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, 1995
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)
3710 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices)
(Zip Code)
(704) 333-1367
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
Rental properties
Land $ 3,554,079 $ 3,554,079
Buildings and improvements 12,788,527 12,788,527
Personal property 65,315 65,315
less accumulated depreciation (2,864,400) (2,766,086)
13,543,521 13,641,835
Cash 221,711 149,639
Restricted cash - tenant security deposits held in trust 29,053 27,153
Accounts receivable, less allowance for doubtful accounts
of $8,800 in 1995 and $55,200 in 1994 41,837 123,435
Prepaids and other assets 88,899 62,770
Amounts held in special escrow 82,049 -
Deferred costs, less amortization
of $151,000 in 1995 and $144,000 in 1994 103,850 111,822
TOTAL ASSETS $ 14,110,920 $ 14,116,654
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage loans payable $ 13,009,282 $ 13,060,575
Trade accounts payable and accrued expense 88,191 52,861
Prepaid rent 28,146 11,263
Tenant security deposits 27,981 26,381
Accrued interest payable 189,895 148,768
13,343,495 13,299,848
Partners' equity (deficit)
Limited partners 825,475 874,362
General partner (58,050) (57,556)
767,425 816,806
TOTAL LIABILITIES AND
PARTNERS' EQUITY (DEFICIT) $ 14,110,920 $ 14,116,654
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1995 1994
REVENUE
Rental revenue $ 394,746 $ 478,126
Interest and other revenue 84,876 1,115
479,622 479,241
EXPENSES
Depreciation 98,314 98,403
Amortization 7,972 8,009
Property operations 55,424 45,451
Property taxes and insurance 40,635 43,731
Property management fees 14,807 17,011
General and administrative 26,065 5,989
Interest 285,786 290,800
529,003 509,394
NET LOSS $ (49,381) $ (30,153)
Net loss allocated to limited partners (99%) $ (48,887) $ (29,851)
Net loss allocated to general partner (1%) $ (494) $ (302)
Net loss per limited partnership unit $ (0.15) $ (0.09)
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities
Net loss $ (49,381) $ (30,153)
Adjustments to reconcile net loss to cash
provided operating activities:
Depreciation 98,314 98,403
Amortization 7,972 8,009
Changes in operating assets and liabilities:
Tenant receivables 81,598 70,323
Other assets (28,029) (57,946)
Amounts held in special escrow (82,049) -
Trade accounts payable and accrued expense 35,330 38,017
Accrued interest payable 41,127 -
Other liabilities 18,483 (121)
Net cash provided by operating activities 123,365 126,653
Cash flows from financing activities
Repayment of mortgage loan principal (51,293) (57,073)
Net increase in cash 72,072 69,580
Cash, beginning of period 149,639 89,334
Cash, end of period $ 221,711 $ 158,914
PART I
Item 1 - Financial Statements.
Schedules are omitted because they are not applicable, not
required or because the requested information is included in
the Financial Statements or notes thereto.
In the opinion of management, 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. Such interim results
are not necessarily indicative of the results that can be
expected for a full year. The accompanying financial
statements should be read in conjunction with the audited
financial statements and related notes appearing in the
Partnership's 1994 Annual Report on Form 10-K.
Item 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition
The following discussion should be read in conjunction with
the attached interim financial statements and with the
Company's audited financial statements and notes thereto for
the year ended December 31, 1994.
Results of Operations:
Rental revenue for the quarter ended March 31, 1995 decreased
to $394,746 from $478,126 for the same quarter in 1994. This
17.44% decrease in rental revenue was primarily attributable
to a decrease in occupancy at New Market Square Shopping
Center (NMS). On August 1, 1994 Rose's Stores, Inc. renounced
its lease as part of its Chapter 11 bankruptcy filing and
vacated its space at NMS. On March 31, 1995, Plaza West was
100% leased, Cape Henry Plaza was 94% leased and NMS was 55%
leased, as compared with 100% for Plaza West, 100% for Cape
Henry Plaza and 100% for NMS on March 31, 1994.
Interest and other revenue increased $83,761 this quarter from
the same quarter last year due to the sale of the claim
against Roses' in the amount of $82,049. See the discussion
in "Legal Proceedings" - Part II, Item 1.
Property operations expense increased to $55,424 from $45,451
for the quarter ended March 31, 1995 and 1994, respectively.
The increase is primarily due to increased grounds costs.
General and administrative expense for the quarter totaled
$26,065 in 1995 compared to $5,989 for the same period in
1994. The increase was attributable to increased legal fees
associated with Rose's renouncing its lease. General and
administrative costs have also increased due to the timing of
the accrual for the annual audit fee in the first quarter of
1995. The audit fee was recorded in the second quarter of
1994.
Management fee decreased 13.0% to $14,807 from $17,001 for the
quarter ended March 31, 1995 and 1994, respectively. The
decline is a direct result of the decrease in rental revenues.
Interest for the first quarter declined 1.7% as compared to
the same quarter in 1994. This is the result of amortization
of the principal amounts of the mortgages of the Registrant's
three shopping centers.
The net loss for the first quarter of 1995 was primarily
attributable to the provision for depreciation and
amortization and the loss of revenue due to the vacancy of
Roses' space at NMS.
Liquidity and Capital Resources:
The Registrant has long term financing on all three shopping
centers. These first mortgage loans all mature in 1998 and
require monthly principal reduction. During the first quarter
of 1995 principal payments of $51,293
were made reducing the total outstanding balance for these
loans to $13,009,282 as of March 31, 1995. As of March 31, 1995,
the Registrant was current on its obligations under the first
mortgage loans for Plaza West and Cape Henry. On March 31, 1995
the Registrant was delinquent on the first mortgage loans on NMS
due to the decreased cash flow as a result of the Roses' vacancy.
If not for the Roses' bankruptcy, the Registrant would be
operating reasonably well. Net losses are primarily
attributable to non-cash charges from depreciation and
amortization. Two of the shopping centers continue to have
positive cash flow from operations. The leases held by the
Registrant are generally long-term with substantially all
increases in operating expenses, taxes and insurance passed
through to and paid by the tenants. Additionally, most leases
include built-in rent increases or increases based on changes
in the consumer price index or percentage rents based on total
sales.
On September 5, 1993, Rose's Stores, Inc., a tenant at NMS,
filed for protection under Chapter 11 of the bankruptcy code.
As discussed above in "Results from Operations", in August
1994, Rose's vacated its space at NMS. After the departure of
Rose's, the Registrant does not have sufficient cash flow to
pay the full payment required under its loan. The lender and
general partner have entered into a forbearance agreement
under which the Registrant will pay the lender net cash flow
after payment of all expenses. Payments under this agreement
amounted to $133,925 during the first quarter of 1995, which
is approximately $40,000 less than the scheduled mortgage
payment. The lender applies these payments first to escrow
for taxes and insurance, then prorata to interest and
principal. The lender may withdraw from the forbearance
agreement by giving written notice.
The Registrant has entered negotiations with several possible
tenants to replace Roses' at NMS, but as of May 1, 1995, no
leases have been executed. The negotiations for a replacement
tenant have been hampered by the lack of available funds to
make required tenant improvements.
If a replacement tenant cannot be found, the Registrant will
be unable to meet its obligations under the NMS loan. In
addition, in absence of the forbearance agreement currently in
effect this revenue loss would result in the Registrant having
substantial negative cash flow and would bring into question
its ability to continue in business without restructuring its
mortgage obligations.
The Registrant had no capital expenditures during the first
quarter of 1995, nor did the Registrant pay distributions.
Future distributions have been suspended until property
operations allow.
PART II
Item 1 - Legal Proceedings.
See the discussion of the Roses' bankruptcy and store closing
discussed under Liquidity and Capital Resources, above.
Rose's Stores, Inc., an anchor tenant at NMS, renounced its
lease pursuant to a bankruptcy filing on August 1, 1994,
vacated the rental space and ceased making rental payments.
Roses' 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. On February 27, 1995,
the Registrant paid Roses' $20,000 in full settlement of the
Section 549 claim. The Partnership filed a proof of claim
against Roses' for unpaid future rent in the amount of
$880,000. On January 20, 1995, the Registrant and Roses'
agreed to fix the Registrant's claim against Roses' for unpaid
future rent at $512,808. The Registrant then agreed, subject
to the approval of the NMS lender, to sell the Roses' unpaid
rent claim to BDS Securities Corporation for the immediate
payment of
$82,049.30. On March 21, 1995, the lender granted its approval
of the sale of the claim and on March 24, 1995, the sale of the
claim was completed.
After the departure of Roses', the Partnership does not have
sufficient cash flow to pay the full payment required under
its loan. The Lender and the General Partner have entered
into a forbearance agreement under which the Partnership will
pay the lender net cash flow after payment of all expenses.
The Lender may withdraw from the forbearance agreement upon
giving written notice.
Item 3 - Defaults Upon Senior Securities.
The Registrant is the sole general partner and holds a 99.99%
interest in New Market Square Limited Partnership which owns
NMS. NMS is held subject to a first mortgage deed of trust
held by Mutual Benefit Life. The mortgage has an original
principal amount of $6,400,000, carries an interest rate of
8.25% through May, 1995, then 9% through its maturity in June,
1998, and has required monthly payments of $58,000.
In view of Roses' renunciation of its lease and subsequent
failure to pay its required lease payments (see Liquidity and
Capital Resources above), NMS Limited Partnership (the
"Partnership") requested from its lender certain relief from
the required monthly payments. The lender has agreed to
accept payments equal to the operating cash flow of the
partnership, pending attempts by the partnership to locate a
replacement tenant or to restructure its debt. The lender's
agreement to accept such payments may be revoked at any time.
Subject to this agreement the Partnership made "cash flow
payments" of $133,925 for the three months ended March 31,
1995 and will continue to make such payments until a
replacement tenant can be found for Roses' space.
The NMS mortgage is secured solely by the NMS Shopping Center
and is not guaranteed by the Registrant. In the event a
replacement tenant cannot be found or the loan cannot be
modified, the lender, at its election, may begin foreclosure
proceedings. The foreclosure of NMS Shopping Center would not
affect the Registrant's remaining two centers.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule (electronic filing)
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the period covered
by this report.
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 there-unto duly authorized.
RETAIL EQUITY PARTNERS
LIMITED PARTNERSHIP
By: Boddie Investment Company
General Partner
Date May 12, 1995 /s/ Philip S. Payne
Philip S. Payne
Duly authorized agent