, Rocky Mount, North Carolina 27802. The telephone number is
(252) 937-2800.
These solicitation materials were mailed to the Limited Partners on or
about May ___, 1998. The cost of this solicitation will be borne by the
Partnership. Certain officers and directors of the General Partner may solicit
consents personally or by telephone or telegram, without additional
compensation.
Consent Required
Approval of the proposal set forth in the accompanying Notice of
Solicitation of Consents of Limited Partners and described herein requires the
affirmative vote of a Majority Interest of the Partnership. Returning the
Consent without indicating a choice will be deemed by the General Partner as
CONSENT to the sale of the Shopping Centers. All Consents are required to be
returned not later than the close of business on July ___, 1998, in order to be
effective. Failure to return a Consent will have the effect of a vote against
the proposal.
Any Limited Partner who executes and delivers a Consent has the right
to revoke it at any time before the authority conferred therein is exercised by
the Partnership by filing with Douglas E. Anderson, Vice President and Secretary
of the General Partner, an instrument revoking such Consent.
Limited Partners of record at the close of business on May 6, 1998 (the
"Record Date") are entitled to notice of the solicitation and to submit
Consents. On May 6, 1998, there were 333,577.1215 outstanding Units held by 455
Limited Partners. No Limited Partner owned or controlled more than 5% of the
Units as of the Record Date.
Effect of Approval
If the proposal is approved by a Majority Interest of the Limited
Partners and the Partnership Assets are sold pursuant to either or both of the
Purchase Agreements, or, if one or both of the Partnership Assets is not sold
pursuant to the Purchase Agreements, the Partnership receives a final offer to
purchase the Partnership Assets for a minimum aggregate price of $7,500,000, and
all conditions in connection with the closing of said offer are satisfied, the
following transactions will occur:
(1) The Partnership will transfer ownership of the Shopping
Centers to the purchasers in exchange for cash;
12
14
(2) The Partnership will prepay, in full, the outstanding
principal balances of the mortgage loans encumbering the Shopping Centers
(including prepayment penalties) of approximately $6,796,006;
(3) The Partnership will collect all accounts receivable due
the Partnership and pay all other liabilities of the Partnership;
(4) The Partnership will distribute all remaining assets in
complete liquidation of the Partnership; and
(5) The Partnership will file a Certificate of Cancellation
with the Secretary of State of North Carolina.
Recommendation of the General Partner
The General Partner believes that the proposed sale of the Partnership
Assets pursuant to the terms and conditions of the Purchase Agreements, and the
sale of the Partnership Assets for a minimum aggregate price of $7,500,000 in
the event either or both of the Shopping Centers is not sold pursuant to the
Purchase Agreements, followed by the complete liquidation of the Partnership, is
in the best interests of the Partnership. The General Partner recommends that
the Limited Partners execute Consents FOR the approval of the transaction
proposed herein.
FINANCIAL STATEMENTS
A copy of each of the Partnership's Annual Report on Form 10-K, without
exhibits, for the fiscal year ended December 31, 1997, and the Partnership's
Quarterly Report on Form 10-Q, without exhibits, for the quarterly period ended
March 31, 1998, each as filed with the Securities and Exchange Commission, is
enclosed herewith and incorporated herein by reference.
By the General Partner
------------------------------------------
Boddie Investment Company
By: Douglas E. Anderson, Vice President
Dated: May ___, 1998
Rocky Mount, North Carolina
13
15
APPENDIX A
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
A NORTH CAROLINA LIMITED PARTNERSHIP
NOTICE OF SOLICITATION OF CONSENTS OF LIMITED PARTNERS
Retail Equity Partners Limited Partnership, a North Carolina limited
partnership (the "Partnership"), hereby solicits from the Limited Partners of
the Partnership (the "Limited Partners") written consent authorizing Boddie
Investment Company, the General Partner of the Partnership (the "General
Partner"), to sell Plaza West Shopping Center, Raleigh, North Carolina, and Cape
Henry Plaza, Virginia Beach, Virginia (collectively, the "Partnership Assets")
for a minimum aggregate purchase price of $7,500,000.00 pursuant to a
transaction that will enable the Partnership to liquidate all liabilities of the
Partnership. Because the Partnership Assets comprise substantially all of the
assets of the Partnership, sale of the Partnership Assets will result in the
automatic dissolution of the Partnership in accordance with the terms and
conditions of the Agreement of Limited Partnership dated as of June 15, 1987
(the "Partnership Agreement").
The proposal is more fully described in the Proxy Statement
accompanying this Notice.
Limited Partners of record at the close of business on May 6, 1998, are
entitled to notice of the solicitation and to submit Consents.
YOUR CONSENT IS IMPORTANT, REGARDLESS OF THE NUMBER OF LIMITED
PARTNERSHIP INTERESTS YOU OWN. TO ASSURE THAT YOUR CONSENT WILL BE CONSIDERED,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED CONSENT AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE NO LATER THAN THE CLOSE OF BUSINESS ON MAY ___, 1998.
By the General Partner
------------------------------------------
Boddie Investment Company
By: Douglas E. Anderson, Vice President
May ___, 1998
16
APPENDIX B
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
1021 NOELL LANE, ROCKY MOUNT, NORTH CAROLINA 27802
CONSENT OF LIMITED PARTNERS
The undersigned Limited Partner of Retail Equity Partners Limited
Partnership (the "Partnership") hereby:
________ CONSENTS to the sale of Cape Henry Plaza and Plaza
West Shopping Center, which constitute substantially
all of the assets of the Partnership, for a minimum
of $7,500,000, which will result in the automatic
dissolution of the Partnership.
________ DOES NOT CONSENT to the sale of Cape Henry Plaza and
Plaza West Shopping Center, which constitute
substantially all of the assets of the Partnership,
for a minimum of $7,500,000, which will result in the
automatic dissolution of the Partnership.
Please indicate your choice by checking one of the above. Failure to indicate a
choice will be deemed by the General Partner as CONSENT to the sale of the
Partnership's assets.
Date:
--------------------------------------
-------------------------------------------
Name of Limited Partner (please print)
-------------------------------------------
Signature of Limited Partner
THIS CONSENT IS SOLICITED ON BEHALF
OF THE PARTNERSHIP BY THE GENERAL PARTNER
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
PLEASE MARK, SIGN, DATE AND RETURN
THIS CONSENT PROMPTLY USING THE
ENCLOSED ENVELOPE.
17
APPENDIX C
[Letterhead of Poyner & Spruill, L.L.P.]
Michael S. Colo
Direct Dial: 919/972-7105
Direct Fax: 919/972-7014
E-Mail: mscolo@poynerspruill.com
May 21, 1998
Retail Equity Partners Limited Partnership
c/o Boddie Investment Company, General Partner
1021 Noell Lane
Rocky Mount, North Carolina 27802
Gentlemen:
The foregoing opinion is rendered pursuant to the provisions of Section
10.03 of the Agreement of Limited Partnership among the Limited Partners and
General Partner (the "Partnership Agreement") of Retail Equity Partners Limited
Partnership (the "Partnership"). Unless otherwise defined herein, capitalized
terms shall have meanings ascribed to them in the Partnership Agreement.
In rendering our opinion, we have (i) examined the Partnership
Agreement, (ii) had discussions with management of the General Partner in
connection with the transaction for which the consent of the Limited Partners of
the Partnership is being solicited, (iii) reviewed applicable law, and (iv)
examined such other laws and documents as we have deemed necessary or
appropriate for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The sale of substantially all of the assets of the
Partnership, in the manner contemplated by the Proxy Statement
dated May __, 1998 (the "Proxy Statement"), resulting in the
automatic dissolution of the Partnership, is legal;
2. The sale of substantially all of the assets of the
Partnership, in the manner contemplated by the Proxy
Statement, may be effected without subjecting the Limited
Partners and BAC holders to liability as general partners
under North Carolina Revised Uniform Limited Partnership Act;
and
3. The sale of substantially all of the assets of the
Partnership, in the manner contemplated by the Proxy
Statement, can be effected without changing the Partnership's
status for tax purposes.
18
Retail Equity Partners Limited Partnership
May 21, 1998
Page 2
Please be advised that we are members of the Bar of the State of North
Carolina and do not purport to be experts in the laws of any jurisdiction other
than the State of North Carolina. Accordingly, this opinion is limited in all
respects to the laws of the State of North Carolina and Federal law. This
opinion is solely for the benefit of the Limited Partners and General Partner of
the Partnership in connection with the transaction contemplated by the
aforementioned Proxy Statement. It may not be otherwise distributed or relied
upon by any person or quoted or reproduced, in whole or in part, in any document
other than the aforementioned Proxy Statement, or filed with any governmental
agency, except in connection with the aforementioned Proxy Statement, without
our prior written consent.
This opinion is specifically limited to the matters expressed herein,
effective as of the date hereof. We assume no duty to inform you of any change
in our opinion hereafter due to any change in law or facts which may hereafter
occur or come to our attention.
Kindest personal regards.
Yours very truly
[Poyner & Spruill, L.L.P.]
MSC/s
19
APPENDIX D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997 or
------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________.
Commission File Number 33-15427
-------
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1590235
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3850 One First Union Center, Charlotte, NC 28202-6032
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704/944-0100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Beneficial Assignment Certificates None
- ---------------------------------- ----
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant at March 20, 1998, was not determinable (no active market).
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 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
--- ---
20
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
TABLE OF CONTENTS
ITEM NO. PAGE NO.
PART I
1 Business 3
2 Properties 4
3 Legal Proceedings 4
4 Submission of Matters to a Vote of Security Holders 4
PART II
5 Market for Registrant's Common Equity and Related 5
Stockholder Matters
6 Selected Financial Data 5
7 Management's Discussion and Analysis of Financial 5
Condition and Results of Operation
8 Financial Statements and Supplementary Data 7
9 Changes in and Disagreements With Accountants on 7
Accounting and Financial Disclosure
PART III
10 Directors and Executive Officers of the Registrant 8
11 Executive Compensation 8
12 Security Ownership of Certain Beneficial Owners and 8
Management
13 Certain Relationships and Related Transactions 8
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on 10
Form 8-K
Retail Equity Partners Limited Partnership 2
21
PART I
ITEM 1. BUSINESS
Retail Equity Partners Limited Partnership (the "Partnership") is a North
Carolina limited partnership, which was organized in 1987 for the purpose of
acquiring, holding, operating and managing three neighborhood shopping centers.
The general partner of the Partnership is Boddie Investment Company ("BIC"), a
North Carolina corporation.
The Partnership offered a minimum of 50,000 and a maximum of 1,000,000
Beneficial Assignment Certificates ("BACs") representing beneficial assignments
of limited partnership interests at $20 per BAC on a best effort basis through
Planned Management Company, the dealer/manager. The Partnership received
aggregate subscription funds of $6,671,543, and the offering closed on April 2,
1990.
The Partnership made cash and leveraged investments in three neighborhood
shopping centers located in Burlington, North Carolina (New Market Square),
Raleigh, North Carolina (Plaza West), and Virginia Beach, Virginia (Cape Henry
Plaza).
In October 1991, the ownership of New Market Square was transferred to New
Market Square Limited Partnership ("NMS"), a newly formed partnership. The
Partnership was the sole general partner holding a 99.99 percent interest in
NMS. In February 1992, NMS filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code. This action was taken after
negotiations to refinance New Market Square's mortgage loan payable of
$6,400,000 failed and alternative financing could not be obtained. NMS received
court approval to continue normal operations. In May 1993, NMS successfully
completed restructuring of the mortgage loan payable with the lender and emerged
from bankruptcy. The principal balance of the mortgage loan was increased to
$6,425,000, the additional $25,000 being attributed to legal fees incurred to
restructure the loan. In May 1993, a $100,000 principal payment was due and
paid.
In August 1994, Rose's Inc., an anchor tenant at New Market Square, renounced
its lease pursuant to a Chapter 11 bankruptcy filing, vacated the rental space,
and ceased making rental payments. Rose's filed a post petition rent claim
against the Partnership, which was settled in February 1995 for $20,000. The
Partnership filed a claim against Rose's for unpaid future rent. An agreement to
fix the claim at $512,808 was reached in January 1995, and the claim was sold in
March 1995 to an unrelated third party for an immediate cash payment of $82,049.
Due to the departure of Rose's, the Partnership was unable to generate
sufficient cash flow to make full payments required under the NMS mortgage loan.
The lender and the Partnership entered into a forbearance agreement under which
NMS remitted to the lender net cash flow, after payment of monthly operating
expenses. In June 1995, the forbearance agreement was terminated and the NMS
mortgage loan was brought current by using substantially all of the
Partnership's cash reserves. During the last half of 1995, BIC advanced the
Partnership sufficient funds to cover operating shortfalls.
In February 1996, the New Market Square land, building and personal property
were sold to an unrelated party for a contract price of $6,558,000, resulting in
a net loss on sale of $499,000.
Cape Henry Plaza and Plaza West are currently held for sale. The general partner
anticipates entering into contracts for sale of both properties in the near
future.
PARTNERSHIP BUSINESS. Following the sale of New Market Square Shopping Center in
February 1996, the Partnership continues to operate two shopping centers, Cape
Henry and Plaza West. Rental revenue is derived from the leasing of shopping
center space to approximately 24 tenants and from a ground lease to a bank for
an out-parcel. The shopping centers are leased subject to net leases. Tenants
reimburse the Partnership for substantially all common area maintenance and
certain other costs incurred.
Retail Equity Partners Limited Partnership 3
22
Historically, a significant portion of rental revenue has been derived from
anchor tenants for which leases extend to 2006. Major tenants (those leasing
greater than 10 percent of total leasable space of 113,800 square feet) are as
follows:
Base Rental Lease
Tenant Shopping Center Square Feet Revenue Expires
- ---------------------------------------------------------------------------------------------------
Harris Teeter Plaza West 25,000 $143,000 2006
Food Lion Cape Henry 33,000 180,000 2006
The Partnership's two properties are located in cities with strong economies and
rapidly growing populations. The properties have been well maintained. Cape
Henry Plaza was painted in 1995 and roof repairs were completed in 1996. The
parking lot at Plaza West was repaved in 1997. With the completion of these
repairs, the centers are in reasonably good physical condition.
Occupancy remains high at both centers. At December 31, 1997, occupancy was 97%
at Cape Henry Plaza and 98% at Plaza West. Rental rates for local tenant
renewals and new local tenant leases continue to improve at both properties.
This improvement appears to be attributable to the combined effect of an
improving economy, good locations and a lack of new construction of similar type
centers.
As of March 20, 1998, the Partnership had no employees.
ITEM 2. PROPERTIES
Both properties are neighborhood shopping centers held subject to loans. The
centers were constructed in 1986 and acquired by the Partnership in May 1988.
Approx. Sq. Ft.
Shopping Center Name Location Rental Space
- -----------------------------------------------------------------------------------------
Plaza West Raleigh, North Carolina 63,800
Cape Henry Plaza Virginia Beach, Virginia 50,000
Summary information regarding occupancy rates is as follows:
As of December 31
1997 1996 1995
- ----------------------------------------------------------------------
Plaza West 98% 100% 100%
Cape Henry Plaza 97% 100% 100%
ITEM 3. LEGAL PROCEEDINGS
The Partnership was not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the fourth
quarter of fiscal year 1997.
Retail Equity Partners Limited Partnership 4
23
PART II
ITEM 5. MARKET FOR REGISTRANT'S BENEFICIAL ASSIGNMENT CERTIFICATES AND
RELATED MATTERS
The Partnership received aggregate subscription funds of $6,671,543 for 333,577
beneficial assignment certificates ("BACs") from approximately 480 investors.
There is currently no established public trading market for the BACs. The
Partnership is unaware of any secondary market for its securities.
During second quarter 1996, the Partnership made a distribution in the amount of
$297,985 to the limited partners. This distribution consisted entirely of return
of capital, and was funded from the net proceeds of the sale of New Market
Square less amounts required to maintain adequate operating reserves. Further
distributions have been suspended until such time that property operations
allow. No distributions were made in 1997 or 1995.
ITEM 6. SELECTED FINANCIAL DATA
For the years ended December 31
1997 1996 (1) 1995 (2) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
Operating Data
Rental revenue $1,032,474 $1,095,417 $ 1,632,519 $ 1,767,669 $ 1,811,601
Net loss (76,500) (150,488) (828,548) (269,830) (277,204)
Net loss per BAC (0.23) (0.45) (2.46) (0.80) (0.82)
Distributions per BAC (3) .00 .00 .00 .00 .00
Balance Sheet Data (at year end)
Total assets 6,348,223 6,490,838 13,029,394 14,116,654 14,493,681
Notes payable 6,812,467 6,874,644 12,797,111 13,060,575 13,266,616
(1) New Market Square Shopping Center was sold to an unrelated third party in
February 1996.
(2) In 1995 the Partnership recorded a charge of $510,000 to reduce the recorded
basis of the New Market Square Shopping Center property to estimated net
realizable value.
(3) Under generally accepted accounting principles, distributions have consisted
entirely of return of capital.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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 management
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, there are certain factors such as general
economic conditions, local real estate conditions, or weather conditions that
might cause a difference between actual results and those forward-looking
statements. This discussion should be read in conjunction with the Financial
Statements and Notes thereto included in Item 14 of this Annual Report.
Retail Equity Partners Limited Partnership 5
24
RESULTS OF OPERATIONS
REVENUES. Rental revenues in 1997 decreased by 6% from 1996, primarily
attributable to the sale of New Market Square in February 1996. Rental revenues
in 1996 decreased by 38% from 1995, again primarily attributable to the sale of
New Market Square in February 1996. Although rental revenues in total decreased,
revenues at the two centers owned throughout the three years, Cape Henry and
Plaza West, were consistent in 1997 compared to 1996, and increased by 4% in
1996 compared to 1995. Occupancy levels at Cape Henry and Plaza West have
remained consistently high.
In 1995 the Partnership recognized approximately $82,000 in other income related
to the sale of its claim against Rose's for unpaid future rent. There were no
other significant income items in 1997, 1996 or 1995.
EXPENSES. Decreases in operating expenses in 1997 compared to 1996, and in 1996
compared to 1995, generally reflect the impact of the sale of New Market Square.
For the two centers owned throughout the three years, operating expenses
decreased by 10% in 1997 compared to 1996, primarily due to repairs at Plaza
West in 1996. For these two centers, 1996 operating expenses increased
approximately 20% compared to 1995 (this increase also reflects the impact of
repairs at Plaza West in 1996). Depreciation and amortization were generally
unchanged in 1997 compared to 1996. The decrease in depreciation and
amortization in 1996 compared to 1995 reflects the impact of sale of New Market
Square. The decrease in interest expense in 1997 compared to 1996, and the
decrease in 1996 compared to 1995, was again attributable to the sale of New
Market Square.
In late December 1995, the Partnership entered into an agreement to sell New
Market Square Shopping Center which was completed in February 1996. In
conjunction with this sale, the Partnership recorded a provision of $510,000 in
1995 (subsequently reduced by $11,000 in 1996) to reduce the recorded net book
value of New Market Square assets to estimated net realizable value (contract
sale price of $6,558,000 less direct costs of the sale totaling approximately
$214,000). (See discussion of New Market Square in Notes to Financial Statements
included in Item 14 of this Annual Report.)
SUMMARY RESULTS OF OPERATIONS. The consolidated statements of operations include
the operations of NMS through February 1996. Decreases in revenues and expenses
in 1996 compared to 1995 generally reflect the effect of the sale of New Market
Square Shopping Center in early February. Summary operating results of Cape
Henry Plaza and Plaza West shopping centers are as follows:
1997 1996 1995
--------------------------------------------
Revenue
Rental revenue $1,032,474 $1,031,987 $ 993,566
Interest 9,205 8,527 5,903
--------------------------------------------
1,041,679 1,040,514 999,469
Expenses
Operating expenses 284,543 314,558 261,708
Depreciation 181,610 177,400 177,534
Amortization 19,194 19,194 19,194
Interest 632,832 638,349 643,379
--------------------------------------------
1,118,179 1,149,501 1,101,815
--------------------------------------------
Net loss $ (76,500) $ (108,987) $ (102,346)
============================================
Retail Equity Partners Limited Partnership 6
25
LIQUIDITY AND CAPITAL RESOURCES
The two remaining shopping centers continue to generate nominal positive cash
flow from operations. The leases held by the Partnership are generally
long-term, with substantially all increases in operating expenses, taxes and
insurance passed through to, and paid by, tenants. Additionally, most leases
include built-in rent increases based on changes in the consumer price index or
percentage rents based on total sales. Although the Partnership currently
generates sufficient cash flow to meet its immediate operating and capital
needs, virtually any adverse development, such as the loss of a major tenant,
the loss of multiple smaller tenants, or the failure of a significant tenant to
pay rent, could create a material deficiency in the Partnership's short-term
liquidity. In addition, the Partnership may not generate sufficient cash flow to
make significant repairs, improvements or modifications to the centers should
such needs arise.
In January 1998, Cape Henry Plaza and Plaza West were listed for sale. The
general partner is currently evaluating numerous offers that have been received,
and anticipates entering into contracts for sale of both centers in the near
future. In the event the properties are sold, the general partner does not
believe that the sale will result in sufficient funds, after repayment of the
first mortgage loans, to allow for more than nominal distributions to investors.
The Partnership's two mortgage loans mature in August 1998. In the event the
Partnership's properties have not been sold prior to that date, the Partnership
will be required to refinance these loans. The general partner can offer no
assurance that, at that time, replacement financing will be obtainable.
During 1997 the Partnership made capital repairs to Plaza West totaling
approximately $115,000. A distribution of approximately $298,000 was made to the
limited partners in 1996 from the net proceeds of the sale of New Market Square.
The Partnership made no distributions in 1997 or 1995. Distributions have been
suspended until property operations allow.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this Annual Report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Retail Equity Partners Limited Partnership 7
26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. The Partnership
Agreement provides that the management of the affairs of the Partnership and the
administration of its day-to-day operations will be performed solely by the
general partner. From the inception of the Partnership until April 14, 1994, the
general partner was BT Venture Partners ("BTVP"), a North Carolina general
partnership formed in June 1985. The two general partners of BTVP were Boddie
Investment Company ("BIC"), a North Carolina corporation, and Tom G. Thornburg
("Thornburg"). In April 1994 BIC purchased Thornburg's interest in BTVP and
certain affiliated partnerships and corporations. In conjunction with this
transaction, BIC became the general partner of the Partnership as of April 14,
1994.
BIC was formed in June 1985 to engage in the business of real estate investment.
B. Mayo Boddie and Nicholas B. Boddie own all of the outstanding shares of
capital stock of BIC and are its only directors. Biographical information
concerning the officers of BIC is set forth below.
B. Mayo Boddie, age 68, President of BIC, together with his brother, Nicholas B.
Boddie, and their late uncle, Carleton Noell, founded Boddie-Noell Enterprises,
Inc. ("Enterprises") in 1961. Enterprises, which is headquartered in Rocky
Mount, North Carolina, is the largest privately owned, and the second largest,
franchisee of Hardee's Restaurants in the United States. Enterprises owns and
operates approximately 365 Hardee's Restaurants. B. Mayo Boddie is chairman of
the board of Enterprises. Mr. Boddie serves as a director of First Union
National Bank of North Carolina. He attended the University of North Carolina at
Chapel Hill.
Nicholas B. Boddie, age 70, a Vice President of BIC, is vice chairman and a
director of Enterprises. He is a director of First Union National Bank of Rocky
Mount. Mr. Boddie attended the University of North Carolina at Chapel Hill.
Douglas E. Anderson, age 50, a Vice President and Secretary of BIC, has been
with Enterprises since 1977 and is currently executive vice president, secretary
and a director of that company. Mr. Anderson is also president of BNE Land and
Development Company, a division of Enterprises, and is Vice President of
Boddie-Noell Properties, Inc., a real estate investment trust traded on the
American Stock Exchange. He serves as a director of Wachovia Bank of Rocky
Mount, North Carolina. He presently serves on the Executive Committee for the
UNC Educational Foundation at Chapel Hill. Mr. Anderson holds a BS degree from
the University of North Carolina at Chapel Hill.
W. Craig Worthy, age 45, Treasurer of BIC, has been with Enterprises since 1979
and is currently senior vice president and chief financial officer of that
company. He serves as a director of First Union National Bank of Rocky Mount,
North Carolina. He received a BA degree from the University of Virginia in 1974
and a Master of Accountancy and of Business Administration from the University
of South Carolina.
ITEM 11. EXECUTIVE COMPENSATION
During the year ended December 31, 1997, the Partnership paid no compensation to
the general partner or to the executive officers, directors or partners of its
affiliates.
Retail Equity Partners Limited Partnership 8
27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are no BAC owners with a 5 percent or greater ownership interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The general partner of the Partnership is BIC, a North Carolina corporation. See
Item 10, Directors and Executive Officers of the Registrant for information
concerning BIC.
BNP Management, Inc. is engaged by the Partnership to provide management and
certain leasing services for its shopping centers. Certain officers and
directors of BIC are also officers and directors of BNP Management, Inc.
Management and partnership administration fees totaling approximately $55,000
were paid to BNP Management, Inc. during 1997. In addition, the Partnership
reimbursed BNP Management, Inc. for certain administrative costs in the amount
of approximately $12,000.
The general partner, subject to audit by independent public accountants,
maintains the books and records of the Partnership. Purchasers of BACs have no
right to participate in the management of the Partnership. It is not intended
that there will be annual meetings of investors.
The Partnership relies on BIC and BNP Management, Inc. for day-to-day
management. BIC and BNP Management, Inc. believe they have sufficient personnel
to be fully capable of discharging their responsibility to all partnerships or
groups to which they are responsible. BIC and BNP Management, Inc. have
conflicts of interest in allocating management time, services and other
functions among affiliated publicly held and privately held entities and other
partnerships or ventures that it may organize. The partners, officers, and
directors of BIC and BNP Management, Inc. will devote only such time to the
affairs of the Partnership as they, within their sole discretion exercised in
good faith, determine to be necessary to carry out their obligations under the
Partnership Agreement.
Retail Equity Partners Limited Partnership 9
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as part of this
Annual Report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
PAGE
Financial Statements and Notes:
Reports of Independent Accountants 12
Consolidated Balance Sheets as of December 31, 1997 and 1996 14
Consolidated Statements of Operations for the Years Ended December 31, 1997,
1996 and 1995 15
Consolidated Statements of Partners' Deficit for the Years 16
Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997,
1996 and 1995 17
Notes to Consolidated Financial Statements 18
Schedules:
Schedule III - Real Estate and Accumulated Depreciation 26
The financial statements and schedule are filed as part of this Annual Report.
All other schedules are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.
(a) 3. Exhibits
The registrant agrees to furnish a copy of all agreements related to long-term
debt upon request of the Commission.
Exhibit No.
2* Plan for Reorganization and Disclosure Statement, a Motion
seeking authority to make post-petition expenditures and
certain other related filings (filed as Exhibit 29(e) to the
Partnership 8-K filing dated February 14, 1992, and
incorporated herein by reference)
4* Retail Equity Partners Limited Partnership Agreement (filed as
Exhibit 4 to the Partnership's Registration Statement (File
No. 33-15427) on Form S-11 and incorporated herein by
reference)
27 Financial Data Schedule (electronic filing)
* Incorporated herein by reference
(b) Reports on Form 8-K:
None
Retail Equity Partners Limited Partnership 10
29
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
March 24, 1998 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized agent)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ B. Mayo Boddie Director March 24, 1998
- --------------------------------
B. Mayo Boddie
/s/ Nicholas B. Boddie Director March 24, 1998
- --------------------------------
Nicholas B. Boddie
Retail Equity Partners Limited Partnership 11
30
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Retail Equity Partners Limited Partnership
We have audited the accompanying consolidated balance sheets of Retail Equity
Partners Limited Partnership as of December 31, 1997 and 1996 and the related
consolidated statements of operations, changes in partners' deficit and cash
flows for the years then ended. Our audits also included the financial statement
schedule as of and for the years ended December 31, 1997 and 1996 listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Retail Equity
Partners Limited Partnership as of December 31, 1997 and 1996 and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule as of and for the years ended December 31, 1997 and
1996 when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 6 to the financial statements, the Partnership's recurring
losses from operations and net capital deficiency raise substantial doubt about
its ability to continue as a going concern. Management's plans as to these
matters are also described in Note 6. The 1997 financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Raleigh, North Carolina
February 4, 1998
Retail Equity Partners Limited Partnership 12
31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Retail Equity Partners Limited Partnership:
We have audited the accompanying consolidated statements of operations, changes
in partners' deficit and cash flows of Retail Equity Partners Limited
Partnership (a North Carolina limited partnership) for the year ended December
31, 1995. These financial statements are the responsibility of the managing
general partner. Our responsibility is to express an opinion on those financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Retail Equity
Partners Limited Partnership for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Charlotte, North Carolina,
February 8, 1996
Retail Equity Partners Limited Partnership 13
32
Retail Equity Partners Limited Partnership
Consolidated Balance Sheets
DECEMBER 31
1997 1996
----------------------------
ASSETS
Investments in shopping centers:
Land $ -- $ 2,094,634
Buildings and improvements -- 5,795,381
Personal property -- 32,181
Less accumulated depreciation -- (1,697,749)
----------------------------
-- 6,224,447
Cash and cash equivalents 76,863 119,440
Restricted cash - tenant security deposits 22,243 25,407
Accounts receivable 51,621 63,925
Prepaids and other assets 30,154 28,625
Deferred cost, net of amortization of $182,142 in 1997
and $162,948 in 1996 9,800 28,994
Property held for sale 6,157,542 --
----------------------------
Total assets $6,348,223 $ 6,490,838
============================
LIABILITIES AND PARTNERS' DEFICIT
Mortgage loans payable $6,812,467 $ 6,874,644
Trade accounts payable and accrued expenses 52,522 52,992
Prepaid rents and tenant security deposits 19,949 23,417
----------------------------
Total liabilities 6,884,938 6,951,053
Partners' deficit:
Limited partners (468,604) (392,869)
General partner (68,111) (67,346)
----------------------------
Total partners' deficit (536,715) (460,215)
----------------------------
Total liabilities and partners' deficit $6,348,223 $ 6,490,838
============================
See accompanying notes.
Retail Equity Partners Limited Partnership 14
33
Retail Equity Partners Limited Partnership
Consolidated Statements of Operations
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------
Revenue:
Rental revenue $1,032,474 $1,095,417 $1,632,519
Interest 9,205 12,934 9,205
Other income -- -- 82,049
--------------------------------------------
1,041,679 1,108,351 1,723,773
Expenses:
Property operations 91,533 153,514 193,793
General and administrative 39,226 31,841 55,496
Property taxes and insurance 98,482 101,743 163,824
Management fees 55,302 58,682 51,330
Depreciation 181,610 177,400 392,188
Amortization 19,194 20,782 31,884
Interest 632,832 696,171 1,153,806
Provision for loss on sale of New Market Square
Shopping Center -- (11,457) 510,000
--------------------------------------------
1,118,179 1,228,676 2,552,321
--------------------------------------------
Loss before extraordinary item (76,500) (120,325) (828,548)
Extraordinary item - loss on extinguishment of debt
-- (30,163) --
--------------------------------------------
Net loss $ (76,500) $ (150,488) $ (828,548)
============================================
Net loss allocated to limited partners (99%) $ (75,735) $ (148,983) $ (820,263)
============================================
Net loss allocated to general partner (1%) $ (765) $ (1,505) $ (8,285)
============================================
Net loss per limited partnership unit $ (0.23) $ (0.45) $ (2.46)
============================================
Weighted average number of limited partnership units
outstanding 333,577 333,577 333,577
============================================
See accompanying notes.
Retail Equity Partners Limited Partnership 15
34
Retail Equity Partners Limited Partnership
Consolidated Statements of Partners' Deficit
LIMITED GENERAL
PARTNERS PARTNER TOTAL
----------------------------------------
Balance at December 31, 1994 $ 874,362 $(57,556) $ 816,806
Net loss (820,263) (8,285) (828,548)
----------------------------------------
Balance at December 31, 1995 54,099 (65,841) (11,742)
Distribution to limited partners (297,985) -- (297,985)
Net loss (148,983) (1,505) (150,488)
----------------------------------------
Balance at December 31, 1996 (392,869) (67,346) (460,215)
Net loss (75,735) (765) (76,500)
----------------------------------------
Balance at December 31, 1997 $(468,604) $(68,111) $(536,715)
========================================
See accompanying notes.
Retail Equity Partners Limited Partnership 16
35
Retail Equity Partners Limited Partnership
Consolidated Statements of Cash Flows
YEAR ENDING DECEMBER 31
1997 1996 1995
-------------------------------------------
OPERATING ACTIVITIES
Net loss $ (76,500) $ (150,488) $(828,548)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 200,804 198,182 424,072
Extraordinary item - loss on early extinguishment of debt -- 30,163 --
Provision for loss on sale of New Market Square -- (11,457) 510,000
Changes in operating assets and liabilities:
Accounts receivable 12,304 49,215 10,295
Prepaids and other assets (1,529) 7,468 15,263
Trade accounts payable and accrued expenses (470) (53,335) (72,302)
Prepaid rent and tenant security deposits (304) (3,147) (9,334)
Accrued interest due to affiliates -- (1,846) 1,846
-------------------------------------------
Net cash provided by operating activities 134,305 64,755 51,292
INVESTING ACTIVITIES
Proceeds from sale of New Market Square -- 6,363,400 --
Additions to shopping center properties (114,705) (25,730) --
-------------------------------------------
Net cash (used in) provided by investing activities (114,705) 6,337,670 --
FINANCING ACTIVITIES
Payments of long-term debt (62,177) (5,922,467) (263,464)
Distribution to limited partners -- (297,985) --
Advances from (repayments to) general partner -- (79,000) 79,000
-------------------------------------------
Net cash used in financing activities (62,177) (6,299,452) (184,464)
-------------------------------------------
Net (decrease) increase in cash and cash equivalents (42,577) 102,973 (133,172)
Cash and cash equivalents at beginning of year 119,440 16,467 149,639
-------------------------------------------
Cash and cash equivalents at end of year $ 76,863 $ 119,440 $ 16,467
===========================================
See accompanying notes.
Retail Equity Partners Limited Partnership 17
36
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Retail Equity Partners Limited Partnership (the "Partnership") is a North
Carolina limited partnership formed to acquire, hold, operate and manage three
neighborhood shopping centers. In October 1991 the ownership of one of the
shopping centers was transferred to a newly formed partnership, New Market
Square Limited Partnership ("NMS"), which was 99.99 percent owned by the
Partnership. In 1996, NMS was sold to an unrelated third party (see Note 5). The
financial statements for the two years ended December 31, 1996 include the
accounts of NMS, and all significant intercompany accounts and transactions have
been eliminated.
Under the terms of the partnership agreement, net income (loss) and cash
distributions from operations are allocated 99 percent to the limited partners
and 1 percent to the general partner. When the limited partners have received
distributions equal to their equity contributions plus a priority return (as
defined), any further taxable income, losses or distributions will be allocated
90 percent to the limited partners and 10 percent to the general partner. Upon
the sale or refinancing of the Partnership property, the partnership agreement
specifies certain allocations of net proceeds.
RENTAL REVENUE AND EXPENSES
Rental revenue is derived from the leasing of shopping center space and from a
ground lease for an out-parcel. Fixed rental amounts are recorded as they accrue
under the terms of each lease. Contingent rents based on tenants' sales or
future changes in the Consumer Price Index are recorded at the time such amounts
are both determinable and due under the terms of related leases. There was no
contingent rental income earned in 1997, 1996 or 1995. The shopping centers are
leased subject to net leases. Tenants reimburse the Partnership for common area
maintenance and certain other expenses incurred.
PROPERTY
All property to be held and used is stated at cost. Buildings are depreciated on
a straight-line basis over the estimated useful life of 33 years. Capitalized
building improvements and personal property are depreciated using an accelerated
method over 15 years and 7 years, respectively. Repairs and maintenance costs
are expensed as incurred. Property held for sale is stated at the lower of cost
or fair value.
Retail Equity Partners Limited Partnership 18
37
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW MARKET SQUARE SHOPPING CENTER
The New Market Square Shopping Center land, building and personal property were
sold to an unrelated party in February 1996.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
DEFERRED COSTS
Financing costs have been capitalized and are amortized over the term of the
related mortgages. Leasing commissions are capitalized and amortized over
related lease terms.
SYNDICATION AND OFFERING COSTS
Fees related to the sale of limited partnership units were charged against
partners' equity. These fees included various legal and accounting services and
sales commissions.
INCOME TAXES
Under current income tax laws, income or loss of the Partnership is included in
the income tax returns of the partners. Accordingly, no provision has been made
for federal or state income taxes in the accompanying financial statements. The
tax returns of the Partnership are subject to examination by federal and state
taxing authorities. If such examinations occur and result in changes with
respect to the partnership qualification or in changes to partnership income or
loss, the tax liability of the partners would be changed accordingly.
Retail Equity Partners Limited Partnership 19
38
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions are used by the Partnership in estimating
its fair value disclosures for financial instruments.
Cash and Cash Equivalents: The carrying amount reported on the balance sheet for
cash and cash equivalents approximates fair value.
Notes Payable: The fair value of the Partnership's fixed rate mortgage notes is
estimated using discounted cash flow analysis based on estimated incremental
borrowing rates. The carrying amounts of the Partnership's borrowings under
notes payable approximate fair value at December 31, 1997.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Depreciation amounts included in these
financial statements reflect management's estimate of the life and related
depreciation rates for rental properties. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1997 and 1996 presentation. These reclassifications had no effect
on net income or partners' deficit as previously reported.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income"
("SFAS 130") and No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), which are both effective for fiscal years
beginning after December 15, 1997. SFAS 130 addresses reporting amounts of other
comprehensive income and SFAS 131 addresses reporting segment information. The
Partnership does not believe that the adoption of these new standards will have
a material impact on its financial statements.
Retail Equity Partners Limited Partnership 20
39
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
2. PROPERTY HELD FOR SALE
In 1997, the Partnership transferred all investments in shopping centers to
property held for sale (see Note 6). Property held for sale at December 31,
1997, includes the following:
APPROXIMATE
SQUARE FEET
SHOPPING CENTER NAME LOCATION RENTAL SPACE
- ----------------------------------------------------------------------------------------------
Cape Henry Plaza Virginia Beach, Virginia 50,000
Plaza West Raleigh, North Carolina 63,800
Approximately 35 percent of rental revenue at these two properties is derived
from two anchor tenants for which leases extend to 2006. Annual base rental
revenue from these two major tenants was approximately $180,000 and $143,000,
respectively in 1997, 1996 and 1995.
Minimum future rentals on noncancelable operating leases, excluding
reimbursement of operating expenses and contingent rent, in effect as of
December 31, 1997, are as follows:
1998 $ 862,100
1999 817,400
2000 795,000
2001 682,400
2002 459,700
Thereafter 1,638,600
----------
$5,255,200
==========
Retail Equity Partners Limited Partnership 21
40
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
3. MORTGAGE LOANS PAYABLE
Mortgage loans payable at December 31 consist of the following:
1997 1996
---------- ----------
Mortgage loan payable to a financial institution, collateralized by Cape Henry
Plaza assets; principal and interest at 9.25% payable in monthly installments
of $29,370 with outstanding balance due August 1998. Prepayment penalty is
the greater of 1% of outstanding principal balance or an amount calculated
based on annual yield of U.S. government securities, as defined
$3,452,165 $3,483,673
Mortgage loan payable to a financial institution, collateralized by Plaza West
assets; principal and interest at 9.25% payable in monthly installments of
$28,588 with outstanding balance due August 1998. Prepayment penalty is the
greater of 1% of outstanding principal balance or an amount calculated based
on annual yield of U.S. government securities, as defined 3,360,302 3,390,971
========== ==========
$6,812,467 $6,874,644
========== ==========
Scheduled principal payments on mortgage loans are as follows:
1998 $6,812,467
==========
$6,812,467
==========
Interest payments totaled approximately $633,300, $742,400, and $1,203,300, in
1997, 1996, and 1995, respectively.
Retail Equity Partners Limited Partnership 22
41
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
4. TRANSACTIONS WITH AFFILIATES
The general partner in the Partnership is Boddie Investment Company ("BIC"). BNP
Management, Inc. serves as management agent of the rental property and
Partnership matters. Certain officers of BIC are also officers of BNP
Management, Inc.
During 1995, BIC made advances to the Partnership totaling $79,000, which were
repaid in 1996. Such advances accrued interest at the prime rate.
The Partnership is charged a property management fee of 3 percent of gross
collections, as defined. In 1997 and 1996 the Partnership was also charged a
partnership administration fee of $24,000. In addition, the management agent
allocates certain costs to the Partnership totaling $12,000 in 1997, 1996 and
1995. Operating expenses paid on behalf of the Partnership are reimbursed on a
monthly basis.
5. NEW MARKET SQUARE LIMITED PARTNERSHIP
In February 1992 NMS filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code. NMS received court approval to continue
normal operations. In May 1993 NMS successfully completed its restructuring of
the mortgage loan payable with the lender and emerged from bankruptcy.
During August 1994 a major tenant at NMS, Rose's Inc., renounced its lease
pursuant to its Chapter 11 bankruptcy filing, vacated the rental space and
ceased making rental payments. Rose's filed a claim against the Partnership in
the amount of $45,743 for rent which it claimed was paid improperly after the
filing of its bankruptcy petition. In February 1995 the Partnership paid Rose's
$20,000 in settlement of the claim for payment of post petition rent. In
addition, the Partnership settled and sold its claim against Rose's for unpaid
future rent for the net amount of $82,000, with proceeds paid to the mortgage
lender applied against principal and interest in arrears.
Subsequent to Rose's vacating its rental space, NMS was unable to fund the
required debt service on the mortgage loan secured by its assets. As a result,
the lender and general partner entered into a forbearance agreement under which
NMS paid the lender net cash flow, as defined, in lieu of the principal and
interest requirement of the original note. In June 1995 the forbearance
agreement was terminated and the NMS mortgage loan was brought current by using
substantially all of the Partnership's cash reserves.
Retail Equity Partners Limited Partnership 23
42
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
5. NEW MARKET SQUARE LIMITED PARTNERSHIP (CONTINUED)
New Market Square Shopping Center was subsequently sold to an unrelated third
party on February 8, 1996, for a contract price of $6,558,000. Direct costs of
the sale totaled approximately $214,000.
Proceeds from the sale were used to pay off the mortgage loan secured by the
assets of New Market Square Shopping Center. The Partnership also recorded an
extraordinary loss of $30,163 consisting of the write-off of deferred financing
costs related to that mortgage loan.
NMS was dissolved effective July 31, 1996. During 1996 the partnership made a
distribution to the limited partners totaling $297,985 from proceeds of the sale
of New Market Square Shopping Center.
Results of operations of NMS were as follows:
1996 1995
-------------------------
Revenue:
Rental revenue $ 63,430 $ 638,953
Interest 4,407 3,302
Net proceeds, sale of Rose's claim -- 82,049
-------------------------
67,837 724,304
Expenses:
Property operations 18,571 84,944
General and administrative 1,665 24,169
Property taxes and insurance 7,155 72,253
Management fees 3,831 21,369
Depreciation -- 214,654
Amortization 1,588 12,690
Interest 57,822 510,427
Provision for loss on sale of New Market Square
Shopping Center (11,457) 510,000
-------------------------
79,175 1,450,506
-------------------------
Loss before extraordinary item (11,338) (726,202)
Extraordinary item - loss on extinguishment of debt (30,163) --
-------------------------
Net loss $(41,501) $ (726,202)
=========================
Retail Equity Partners Limited Partnership 24
43
Retail Equity Partners Limited Partnership
Notes to Consolidated Financial Statements (continued)
6. LIQUIDITY
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership's mortgage loans
totaling $6.8 million mature in August 1998. In light of the Partnership's
current projected earnings and cash flow, management believes the Partnership
has the financial resources to maintain its current level of operations until
the August 1998 mortgage loans are due. However, cash generated from operations
alone will not be sufficient to repay the $6.8 million in August 1998, without
proceeds from the sale of assets or a refinancing or restructuring of the
mortgage loans prior to such date.
The properties are held for sale, and it is the intent of the general partner to
consummate a sale of the properties to the highest bidder prior to the maturity
date of the mortgage loans. Proceeds from the sale will be used to repay the
mortgage loans and liquidate the Partnership. The net proceeds from the
disposition are expected to exceed the current carrying value. If the
Partnership does not make the August 1998 mortgage loan payment, it will be
unable to continue its normal operations, and will be required to file
bankruptcy.
Retail Equity Partners Limited Partnership 25
44
Insert Schedule III here
Retail Equity Partners Limited Partnership 26
45
INDEX TO EXHIBITS
Exhibit No. Page
2* Plan for Reorganization and Disclosure Statement, a Motion
seeking authority to make post-petition expenditures and
certain other related filings (filed as Exhibit 29(e) to the
Partnership 8-K filing dated February 14, 1992, and
incorporated herein by reference)
4* Retail Equity Partners Limited Partnership Agreement (filed as
Exhibit 4 to the Partnership's Registration Statement (File
No. 33-15427) on Form S-11 and incorporated herein by
reference)
27 Financial Data Schedule (electronic filing)
* Incorporated herein by reference
Retail Equity Partners Limited Partnership 27
46
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 MARCH 31, 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
--- ---
47
TABLE OF CONTENTS
ITEM NO. PAGE NO.
PART I - FINANCIAL INFORMATION
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II - OTHER INFORMATION
6 Exhibits and Reports on Form 8-K 9
Retail Equity Partners Limited Partnership 2
48
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
BALANCE SHEETS
MARCH 31 DECEMBER 31
1998 1997
---------------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 101,922 $ 76,863
Restricted cash - tenant security deposits 23,681 22,243
Accounts receivable, net 42,001 51,621
Prepaids and other assets 52,525 30,154
Deferred financing costs, net 4,997 9,800
Property held for sale 6,157,542 6,157,542
---------------------------
Total assets $6,382,668 $6,348,223
===========================
LIABILITIES AND PARTNERS' DEFICIT
Mortgage loans payable $6,796,006 $6,812,467
Trade accounts payable and accrued expenses 77,818 52,522
Prepaid rents and tenant security deposits 20,555 19,949
---------------------------
Total liabilities 6,894,379 6,884,938
Partners' deficit:
Limited partners (443,850) (468,604)
General partner (67,861) (68,111)
---------------------------
Total partners' deficit (511,711) (536,715)
---------------------------
Total liabilities and partners' deficit $6,382,668 $6,348,223
===========================
Retail Equity Partners Limited Partnership 3
49
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
MARCH 31
1998 1997
----------------------
REVENUES
Rental revenue $257,331 $265,893
Interest and other income 1,431 1,800
----------------------
258,762 267,693
EXPENSES
Property operations 22,671 26,763
General and administrative 8,761 16,066
Property taxes and insurance 26,142 25,086
Management fees 13,969 14,094
Depreciation -- 44,283
Amortization 4,803 4,803
Interest 157,412 158,861
----------------------
233,758 289,956
----------------------
NET INCOME (LOSS) $ 25,004 $(22,263)
======================
ALLOCATION OF
NET INCOME (LOSS):
LIMITED PARTNERS (99%) $ 24,754 $(22,040)
======================
GENERAL PARTNER (1%) $ 250 $ (223)
======================
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $ 0.07 $ (0.07)
======================
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 333,577 333,577
======================
Retail Equity Partners Limited Partnership 4
50
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
LIMITED GENERAL
PARTNERS PARTNER TOTAL
----------------------------------------
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)
========================================
Retail Equity Partners Limited Partnership 5
51
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31
1998 1997
-----------------------
OPERATING ACTIVITIES:
Net income (loss) $ 25,004 $(22,263)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 4,803 49,086
Changes in operating assets and liabilities:
Rent and other receivables 9,620 5,754
Prepaid expenses and other assets (22,371) (22,025)
Accounts payable and accrued expenses 25,296 24,385
Security deposits and deferred revenue (832) (584)
-----------------------
Net cash provided by operating activities 41,520 34,353
INVESTING ACTIVITIES - NONE
FINANCING ACTIVITIES:
Principal payments on notes payable (16,461) (15,011)
-----------------------
Net increase in cash and cash equivalents 25,059 19,342
Cash and cash equivalents at
beginning of period 76,863 119,440
-----------------------
Cash and cash equivalents at end of period $101,922 $138,782
=======================
Retail Equity Partners Limited Partnership 6
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 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 three 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.
NOTE 2. RECENTLY ADOPTED ACCOUNTING STANDARDS
We adopted Statement No. 130, Reporting Comprehensive Income, as of January 1,
1998. Statement No. 130 established requirements for reporting and displaying
comprehensive income and its components. Adoption of this Statement had no
impact on our net income or partners' deficit, or the presentation of our
financial statements.
Retail Equity Partners Limited Partnership 7
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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 first quarter of 1998 was $257,000, a decrease of
3.2% compared to the first quarter of 1997. During the first quarter of 1998,
Plaza West was 98% occupied, and Cape Henry Plaza was 97% occupied.
During the first quarter of 1997 both centers were 100% occupied.
Expenses
Total expenses for the first quarter of 1998 were $234,000, a decrease of
19.4% compared to the first quarter of 1997. The primary reason for this
decrease is that no depreciation was recorded in the first quarter of 1998,
compared to a $44,000 depreciation charge in the first quarter 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. Operating and administrative expenses were
generally in line with management's expectations.
Net income
Net income for the first quarter of 1998 was $25,000, compared to a loss
of $22,000 for
Retail Equity Partners Limited Partnership 8
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the first quarter of 1997. Again, the increase in net income is primarily due to
the fact that no depreciation was charged in the first quarter of 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, subject to a vote by the
limited partners. Negotiations for the sale of Cape Henry Plaza are in final
stages, again subject to a vote by the limited partners.
The Partnership's two mortgage loans mature in August 1998. In the event
the Partnership's properties have not been sold prior to that date, the
Partnership will be required to refinance these loans. The general partner can
offer no assurance that, at that time, replacement financing will be obtainable.
RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997 the Financial Accounting Standards Board issued Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information. Statement
131 establishes standards for the way that public entities report information
about operating segments in annual financial statements and requires that those
entities report selected information about operating segments in interim
financial statements. We will be required to disclose segment information in
accordance with Statement 131 beginning in our 1998 annual report. We expect
that adoption of Statement 131 will not have a material impact on our financial
statements.
PART II - OTHER INFORMATION
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
Retail Equity Partners Limited Partnership 9
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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
May 14, 1998 /s/ Philip S. Payne
------------------------------
Philip S. Payne
(Duly authorized officer)
Retail Equity Partners Limited Partnership 10