Shopco Regional Malls LP – ‘10-K’ for 12/31/99

On:  Friday, 4/14/00   ·   For:  12/31/99   ·   Accession #:  1073339-0-52   ·   File #:  1-10217

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report for 1999                                26    148K 
 2: EX-27       FDS -- 1999 Form 10-K                                  1      5K 

10-K   —   Annual Report for 1999
Document Table of Contents

10-K
1st Page of 26
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549

 FORM 10-K

 X   ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
---                                                                             

 For the fiscal year ended December 31, 1999
                           -----------------

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES   
---  EXCHANGE ACT OF 1934                                                       

For the transition period from               to             
                                -------------    -------------

Commission file number: 33-20614
                        --------

 SHOPCO REGIONAL MALLS, L.P.
 ---------------------------
Exact name of Registrant as specified in its charter

     Delaware                                               13-3217028
     --------                                               ----------
State or other jurisdiction of                                 I.R.S. Employer  
incorporation or organization                                 Identification No.

Attn.:  Andre Anderson                                                          
3 World Financial Center, 29th Floor, New York, NY               10285-2900     
--------------------------------------------------               ----------     
Address of principal executive offices                            Zip code      

Registrant's telephone number, including area code:  (212) 526-3183             

Securities registered pursuant to Section 12(b) of the Act:  None               

Securities registered pursuant to Section 12(g) of the Act:                     

 LIMITED PARTNERSHIP INTERESTS
 -----------------------------
Title of Class

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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 the 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                                                
---                 

State the aggregate market value of the voting stock held by non-affiliates of  
the registrant: Not applicable.                                                 

Documents incorporated by reference:  See Exhibit Index at Item 14.             

                                                                             1

10-K
2nd Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 2nd
PART I

Item 1.   Business                                                              

(a)  General Development of Business                                            
-------------------------------                                       

Shopco Regional Malls, L.P., a Delaware limited partnership (the "Partnership") 
was formed on March 11, 1988. The affairs of the Partnership are conducted by   
its general partner, Regional Malls Inc. (the "General Partner," formerly       
Shearson Regional Malls, Inc.), a Delaware corporation and an affiliate of      
Lehman Brothers Inc. ("Lehman"). The Partnership is the general partner of      
Shopco Malls L.P. (the "Owner Partnership," formerly Shearson Shopco Malls      
L.P.), a Delaware limited partnership that originally owned two enclosed        
regional malls, The Mall at Assembly Square ("Assembly Square") located in      
Somerville, Massachusetts and Cranberry Mall ("Cranberry") located in           
Westminster, Maryland (both Assembly Square and Cranberry are referred to herein
as the "Malls"). On December 20, 1996, the Owner Partnership transferred title  
of Assembly Square to the holder of the mortgage secured by Assembly Square     
pursuant to a foreclosure proceeding. See Note 3 of the Notes to the            
Consolidated Financial Statements for a discussion regarding the foreclosure of 
Assembly Square. As of December 31, 1999, the Owner Partnership owned only      
Cranberry Mall which was subsequently sold on April 3, 2000. The General Partner
is currently in the process of terminating the Partnership, which is expected to
occur in fiscal 2000. See Item 7 and Note 12 to the Consolidated Financial      
Statements for a discussion of the sale. The sole limited partner of the Owner  
Partnership is Shopco Limited Partnership ("Shopco L.P."), a Delaware limited   
partnership and an affiliate of The Shopco Group. (The Partnership and Shopco   
L.P. are referred to collectively as the "Owner Partners.")                     

On June 14, 1988 the Partnership commenced an offering of 110,000 depositary    
units ("Units") at $1,000 per Unit to be sold by the underwriter, Lehman,       
(formerly Shearson Lehman Brothers Inc.) on a "best efforts" basis (the         
"Offering"), of which the Partnership accepted subscriptions of 70,250 Units,   
the maximum closing amount authorized by the Amended and Restated Agreement of  
Limited Partnership of Shopco Regional Malls, L.P. (the "Agreement of Limited   
Partnership"). Concurrent with the consummation of the Offering, the Assignor   
Limited Partner assigned its rights as a limited partner to the holders of Units
("Unitholders") who then became limited partners.                               

The Partnership was formed to acquire the fee interest and improvements in the  
Malls. The Malls were purchased using the proceeds of the Offering, the issuance
of two Promissory Notes and a loan from Lehman Brothers Holdings Inc. ("Lehman  
Holdings", formerly Shearson Lehman Brothers Holdings Inc.), an affiliate of the
General Partner, (the "Gap Loan") in October 1988. The aggregate purchase price 
of the Malls was $96,205,500. Assembly Square was acquired from Somerville S.C. 
Associates L.P., a Massachusetts limited partnership for a purchase price of    
$42,358,000 on October 11, 1988. Cranberry was acquired from Cranberry L.P., a  
Maryland limited partnership and an affiliate of The Shopco Group for a purchase
price of $53,847,500 on October 5, 1988.                                        

Two mortgage loans were issued in October 1988. The first was from the Aetna    
Life Insurance Company ("Aetna") in the initial principal amount of $28,000,000 
(the "Assembly Note"), and the second in the original principal amount of       
$27,250,000 (the "Original Cranberry Note") from the Mutual Life Insurance      
Company of New York ("MONY"). In December 1996, Aetna acquired Assembly Square  
pursuant to a foreclosure proceeding, and the Owner Partnership was absolved of 
its mortgage obligation under the Assembly Note. Aetna subsequently pursued     
claims arising out of its mortgage and security agreement, and a settlement     
agreement was reached between the Partnership and Aetna in September 1997. See  
Item 3 for a discussion of the settlement. In September 1990, MONY issued an    
additional mortgage loan in the original principal amount of $3,775,000 (the    
"Additional Cranberry Note") and at such time, the Original Cranberry Note and  
the Additional Cranberry Note were consolidated. The MONY loan was subsequently 
purchased by Metropolitan Life Insurance Company. The Cranberry Note matured on 
November 1, 1993, was extended to May 1994, and was subsequently modified and   
extended until April 1, 1999. In March 1999, Metropolitan Life Insurance Company
agreed to allow the Partnership to defer the payment of the principal balance of
the loan to April 1, 2000, provided that the Partnership continued to pay       
interest at the same rate and times set forth in the Cranberry Note. The        
Cranberry Note was paid in full from the Cranberry sales proceeds. See Item 7   
and Note 12 to the Consolidated Financial Statements for a discussion of the    
sale of Cranberry Mall and Note 6 to the Consolidated Financial Statements for a
description of the terms of the Cranberry Note.                                 

                                                                             2

10-K
3rd Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 3rd
The Owner Partnership's business, as an owner of a mall property, is somewhat   
seasonal since a portion of its revenue is derived from a percentage of the     
retail sales of certain tenants. Generally, such sales are higher in November   
and December during the holiday season.                                         

(b)  Financial Information about Industry Segments                              
---------------------------------------------                         

Substantially all of the Partnership's revenues, operating profit or loss and   
assets relate to its interest as general partner of the Owner Partnership whose 
operating profit or loss and assets relate to its ownership and operation of    
Cranberry.                                                                      

(c)  Narrative Description of Business                                          
---------------------------------                                     

The Partnership's primary business is acting as general partner for the Owner   
Partnership. As of December 31, 1999, the Owner Partnership's sole business was 
the ownership and operation of Cranberry Mall (See Item 2 for a description of  
Cranberry Mall and its operations).                                             

On September 11, 1999, the Partnership entered into a contract to sell the Mall 
to a third-party buyer. The proposed sale, and subsequent liquidation of the    
Partnership, was approved by a majority in interest of the Limited Partners at a
Special Meeting of the Limited Partners on February 29, 2000. The General       
Partner completed the sale on April 3, 2000 and will terminate the Partnership  
during fiscal 2000. See Item 7 and Note 12 to the Consolidated Financial        
Statements for a discussion of the sale.                                        

Competition                                                                     
-----------                                                                     

See Item 2 for a discussion of competitive conditions at Cranberry Mall.        

Employees                                                                       
---------                                                                       

The Partnership has no employees. The business of the Partnership is managed by 
the General Partner. Cranberry Mall is managed on a day-to-day basis by Insignia
Retail Group, (the "Property Manager"). See Note 8 to the Consolidated Financial
Statements for the terms of the Management Agreement and amounts paid           
thereunder.                                                                     

Item 2.   Properties                                                            

The Owner Partnership's remaining mall property as of December 31, 1999 was     
Cranberry Mall, a single level enclosed regional shopping center located in     
Westminster, Maryland, approximately 30 miles northwest of Baltimore. Cranberry,
which opened in March 1987, consists of approximately 530,000 square feet of    
gross leasable area including space for approximately 90 retail tenants, a      
nine-theater cinema complex and four anchor stores; Sears, Belk (formerly       
Leggett), Montgomery Ward and a vacated Caldor store. Caldor rejected its lease 
and vacated its space in 1998 pursuant to its Chapter 11 bankruptcy filing. See 
Item 7 for a discussion of Caldor's bankruptcy filing and its effect on the     
Partnership. Cranberry is located on 55.61 acres and provides parking for 2,597 
automobiles.                                                                    

The total gross leasable building area of Cranberry Mall is allocated as shown  
in the table below.                                                             

                                                                [Download Table]

                                        Square Feet      Percentage of         
                                        Leasable to     Gross Leasable         
             Tenants                      Tenants            Area              
          ------------------------------------------------------------         
                                                                               
          Anchor Stores:                                                       
            Vacant(a)                      81,200              15%             
            Belk                           65,282              12%             
            Montgomery Ward                80,260              15%             
            Sears                          70,000              13%             
          Enclosed Mall Tenants           224,377              43%             
          Outparcel Store(b)                9,000               2%             
                                          -------             ---              

          Total                           530,119             100%             
                                          =======             ===              

                                                                              3

10-K
4th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 4th
<FN>                                                                           
(a)  Caldor rejected its lease and vacated its space in 1998 pursuant to its   
     Chapter 11 bankruptcy filing. See Item 7 for a discussion of Caldor's     
     bankruptcy filing and its effect on the Partnership.                      
(b)  Outparcel Store is an auto service center leased to Montgomery Ward.      
</FN>                                                                          

On May 1, 1997, Insignia Retail Group ("Insignia") was installed as the new     
property manager for Cranberry Mall. Insignia replaced Shopco Management        
Corporation, an affiliate of the Owner Partnership as property manager. Insignia
receives an annual fee equal to 4% of the gross rents collected from Cranberry  
Mall. The management agreement with Insignia was scheduled to expire on April   
30, 2000 and was terminated automatically upon the sale of Cranberry Mall.      

Mall Tenants - As of December 31, 1999, Cranberry Mall had approximately 62 mall
tenants (excluding anchor tenants) occupying gross leasable area of             
approximately 171,000 square feet. As of December 31, 1999, Cranberry Mall had  
26 vacant mall stores containing approximately 53,000 gross leasable square     
feet.                                                                           

Anchor Tenants - Sears leases approximately 70,000 square feet of gross leasable
building area. The Sears store opened in October 1987 and the initial term of   
the lease expires in 2002, with Sears having two successive five-year renewal   
options. Sears pays an annual fixed rent of $195,800 and an annual percentage   
rent equal to 2.25% of net sales in excess of $10,000,000 up to $15,000,000 and 
2% of net sales in excess of $15,000,000. Beginning in 1993, Sears commenced    
paying its pro rata share of increases in real estate taxes, but such tax       
payments may be deducted from percentage rent due on an annual non-cumulative   
basis. Also commencing in 1993, Sears became responsible for contributing to    
exterior common area maintenance on a flat rate basis. Sears currently pays all 
utilities directly and is not required to carry its own fire insurance. Sears is
required to use the premises as a Sears retail store until the year 2002 or     
under such other trade name as the majority of Sears retail stores are then     
operating. Thereafter, Sears may assign or sublet the premises with the         
landlord's consent, not to be unreasonably withheld.                            

On November 1, 1996, Belk acquired 100% in the stock of Leggett of Virginia Inc.
and its affiliated Leggett stores, which includes the Leggett store at Cranberry
Mall. Belk currently leases 65,282 square feet of gross leasable building area. 
The initial term of the lease expires in 2007 and the lease provides four       
successive, five-year renewal options at the same rent. Belk is obligated to pay
an annual fixed rent of $228,487 and an annual percentage rent equal to 2% of   
sales above $10,608,325. Belk is responsible for its pro rata share of increases
in real estate taxes after the third year of full assessment but it may deduct  
one-half of these tax payments on a cumulative basis from percentage rent due.  
Utility charges are paid directly to the public utility and Belk is not required
to carry its own fire insurance or to pay for common area maintenance. During   
the first 15 years of the lease, ending March 4, 2002, the tenant is required to
use the premises as a Belk retail department store or under such other trade    
name as Belk is then operating substantially all of its department stores. The  
tenant cannot assign or sublet the premises during the first 15 years of the    
lease term without the landlord's consent to anyone other than another Belk     
mercantile company of comparable net worth as the tenant.                       

Montgomery Ward leases approximately 80,000 square feet of gross leasable       
building area and 9,000 square feet for an automotive center. The Montgomery    
Ward store opened for business on November 4, 1990 and the initial term of the  
lease expires in 2010 with four successive five-year renewal options. Montgomery
Ward pays an annual fixed rent of $348,114 and an annual percentage rent equal  
to 2.5% of the net retail sales in excess of $13,924,560. Montgomery Ward is    
required to reimburse the landlord for its pro rata share of insurance and      
utility costs and real estate taxes based on its gross leasable area of the     
building. Montgomery Ward will be required to reimburse the landlord for a      
portion of the common area and maintenance charges as set forth under the lease 
agreement. During the first 15 years of the lease term, the tenant is required  
to use the premises as a retail store under the trade name Montgomery Ward or   
under such other name as the tenant is doing business in the majority of its    
retail department stores in the State of Maryland. Montgomery Ward has the right
to sublease the premises at any time during its lease term with the landlord's  
written consent, however, they will not be relieved of their obligations under  
the terms of the lease.                                                         

On July 7, 1997, Montgomery Ward filed for protection under Chapter 11 of the   
Bankruptcy Code. On October 10, 1997, as part of its bankruptcy reorganization  
process, Montgomery Ward announced the closing of 48 stores. Montgomery Ward    
confirmed its plan of reorganization in July 1999, with an effective date of    
August 2, 1999, and successfully emerged from bankruptcy. In conjunction with   
the confirmation of its Chapter 11 plan, Montgomery Ward has assumed its store  
lease at Cranberry Mall and will remain in possession of the store.             

                                                                             4

10-K
5th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 5th
Historical Occupancy - The following table sets forth the historical occupancy  
rates for Cranberry Mall at December 31 for the years indicated.                

                                                                [Download Table]

                               1999    1998    1997    1996    1995
                               ----    ----    ----    ----    ----
                                                                   
Including Anchor Stores         76%     77%     92%     93%     93%
Excluding Anchor Stores         78%     79%     82%     84%     83%

Competition - The General Partner believes that the primary trade area for      
Cranberry (i.e., the primary geographical area from which Cranberry derives its 
repeat sales and regular customers) is the area within a radius of approximately
15 miles from Cranberry. The General Partner believes the secondary trade area  
is within a radius of 15 to 20 miles from Cranberry.                            

There are no competitive shopping malls in the primary trade area of Cranberry, 
although there is considerable retail activity in strip centers and on local    
roads near Cranberry. Also, a 116,000 square foot free-standing WalMart opened  
in November of 1992 near Cranberry in the Englar Business Park. In addition, in 
1996, a Target store opened approximately one mile southeast of Cranberry and in
1999 this store closed. In the secondary trade area there are three competitive 
shopping malls; Hunt Valley Mall, Carrolltowne Mall and Owings Mill Mall. Hunt  
Valley Mall is a bi-level enclosed shopping mall located approximately 19 miles 
east of Cranberry and is anchored by Macy's and Sears. Carrolltowne Mall is     
located 25 miles from Cranberry and was expanded and enclosed during 1989.      
Carrolltowne Mall is oriented to the discount shopper. Owings Mill Mall is      
located approximately 25 miles from Cranberry and is anchored by Macy's, Hechts,
Sears and J.C. Penney. Owings Mill Mall caters to the upscale market. Cranberry 
also competes with the North Hanover Mall in Hanover, Pennsylvania, located 26  
miles north of Cranberry. North Hanover Mall is a 450,000 square foot regional  
mall anchored by Bon Ton, J.C. Penney, Kmart and Sears. Retail stores at malls  
also compete with local shops, stores and power centers. Generally, competition 
among retailers for customers is intense, with retailers competing on the basis 
of quality, price, service and location.                                        

Item 3.   Legal Proceedings                                                     

Following the foreclosure on the mortgage of Assembly Square by Aetna in        
December 1996, Aetna advised the Partnership it would pursue environmental      
remediation claims for land contamination. On September 3, 1997, the Partnership
and Aetna entered into a Settlement Agreement whereby the Partnership paid      
$400,000 to Aetna for a complete release from environmental claims. The release 
excludes environmental claims already made by Aetna regarding existing          
environmental conditions and environmental claims which could arise in the      
future because of existing conditions. The Partnership separately funded        
approximately $500,000 to pay for work performed to address environmental       
conditions at Assembly Square. Accordingly, the Partnership accrued             
environmental remediation and settlement costs of $900,000, as reflected in the 
1997 consolidated statements of operations. At December 31, 1998, $879,423 of   
this amount had been paid by the Partnership.                                   

The Partnership collected in 1999 a $300,000 contribution from a prior owner of 
the Assembly Square property for the amounts the Partnership expended in        
connection with the environmental site remediation. The Partnership also        
collected in 1999 a $25,000 contribution from another former owner for costs    
associated with the environmental remediation at the property. The Commonwealth 
of Massachusetts performed a statutorily-required audit on the remediation      
performed at Assembly Square; it is uncertain whether that audit will require   
additional remediation to be performed. The Partnership has negotiated an       
agreement with the current owner of Assembly Square Mall, under which that owner
assumed responsibility for responding to the audit and indemnified the          
Partnership from any liability arising from that audit or environmental         
conditions on the property.                                                     

In July 1998, Caldor, a former anchor tenant at Cranberry Mall, rejected its    
lease with bankruptcy court approval and the Partnership's claims for unpaid    
rent and rejection damages under Caldor's lease in the amount of $833,921 was   
filed shortly thereafter. Caldor did not submit a plan of reorganization and on 
January 22, 1999 was ordered to wind-down its business operations and affairs   
under Chapter 11 of the Bankruptcy Code. See Item 7 for a discussion of Caldor's
bankruptcy filing and its effect on the Partnership.                            

                                                                             5

10-K
6th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 6th
On or about June 9, 1999, a purported class action, Rice, et al. v. Regional    
Malls, Inc., et al., was commenced on behalf of all Unitholders in the Court of 
Chancery for New Castle County, Delaware, against the General Partner of the    
Partnership, the Partnership, and Lehman Brothers Inc. (the "Defendants"). The  
complaint alleges, among other things, that the General Partner failed to       
protect the Partnership's assets and the interests of the Unitholders in        
connection with the default on the mortgage encumbering Assembly Square Mall,   
the foreclosure sale of Assembly Square Mall and the efforts to sell Cranberry  
Mall. The complaint purports to assert claims for breach of fiduciary duty and  
breach of contract and seeks an accounting. The Defendants have filed a motion  
to dismiss the complaint and intend to defend the action vigorously.            

Item 4.   Submissions of Matters to a Vote of Security Holders                  

A special meeting of the limited partners of Shopco Regional Malls, L.P., a     
Delaware limited partnership, was held at the offices of the Partnership, 3     
World Financial Center, 17th Floor, New York, New York 10285-2900 on February   
29, 2000 for the following purposes:                                            

   1.   To approve the sale of Cranberry Mall, in Westminster, Maryland, and
  the subsequent liquidation and termination of the Partnership.

2.   To transact such other business as may properly come before the  
special meeting or any adjournment or postponement thereof. 

At this special meeting the Partnership received the required approval from the 
limited partner units entitled to vote. The result of the voting was as follows:

For             58.19%
Against          2.25%

As a result of this vote, the General Partner sold Cranberry Mall on April 3,   
2000 and will terminate the Partnership in 2000 (see Note 12 of the Consolidated
Financial Statements).                                                          

 PART II

Item 5.   Market for Registrant's Limited Partnership                           
Units and Related Security Holder Matters                   

(a)  Market Price Information                                                   
------------------------                                              

There is no established trading market for the Units nor is there anticipated to
be any in the future.                                                           

(b)  Holders                                                                    
-------                                                               

As of December 31, 1999, there were 4,718 Unitholders.                          

(c)  Distribution of Net Cash Flow                                              
-----------------------------                                         

The Partnership's policy was to distribute to the Unitholders their allocable   
portion of Net Cash Flow (as defined in the prospectus) with respect to each    
fiscal year in quarterly installments. Distributions of Net Cash Flow, if any,  
were paid on a quarterly basis to registered Unitholders on record dates        
established by the Partnership, which generally were the last day of each       
quarter.                                                                        

The General Partner suspended quarterly cash distributions beginning with the   
1996 first quarter. Quarterly distributions were not reinstated due to the      
foreclosure of Assembly Square, reduced Partnership cash flow and issues        
concerning certain anchor tenants at Cranberry Mall. On October 19, 1998, the   
Partnership paid a special cash distribution of $74.69 per Limited Partnership  
Unit, representing approximately one half of the Partnership's cash reserves.   
The distribution was paid in consideration of the General Partner's decision to 
market the Cranberry Mall for sale, and to reduce the level of cash held in     
reserve for leasing and capital expenditures. See Item 7.                       

                                                                             6

10-K
7th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 7th
The General Partner expects to make a distribution of the net cash proceeds from
the sale of Cranberry Mall (after paying, or providing for payment of,          
transaction costs) of approximately $20 per Unit, and additional cash reserves  
of the Owner Partnership and the Partnership (after paying, or providing for    
payment of, outstanding and anticipated liabilities), which is estimated to be  
approximately $102 per Unit. See Item 7 and Note 12 of the Consolidated         
Financial Statements for a discussion of the sale.                              

Item 6.   Selected Financial Data                                               

                                                        [Enlarge/Download Table]

(dollars in thousands except per Unit data)                                             
--------------------------------------------------------------------------------------- 

As of and for the years ended December 31,                                              

                                       1999       1998       1997       1996       1995 
                                       ----       ----       ----       ----       ---- 

                                                                                        
Total income                        $ 6,444    $ 7,516    $ 8,172    $13,022    $13,806 
Loss on write down of real estate    (2,890)    (4,146)    (7,573)    (7,910)        -- 
Gain on foreclosure of                                                                  
  property (a)                           --         --         --      9,337         -- 
Net income (loss)                    (1,801)    (2,584)    (7,594)     1,008    (17,536)
Net income (loss) per Unit           (25.39)    (36.41)   (107.02)      9.88    (247.13)
Cash distributions per Unit              --      74.69         --         --      15.00 
Real estate, net of                                                                     
  accumulated depreciation (b)       32,440     35,280(b)  39,275     48,197     73,162 
Mortgages payable                    31,025     31,025     31,025     31,025     55,323 
Total assets                         40,977     42,818     50,814     58,266     81,655 
--------------------------------------------------------------------------------------- 

<FN>                                                                                    
(a)  On December 20, 1996, Aetna obtained title to Assembly Square at the               
     foreclosure sale. As a result, the Partnership recorded an extraordinary           
     gain on foreclosure of $9,336,544 due to the release of the Aetna mortgage         
     debt on the property.                                                              

(b)  During 1998, the Partnership engaged a broker to market Cranberry Mall for         
     sale. In view of the anticipated sale of the Mall, the Partnership's real          
     estate is recorded on the Partnership's December 31, 1999 and 1998                 
     consolidated balance sheet as "Real estate assets held for disposition."           
</FN>                                                                                   

The above selected financial data should be read in conjunction with Item 7 and 
the Consolidated Financial Statements and notes thereto in Item 8.              

Item 7.   Management's Discussion and Analysis of                               
Financial Condition and Results of Operations               

Liquidity and Capital Resources                                                 
-------------------------------                                                 

During 1998, the Partnership engaged a broker to market Cranberry Mall for sale.
In view of the anticipated sale of the mall, the Partnership's real estate has  
been recorded on the Partnership's balance sheet as "Real estate assets held for
disposition." Real estate assets held for disposition at December 31, 1999      
totaled $32,440,000.                                                            

On September 11, 1999, the Partnership entered into a contract to sell Cranberry
Mall to a third-party buyer. The buyer satisfactorily completed its due         
diligence process. The sale and subsequent dissolution of the Partnership was   
approved by a majority in interest of the Unitholders, at a Special Meeting of  
the Limited Partners held on February 29, 2000.                                 

The General Partner completed the sale on April 3, 2000 (see Note 12 to the     
Consolidated Financial Statements) and will liquidate the Partnership during    
fiscal 2000. The General Partner expects to make a distribution of the net cash 
proceeds from the sale (after paying, or providing for payment of, transaction  
costs) of approximately $20 per Unit, and additional cash reserves of the Owner 
Partnership and the Partnership (after paying, or providing for payment of,     
outstanding and anticipated liabilities), which is estimated to be approximately
$102 per Unit.                                                                  

                                                                             7

10-K
8th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 8th
On September 18, 1995, Caldor, a former anchor tenant at Cranberry Mall, filed  
for protection under the U.S. Bankruptcy Code. In February 1998, Caldor         
announced that it would close its store at Cranberry, and did so on May 10,     
1998. In July 1998, Caldor rejected its lease with bankruptcy court approval and
the Partnership's claim for unpaid rent and rejection damages under Caldor's    
lease was filed shortly thereafter. Caldor did not submit a plan for            
reorganization and on January 22, 1999 was ordered to wind down its business    
operations and affairs under Chapter 11 of the Bankruptcy Code. Claims for      
unpaid rent and rejection damages will not be paid.                             

On July 7, 1997, Montgomery Ward, an anchor tenant at Cranberry Mall filed for  
protection under Chapter 11 of the Bankruptcy Code. Montgomery Ward confirmed   
its plan of reorganization in July 1999, and successfully emerged from          
bankruptcy. In conjunction with the confirmation of its Chapter 11 plan,        
Montgomery Ward has assumed its store lease at Cranberry Mall and will remain in
possession of the store.                                                        

The first and second mortgage notes secured by Cranberry Mall, which totaled    
$31,025,000 at December 31, 1999 and December 31, 1998, were scheduled to mature
on April 1, 1999. The General Partner and the mortgage lender, Metropolitan Life
Insurance Company, agreed to allow the Partnership to defer the payment of the  
principal balance until the property was sold on April 3, 2000. The loan was    
repaid from the Cranberry sale proceeds.                                        

At December 31, 1999, the Partnership had cash and cash equivalents totaling    
$7,605,884, compared with $5,952,659 at December 31, 1998. The increase is      
primarily due to cash provided by operations and no distributions to partners   
made in 1999.                                                                   

At December 31, 1999, the Partnership's accounts receivable, net of allowance   
for doubtful accounts, decreased to $116,555 from $390,768 at December 31, 1998,
primarily due to increase in timely collections of accounts.                    

Other receivable totaling $300,000 at December 31, 1998, represented amounts due
pursuant to a settlement agreement with a prior owner of Assembly Square        
regarding costs associated with environmental remediation at Assembly Square.   
This receivable was collected in the first quarter of 1999.                     

Prepaid expenses decreased to $317,801 at December 31, 1999 from $419,878 at    
December 31, 1998, primarily due to lower prepaid real estate taxes due to      
abatement in 1999.                                                              

Accounts payable and accrued expenses increased to $232,431 at December 31, 1999
from $202,161 at December 31, 1998.                                             

Other liabilities increased from $20,577 at December 31, 1998 to $168,960 at    
December 31, 1999 as a result of amounts due to tenants for their share of a    
real estate tax refund for 1997 and 1998.                                       

Deferred income decreased from $525,051 at December 31, 1998 to $302,466 at     
December 31, 1999, primarily due to a reduction in income from real estate tax  
escalations due to abatement in 1999.                                           

Year 2000 Compliance                                                            
--------------------                                                            

The Year 2000 compliance issue concerns the ability of computerized information 
systems to accurately calculate, store or use a date after 1999. This could     
result in computer system failures or miscalculations causing disruptions of    
operations. The Year 2000 issue affects almost all companies and organizations. 

Prior to December 31, 1999, the Partnership conducted an assessment of outside  
vendors which provide the Partnership's administrative services (including      
accounting, tax preparation and transfer agent services), property management   
services to the Cranberry Mall, as well as Year 2000 issues related to property 
management systems at the property. The Partnership determined that those       
systems were substantially Year 2000 compliant. As of this date, the Year 2000  
issue has not had an adverse effect on the Partnership's business.              

                                                                             8

10-K
9th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 9th
Results of Operations                                                           
---------------------                                                           

1999 versus 1998                                                                
----------------                                                                

For the year ended December 31, 1999, the Partnership's operations resulted in  
net loss of $1,801,326 compared to net loss of $2,583,615 in fiscal 1998. The   
reduction in the net loss was primarily due to the suspension of depreciation on
the property which is now held for disposition and a decrease in loss on        
write-down of real estate from 1998 to 1999.                                    

For the year ended December 31, 1999, the Partnership's rental income totaled   
$3,773,266, compared to rental income of $4,378,803 in fiscal 1998. The decrease
in rental income is primarily due to Caldor's rejection of its lease in July    
1998 and the resulting vacancy of that space in 1999.                           

Escalation income represents the income received from mall tenants for their    
proportionate share of common area maintenance and real estate tax expenses.    
Escalation income totaled $2,234,194 for the year ended December 31, 1999,      
compared to $2,492,584 in fiscal 1998. The decrease is primarily due to a real  
estate tax abatement received in 1999 and increase in vacancy from 1998 to 1999.

Interest income totaled $377,636 for the year ended December 31, 1999, compared 
with $534,033 in fiscal 1998. The decrease is attributed to lower average cash  
balances maintained in 1999 compared to 1998.                                   

Property operating expenses totaled $1,972,422 for the year ended December 31,  
1999, compared with $2,156,802 in fiscal 1998. The decrease is primarily due to 
lower provisions for bad debts of delinquent tenants.                           

Depreciation and amortization expense totaled $687,466 for the year ended       
December 31, 1998. The Partnership suspended depreciation and amortization on   
July 1, 1998, in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived     
Assets to be Disposed of " ("FAS 121").                                         

General and administrative expenses for the year ended December 31, 1999 were   
$476,595, compared with $459,423 in fiscal 1998. The increase in 1999 reflects  
additional expenses relating to Partnership administrative expenses and         
professional fees in connection with the preparation and mailing of the proxy   
solicitation to obtain approval of the property sale by the Unitholders.        

Mall tenant sales at Cranberry for the year ended December 31, 1999 were        
$32,825,000, compared with sales of $34,082,000 in fiscal 1998. Mature tenant   
sales for the year ended December 31, 1999 were $30,511,000, compared with sales
of $29,703,000 in fiscal 1998. As of December 31, 1999 and 1998, Cranberry was  
78% and 79% occupied, respectively (exclusive of anchor and outparcel tenants). 

1998 versus 1997                                                                
----------------                                                                

For the year ended December 31, 1998, the Partnership's operations resulted in a
net loss of $2,583,615, compared to a net loss of $7,594,087 in 1997. The       
reduction in the net loss was primarily due to the write down of Cranberry Mall 
to its estimated fair market value in the amount of $4,145,677 in 1998, compared
to $7,572,838 in 1997.                                                          

For the year ended December 31, 1998, the Partnership's rental income totaled   
$4,378,803 compared with $4,886,656 in 1997. The decrease in rental income is   
primarily due to Caldor's rejection of its lease in July 1998, when the         
Partnership ceased recognition of rental income from Caldor. Escalation income  
represents the income received from Mall tenants for their proportionate share  
of common area maintenance and real estate tax expenses. Escalation income      
totaled $2,492,584 for the year ended December 31, 1998 compared with $2,639,481
for the year ended December 31, 1997. The decrease in escalation income from    
1997 to 1998 is primarily due to lower property operating expenses in 1998      
compared to 1997.                                                               

Interest income totaled $534,033 for the year ended December 31, 1998, compared 
with $480,283 in 1997. The increase is due to the Partnership maintaining higher
average cash balances during 1998.                                              

                                                                             9

10-K
10th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 10th
Property operating expenses totaled $2,156,802 for the year ended December 31,  
1998, compared with $2,448,079 in 1997. The decrease is primarily due to lower  
general operating expenses including payroll expenses and common area charges.  

Depreciation and amortization expense totaled $687,466 for the year ended       
December 31, 1998, compared with $1,559,102 for the year ended December 31,     
1997. The Partnership suspended depreciation and amortization on July 1, 1998,  
in accordance with Statement of Financial Accounting Standards No. 121,         
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," as a result of the General Partner's decision to sell          
Cranberry.                                                                      

Environmental remediation and settlement costs totaled $(300,000) and $900,000  
for the years ended December 31, 1998 and 1997, respectively. The 1998 amount   
reflects a settlement with the prior owner of Assembly Square Mall relating to  
reimbursement of remediation costs associated with environmental remediation at 
the property. The 1997 amount represents costs related to the Settlement        
Agreement with Aetna relating to environmental costs at Assembly Square. See    
Item 3 for a discussion of the Aetna settlement.                                

General and administrative expenses totaled $459,423 for the year ended December
31, 1998, compared with $372,181 for the year ended December 31, 1997. The      
increase is primarily due to higher partnership service cost in 1998 and costs  
associated with the marketing effort of the Cranberry Mall.                     

Mall tenant sales for the year ended December 31, 1998 were $34,082,000 compared
with sales of $35,732,000 for year ended December 31, 1997. Mature tenant sales 
for the year ended December 31, 1998 were $29,703,000 compared with sales of    
$29,040,000 for the year ended December 31, 1997. As of December 31, 1998 and   
1997, Cranberry was 79% and 82% occupied, respectively (exclusive of anchor and 
outparcel tenants). For the year ended December 31, 1998, Cranberry generated   
net operating income of $4,099,000 on income of $6,982,000 and property         
operating expenses and real estate taxes totaling $2,883,000.                   

Item 8.   Financial Statements and Supplementary Data                           

See Item 14(a) for a listing of the Consolidated Financial Statements and       
Supplementary data filed in this report.                                        

Item 9.   Changes in and Disagreements with Accountants on                      
Accounting and Financial Disclosure                         

None.                                                                           

PART III

Item 10.  Directors and Executive Officers of the Registrant                    

Certain officers or directors of Regional Malls Inc. are now serving (or in the 
past have served) as officers and directors of entities which act as general    
partners of a number of real estate limited partnerships which have sought      
protection under the provisions of the Federal Bankruptcy Code. The partnerships
which have filed bankruptcy petitions own real estate which has been adversely  
affected by the economic conditions in the markets in which that real estate is 
located and, consequently, the partnerships sought the protection of the        
bankruptcy laws to protect the partnerships' assets from loss through           
foreclosure.                                                                    

The following is a list of the officers and directors of Regional Malls Inc.    
at December 31, 1999:                                                           

Name                     Office                                       
----                     ------                                       
Michael T. Marron        President, Director & Chief Financial Officer
Rocco F. Andriola        Director, Vice President                     

Michael T. Marron, 36, is a Vice President of Lehman Brothers and has been a    
member of the Diversified Asset Group since 1990 where he has actively          
managed and restructured a diverse portfolio of syndicated limited              
partnerships.  Prior to joining Lehman Brothers, Mr. Marron was associated      
with Peat Marwick Mitchell & Co. serving in both its audit and tax divisions    
from 1985 to 1989.  Mr. Marron received a B.S. degree from the State            
University of New York at Albany and an M.B.A. degree from Columbia             
University and is a Certified Public Accountant.                                

                                                                              10

10-K
11th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 11th
Rocco F. Andriola, 41, is a Managing Director of Lehman Brothers in its         
Diversified Asset Group and has held such position since October 1996.  Mr.     
Andriola also serves as the Director of Global Corporate Services for           
Lehman.  Since joining Lehman in 1986, Mr. Andriola has been involved in a      
wide range of restructuring and asset management activities involving real      
estate and other direct investment transactions.  From June 1991 through        
September 1996, Mr. Andriola held the position of Senior Vice President in      
Lehman's Diversified Asset Group.  From June 1989 through May 1991, Mr.         
Andriola held the position of First Vice President in Lehman's Capital          
Preservation and Restructuring Group.  From 1986 to 1989, Mr. Andriola served   
as a Vice President in the Corporate Transactions Group of Shearson Lehman      
Brothers' office of the general counsel.  Prior to joining Lehman, Mr.          
Andriola practiced corporate and securities law at Donovan Leisure Newton &     
Irvine in New York.  Mr. Andriola received a B.A. from Fordham University, a    
J.D. from New York University School of Law, and an LL.M in Corporate Law       
from New York University's Graduate School of Law.                              

Item 11.  Executive Compensation                                                

The Officers and Directors of the General Partner do not receive any salaries or
other compensation from the Partnership. See Item 13 below with respect to a    
description of certain transactions of the General Partner and its affiliates   
with the Partnership.                                                           

Item 12.  Security Ownership of Certain Beneficial Owners and Management        

(a)  Security ownership of certain beneficial owners                            
-----------------------------------------------                       

At December 31, 1999, to the Partnership's knowledge, no investor held more than
5% of the outstanding Units.                                                    

(b)  Security ownership of management                                           
--------------------------------                                      

Various employees of Lehman Brothers that perform services on behalf of the     
General Partner own no units of the Partnership as of December 31, 1999.        

(c)  Changes in control                                                         
------------------                                                    

None.                                                                           

Item 13.  Certain Relationships and Related Transactions                        

Affiliates of the General Partner have been responsible for certain             
administrative functions of the Partnership. Commencing January 1, 1997, the    
Partnership began reimbursing certain expenses incurred by the General Partner  
and its affiliates in servicing the Partnership to the extent permitted by the  
partnership agreement. In prior years, affiliates of the General Partner had    
voluntarily absorbed these expenses. Disclosure relating to amounts paid to the 
General Partner or its affiliates during the past three years is incorporated   
herein by reference to Note 7 of the Notes to the Consolidated Financial        
Statements.                                                                     

On July 31, 1993, Shearson Lehman Brothers Inc. ("Shearson") sold certain of    
its domestic retail brokerage and asset management businesses to Smith          
Barney, Harris Upham & Co. Incorporated ("Smith Barney").  Subsequent to this   
sale, Shearson changed its name to Lehman Brothers Inc.  The transaction did    
not affect the ownership of the Partnership or the Partnership's General        
Partner.  However, the assets acquired by Smith Barney included the name        
"Shearson."  Consequently, the general partner changed its name to Regional     
Malls Inc., the Assignor Limited Partner changed its name to Regional Malls     
Depositary Corp. and the Owner Partnership changed its name to Shopco Malls     
L.P. to delete any references to "Shearson."                                    

                                                                              11

10-K
12th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 12th
 Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K       

(a)(1) and (2).                                                                 
---------------                                                                 

Index to Consolidated Financial Statements and Schedules
                                                                          Page
                                                                          Number
                                                                          ------

Consolidated Balance Sheets                                 
         At December 31, 1999 and 1998 .................................   F-2

Consolidated Statements of Partners' Capital (Deficit)      
         For the years ended December 31, 1999, 1998 and 1997...........   F-2

Consolidated Statements of Operations                       
         For the years ended December 31, 1999, 1998 and 1997...........   F-3

Consolidated Statements of Cash Flows                       
         For the years ended December 31, 1999, 1998 and 1997...........   F-4

         Notes to the Consolidated Financial Statements ................   F-5

         Independent Auditors' Report ..................................  F-13

         Schedule II - Valuation and Qualifying Accounts ...............  F-14

         Schedule III - Real Estate and Accumulated Depreciation .......  F-14

(b)  Exhibits                                                                   
--------                                                              

 Subject to Rule 12b-32 of the Securities Exchange Act of 1934
       regarding incorporation by reference, listed below are the exhibits
which are filed as part of this report.                     

3.      Partnership's Amended and Restated Agreement of Limited Partnership,
         dated October 6, 1988, is hereby incorporated by reference to Exhibit
         A to the Prospectus contained in Registration Statement No. 33-20614,
   which Registration Statement (the "Registration Statement") was
declared effective by the SEC on May 20, 1988.              

4.1     The form of Unit Certificate is hereby incorporated by reference to 
Exhibit 7 to the Form 8-A dated April 10, 1989.             

  10.1    The form of Subscription Agreement is hereby incorporated by reference
to Exhibit C to the Registration Statement.                 

10.2    Escrow Agreement between Partnership and United States Trust Company
       of New York, is hereby incorporated by reference to Exhibit 10.2 to
the Registration Statement.                                 

10.3    The form of Depository Agreement between Partnership and Shearson   
          Regional Malls Depository Corp., as Assignor Limited Partner is hereby
 incorporated by reference to Exhibit 10.3 to the Registration
Statement.                                                  

10.4    The form of Sale Contract concerning the acquisition of Assembly    
     Square is hereby incorporated by reference to Exhibit 10.4 to the
Registration Statement.                                     

                                                                              12

10-K
13th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 13th
10.5    Letter of Intent to Purchase Cranberry is hereby incorporated by    
reference to Exhibit 10.5 to the Registration Statement.    

10.6    The form of Master Rental Income Guaranty is hereby incorporated by 
reference to Exhibit 10.6 to the Registration Statement.    

  10.7    The form of Management and Leasing Agreement is hereby incorporated by
reference to Exhibit 10.7 to the registration Statement.    

  10.8    Amendment of Mortgage Loan Modification between Shearson Shopco Malls,
   L.P. and Aetna Life Insurance Company is hereby incorporated by
       reference to Exhibit 10.8 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992.                  

10.9    Note Modification Agreement between Shopco Malls, L.P. and          
        Metropolitan Life Insurance Company for Cranberry Mall as of May 31,
    1994, is hereby incorporated by reference to Exhibit 10.1 to the
    Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994.                                              

10.10   Forbearance letter dated March 19, 1999 from Metropolitan Life      
        Insurance Company regarding the maturity date of the Cranberry Note,
         incorporated by reference to Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.   

22.1    Notice of Special Meeting of The Limited Partners of Shopco Regional
Malls, L.P., filed with the Commission on February 1, 2000. 

27      Financial Data Schedule                                             

(c)  Reports on Form 8-K filed during the fourth quarter of 1999:               
-----------------------------------------------------------           

  No reports on Form 8-K were filed during the three months ended December
31, 1999.                                                             

On March 8, 2000, the Partnership filed a Current Report on Form 8-K  
    reporting the proxy solicitation to approve the Sale of Cranberry Mall and
subsequent dissolution of the Partnership.                            

                                                                              13

10-K
14th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 14th
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange  
Act of 1934, the Registrant has duly caused this report to be signed on its     
behalf by the undersigned, thereunto duly authorized.                           

SHOPCO REGIONAL MALLS, L.P.         

BY: Regional Malls, Inc.            
General Partner             

Date:  April 14, 2000     BY:    /s/Michael T. Marron                           
      --------------------
Name:  Michael T. Marron    
                          Title: President, Director and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in   
the capacities and on the dates indicated.                                      

REGIONAL MALLS, INC.        
General Partner             

Date:  April 14, 2000     BY:    /s/Michael T. Marron                           
      --------------------
Name:  Michael T Marron     
                          Title: President, Director and Chief Financial Officer

Date:  April 14, 2000     BY:    /s/Rocco F. Andriola                           
      --------------------
Name:  Rocco F. Andriola    
   Title: Director, Vice President

                                                                              14

10-K
15th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 15th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------- 
CONSOLIDATED BALANCE SHEETS                                                                        
                                                                  At December 31,   At December 31,
                                                                            1999              1998 
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Assets                                                                                             
Real estate assets held for disposition                              $32,440,000       $35,280,000 
Cash and cash equivalents                                              7,605,884         5,952,659 
Construction escrow (note 5)                                             491,246           473,246 
Accounts receivable, net of allowance of $13,390 in 1999                                           
  and $131,910 in 1998                                                   116,555           390,768 
Other receivables (note 3)                                                 5,444           300,000 
Prepaid expenses                                                         317,801           420,873 
-------------------------------------------------------------------------------------------------- 
      Total Assets                                                   $40,976,930       $42,817,546 
================================================================================================== 
Liabilities, Minority Interest and Partners' Capital                                               
Liabilities:                                                                                       
  Accounts payable and accrued expenses                              $   232,431       $   202,161 
  Other liabilities                                                      168,960            20,577 
  Mortgages payable (note 6)                                          31,025,000        31,025,000 
  Due to affiliates (note 7)                                              45,500            25,549 
  Security deposits payable                                               10,021            10,271 
  Deferred income                                                        302,466           525,051 
                                                                     ----------------------------- 
      Total Liabilities                                               31,784,378        31,808,609 
                                                                     ----------------------------- 
Minority interest                                                       (133,180)         (118,121)
                                                                     ----------------------------- 
Partners' Capital (note 4):                                                                        
  General Partner                                                        (88,201)          (70,188)
  Limited Partners (70,250 limited partnership units authorized                                    
  issued and outstanding)                                              9,413,933        11,197,246 
                                                                     ----------------------------- 
      Total Partners' Capital                                          9,325,732        11,127,058 
-------------------------------------------------------------------------------------------------- 
      Total Liabilities, Minority Interest and Partners' Capital     $40,976,930       $42,817,546 
================================================================================================== 

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------- 
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)                                             
For the years ended December 31, 1999, 1998 and 1997                                               
                                                       General           Limited                   
                                                       Partner          Partners             Total 
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Balance at December 31, 1996                          $ 84,589       $26,520,163       $26,604,752 
Net loss                                               (75,941)       (7,518,146)       (7,594,087)
-------------------------------------------------------------------------------------------------- 
Balance at December 31, 1997                             8,648        19,002,017        19,010,665 
Net loss                                               (25,836)       (2,557,779)       (2,583,615)
Distributions (note 9)                                 (53,000)       (5,246,992)       (5,299,992)
-------------------------------------------------------------------------------------------------- 
Balance at December 31, 1998                           (70,188)       11,197,246        11,127,058 
Net loss                                               (18,013)       (1,783,313)       (1,801,326)
-------------------------------------------------------------------------------------------------- 
Balance at December 31, 1999                          $(88,201)      $ 9,413,933       $ 9,325,732 
================================================================================================== 

See accompanying notes to the consolidated financial statements.            F-2 

10-K
16th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 16th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------- 
CONSOLIDATED STATEMENTS OF OPERATIONS                                                              
For the years ended December 31,                                                                   
                                                          1999              1998              1997 
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Income                                                                                             
Rental income (note 3)                            $  3,773,266      $  4,378,803      $  4,886,656 
Escalation income (note 3)                           2,234,194         2,492,584         2,639,481 
Interest income                                        377,636           534,033           480,283 
Miscellaneous income                                    58,469           110,183           165,569 
                                                  ------------------------------------------------ 
      Total Income                                   6,443,565         7,515,603         8,171,989 
-------------------------------------------------------------------------------------------------- 
Expenses                                                                                           
Interest expense                                     2,249,312         2,249,312         2,249,312 
Property operating expenses                          1,972,422         2,156,802         2,448,079 
Loss on write-down of real estate                    2,890,000         4,145,677         7,572,838 
Depreciation and amortization                               --           687,466         1,559,102 
Real estate taxes                                      696,621           726,227           732,018 
General and administrative                             476,595           459,423           372,181 
Environmental remediation and                                                                      
  settlement costs (note 3)                            (25,000)         (300,000)          900,000 
                                                  ------------------------------------------------ 
      Total Expenses                                 8,259,950        10,124,907        15,833,530 
-------------------------------------------------------------------------------------------------- 
Loss before minority interest                       (1,816,385)       (2,609,304)       (7,661,541)
Minority interest                                       15,059            25,689            67,454 
-------------------------------------------------------------------------------------------------- 
      Net Loss                                    $ (1,801,326)     $ (2,583,615)     $ (7,594,087)
================================================================================================== 
Net Loss Allocated:                                                                                
To the General Partner                            $    (18,013)     $    (25,836)     $    (75,941)
To the Limited Partners                             (1,783,313)       (2,557,779)       (7,518,146)
-------------------------------------------------------------------------------------------------- 
                                                  $ (1,801,326)     $ (2,583,615)     $ (7,594,087)
================================================================================================== 
Per limited partnership unit                                                                       
(70,250 units outstanding):                                                                        
-------------------------------------------------------------------------------------------------- 
      Net Income (Loss)                               $ (25.39)         $ (36.41)        $ (107.02)
================================================================================================== 

See accompanying notes to the consolidated financial statements.            F-3 

10-K
17th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 17th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------- 
CONSOLIDATED STATEMENTS OF CASH FLOWS                                                              
For the years ended December 31,                                                                   
                                                          1999              1998              1997 
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Cash Flows From Operating Activities:                                                              
Net loss                                           $(1,801,326)      $(2,583,615)      $(7,594,087)
Adjustments to reconcile net loss to net cash                                                      
provided by operating activities:                                                                  
  Minority interest                                    (15,059)          (25,689)          (67,454)
  Depreciation and amortization                             --           687,466         1,559,102 
  Loss on write-down of real estate                  2,890,000         4,145,677         7,572,838 
  Increase (decrease) in cash arising from changes                                                 
  in operating assets and liabilities:                                                             
    Accounts receivable                                274,213           (45,620)          (38,796)
    Other receivables                                  294,556          (300,000)               -- 
    Deferred rent receivable                                --           (76,644)         (145,389)
    Prepaid expenses and other assets                  103,072            (8,970)          (19,407)
    Accounts payable and accrued expenses               30,270            97,166           107,827 
    Other liabilities                                  148,383           (90,465)               -- 
    Due to affiliates                                   19,951            (8,199)           33,217 
    Security deposits payable                             (250)            5,500                -- 
    Deferred income                                   (222,585)           17,477            68,408 
                                                   ----------------------------------------------- 
Net cash provided by operating activities            1,721,225         1,814,084         1,476,259 
-------------------------------------------------------------------------------------------------- 
Cash Flows From Investing Activities:                                                              
Additions to real estate                               (50,000)          (36,094)         (176,000)
Construction escrows                                   (18,000)          (18,000)          (17,900)
                                                   ----------------------------------------------- 
Net cash used for investing activities                 (68,000)          (54,094)         (193,900)
-------------------------------------------------------------------------------------------------- 
Cash Flows From Financing Activities:                                                              
Distributions paid -  minority interest                     --          (108,163)               -- 
Distributions paid - general partner                        --           (53,000)               -- 
Distributions paid - limited partners                       --        (5,246,992)               -- 
                                                   ----------------------------------------------- 
Net cash used for financing activities                      --        (5,408,155)               -- 
-------------------------------------------------------------------------------------------------- 
Net increase (decrease) in cash                                                                    
and cash equivalents                                 1,653,225        (3,648,165)        1,282,359 
Cash and cash equivalents, beginning of period       5,952,659         9,600,824         8,318,465 
                                                   ----------------------------------------------- 
Cash and cash equivalents, end of period           $ 7,605,884       $ 5,952,659       $ 9,600,824 
================================================================================================== 
Supplemental Disclosure of Cash Flow Information:                                                  
Cash paid during the period for interest           $ 2,249,312       $ 2,249,312       $ 2,249,312 
-------------------------------------------------------------------------------------------------- 
Supplemental Disclosure of Non-Cash Activities:                                                    
In connection with the General Partner's decision to market the Mall for sale, real estate held    
for investment, deferred rent receivable and deferred leasing costs in the amounts of $38,603,961, 
$544,832 and $240,790, respectively, were reclassified to "Real estate assets held for             
disposition" in 1998.                                                                              
-------------------------------------------------------------------------------------------------- 

See accompanying notes to the consolidated financial statements.            F-4 

10-K
18th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 18th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
December 31, 1999, 1998 and 1997                                                

1.   Organization                                                               
Shopco Regional Malls, L.P. (the "Partnership") was formed as a limited         
partnership on March 11, 1988 under the laws of the State of Delaware. The      
Partnership is the general partner of Shopco Malls L.P. (the "Owner             
Partnership"), a Delaware limited partnership, which in October 1988 purchased  
The Mall at Assembly Square ("Assembly Square") and Cranberry Mall              
("Cranberry"). The Partnership sold Assembly Square at a foreclosure sale during
1996. As discussed in Note 12, Cranberry Mall was sold on April 3, 2000. The    
General Partner intends to wind up the Partnership's affairs and terminate the  
Partnership during the year 2000.                                               

The general partner of the Partnership is Regional Malls Inc. (the "General     
Partner") formerly Shearson Regional Malls, Inc., an affiliate of Lehman        
Brothers Inc., formerly Shearson Lehman Brothers Inc. (see below).              

On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic    
retail brokerage and asset management businesses to Smith Barney, Harris        
Upham & Co. Incorporated ("Smith Barney").  Subsequent to the sale, Shearson    
Lehman Brothers Inc. changed its name to Lehman Brothers Inc. ("Lehman          
Brothers").  The transaction did not affect the ownership of the general        
partner.  However, the assets acquired by Smith Barney included the name        
"Shearson."  Consequently, effective October 29, 1993, the General Partner      
changed its name to Regional Malls Inc. to delete any reference to              
"Shearson."                                                                     

The first investor closing occurred in October 1988 and the offering was        
completed in April 1989 when 70,250 total authorized limited partnership units  
("Unitholders") were accepted.                                                  

2.   Summary of Significant Accounting Policies                                 

Basis of Accounting  The consolidated financial statements of the Partnership   
have been prepared on the accrual basis of accounting and include the accounts  
of the Partnership and the Owner Partnership. All significant intercompany      
accounts and transactions have been eliminated.                                 

Long-Lived Assets Held for Sale  Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived     
Assets to be Disposed of " ("FAS 121"), requires the Partnership to record real 
estate held for sale at the lower of carrying amount or fair value less cost to 
sell.                                                                           

During 1998, the Partnership engaged a broker to market Cranberry Mall for sale.
In view of the anticipated sale of the Mall, the Partnership's real estate      
assets, deferred rent receivable and deferred leasing costs were reclassified as
Real Estate Assets Held for Disposition. Pursuant to FAS 121, during the third  
quarter of 1998, the Partnership suspended depreciation of the Cranberry Mall.  

At December 31, 1999 and 1998, the Partnership completed a review of the        
recoverability of the carrying value of Cranberry Mall based upon information   
obtained during the marketing of this property for sale. Based upon the market  
information obtained during the sales process, the Partnership revised the      
estimate of the carrying value of Cranberry to an amount equal to Cranberry's   
estimated fair value less costs to sell at December 31, 1999 and 1998 in        
accordance with FAS 121.                                                        

Real Estate Held for Investment  At December 31, 1997, real estate held for     
investment, which consists of buildings, land and improvements at Cranberry, was
recorded at cost less accumulated depreciation and amortization and adjustment  
for impairment. Cost includes the initial purchase price of each property plus  
closing costs, acquisition and legal fees and capital improvements. Depreciation
is computed using the straight-line method based on an estimated useful life of 
40 years. Depreciation of improvements is computed using the straight-line      
method over estimated useful lives of 7 to 12 years.                            

                                                                           F-5

10-K
19th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 19th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

At December 31, 1997, the Partnership completed a review of recoverability of   
the carrying amount of Cranberry and related accounts based upon estimates of   
undiscounted future cash flows expected to result from Cranberry's use and      
eventual disposition. Based upon the review completed at December 31, 1997, and 
a change in the estimated holding period for Cranberry, the Partnership wrote   
down the carrying value of Cranberry and related assets to $39,275,000 which    
resulted in a loss on writedown of real estate in accordance with FAS 121 in    
1997.                                                                           

Fair Value of Financial Instruments  Statement of Financial Accounting Standards
No. 107 "Disclosures about Fair Value of Financial Instruments" ("FAS 107"),    
requires the Partnership to disclose the estimated fair values of its financial 
instruments. Fair values generally represent estimates of amounts at which a    
financial instrument could be exchanged between willing parties in a current    
transaction other than in forced liquidation. The carrying amount of receivables
and payables approximates fair value.                                           

Fair value estimates are subjective and are dependent on a number of significant
assumptions based on management's judgment regarding future expected loss       
experience, current economic conditions, risk characteristics of various        
financial instruments, and other factors. In addition, FAS 107 allows a wide    
range of valuation techniques, therefore, comparisons between entities, however 
similar may be difficult.                                                       

Deferred Charges  Mortgage commitment and placement fees, and extension fees    
were amortized over the term of the mortgage notes payable. Leasing commissions 
were amortized using the straight-line method over 7 years, which approximates  
the average life of the leases.                                                 

Offering Costs  Offering costs are non-amortizable and are deducted from limited
partners' capital.                                                              

Transfer of Units and Distributions  Net income or loss from operations is      
allocated to registered Unitholders. Upon the transfer of a limited partnership 
unit, net income (loss) from operations attributable to such unit generally is  
allocated between the transferor and the transferee based on the number of days 
during the year of transfer that each is deemed to have owned the unit. The     
Unitholder of record on the first day of the calendar month is deemed to have   
transferred their interest on the first day of such month.                      

Distributions of operating cash flow, as defined in the Partnership Agreement,  
are paid on a quarterly basis to registered Unitholders on record dates         
established by the Partnership. Distributions, when paid, are generally paid 45 
days after quarter end.                                                         

Income Taxes  No provision is made for income taxes in the consolidated         
financial statements since such liability is the liability of the individual    
partners.                                                                       

Net Income (Loss) Per Limited Partnership Unit  Net income (loss) per limited   
partnership unit is calculated based upon the number of limited partnership     
units outstanding during the period.                                            

Rental Income and Deferred Rent  The Partnership leases its property to tenants 
under operating leases with various terms. Deferred rent receivable consisted of
rental income which was recognized on the straight-line basis over the lease    
terms, but will not be received until later periods as a result of scheduled    
rent increases.                                                                 

Cash and Cash Equivalents  Cash and cash equivalents consist of short-term,     
highly liquid investments which have maturities of three months or less from the
date of issuance. The carrying amount approximates fair value because of the    
short maturity of these investments.                                            

Concentration of Credit Risk  Financial instruments which potentially subject   
the Partnership to a concentration of credit risk principally consist of cash   
and cash equivalents in excess of the financial institutions' insurance limits. 

                                                                           F-6

10-K
20th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 20th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

Use of Estimates  The preparation of 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 and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of income and expenses during the reporting 
period. Actual results could differ from those estimates.                       

Reclassifications  Certain prior year amounts have been reclassified to conform 
to the current year's presentation.                                             

3.   Real Estate Assets Held for Disposition                                    
As of December 31, 1999 and 1998, the Partnership's real estate consisted of    
Cranberry Mall, an enclosed regional mall located in Westminster, Maryland.     
Formerly, the Partnership owned another regional mall, The Mall at Assembly     
Square in Somerville, Massachusetts, which was sold through foreclosure on      
December 20, 1996.                                                              

Cranberry Mall                                                                  
--------------                                                                  
Cranberry Mall, which includes approximately 55.61 acres of land, was purchased 
on October 5, 1988 for $53,847,500. Cranberry contains approximately 530,000    
square feet of gross leasable area including four anchor spaces: Sears, Belk    
(formerly Leggett), Montgomery Ward and a vacated Caldor store.                 

Sears leases approximately 70,000 square feet of gross leasable building area.  
Sears is required to use the premises as a Sears retail store until the year    
2002 or under such other trade name as the majority of Sears retail stores are  
then operating.                                                                 

Caldor leased approximately 81,200 square feet of gross leasable building area. 
On September 18, 1995, Caldor filed for protection under the U.S. Bankruptcy    
Code. In February 1998, Caldor announced that it would close its store at       
Cranberry, and did so on May 10, 1998. In July 1998, Caldor rejected its lease  
and vacated the property with bankruptcy court approval, and the Partnership's  
claims for unpaid rent and rejection damages under Caldor's lease was filed     
shortly thereafter. Caldor did not submit a plan for reorganization and on      
January 22, 1999 was ordered to wind down its business operations and affairs   
under Chapter 11 of the Bankruptcy Code. The Partnership's claim for unpaid rent
and reduction damages will not be paid. Caldor represented approximately 4.8%   
and 10% of Cranberry's rental income for the years ended December 31, 1998 and  
1997, respectively.                                                             

Belk (formerly "Leggett") currently leases 65,282 square feet of gross leasable 
building area. During the first 15 years of the lease, ending March 4, 2002, the
tenant is required to use the premises as a Belk retail department store or     
under such other trade name as Belk is then operating substantially all of its  
department stores.                                                              

Montgomery Ward leases approximately 80,000 square feet of gross leasable       
building area and 9,000 square feet for an automotive center. During the first  
15 years of the lease term, the tenant is required to use the premises as a     
retail store under the trade name Montgomery Ward or under such other name as   
the tenant is doing business in the majority of its retail department stores in 
the State of Maryland.                                                          

On July 7, 1997, Montgomery Ward filed for protection under Chapter 11 of the   
Bankruptcy Code. Montgomery Ward confirmed its plan of reorganization in July   
1999 and successfully emerged from bankruptcy. In conjunction with the          
confirmation of its Chapter 11 plan, Montgomery Ward has assumed its store lease
at Cranberry Mall and will remain in possession of the store.                   

                                                                           F-7

10-K
21st Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 21st
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

The following is a schedule of the remaining minimum lease payments as called   
for under the lease agreements:                                                 

                                                                [Download Table]

Year ending                           
December 31,                    Amount
--------------------------------------
                                      
2000                       $ 2,758,892
2001                         2,523,438
2002                         2,332,884
2003                         1,935,376
2004                         1,792,034
Thereafter                   6,156,056
--------------------------------------
                           $17,498,680
                           ===========

In addition to the minimum lease amounts, the leases provide for percentage     
rents and escalation charges to tenants for common area maintenance and real    
estate taxes. For the years ended December 31, 1999, 1998 and 1997,             
respectively, percentage rents amounted to $398,742, $285,910 and $240,961 for  
Cranberry. These amounts are included in rental income. For the years ended     
December 31, 1999, 1998 and 1997, respectively, temporary tenant income amounted
to $179,360, $268,694 and $291,706 for Cranberry. These amounts are included in 
rental income.                                                                  

During 1998, the Partnership engaged a broker to market Cranberry for sale. In  
view of the anticipated sale of the mall, the Partnership's real estate assets  
were recorded on the Partnership's December 31, 1998 consolidated balance sheet 
as "Real estate assets held for disposition." On September 11, 1999, the        
Partnership entered into a contract to sell Cranberry Mall to a third-party     
buyer. Any sale of the Partnership's interest in the Mall is subject to the     
approval of a majority-in-interest of the Limited Partners. The proposed sale   
and subsequent dissolution of the Partnership was approved by a                 
majority-in-interest of the Unitholders at a Special Meeting of the Limited     
Partners held on February 29, 2000.                                             

On April 3, 2000, the General Partner sold Cranberry (see Note 12).             

Assembly Square                                                                 
---------------                                                                 
The Mall at Assembly Square in Somerville, Massachusetts was purchased on       
October 11, 1988 for $42,358,000. Assembly Square contained approximately       
322,000 square feet of gross leasable area.                                     

On October 15, 1996, the Owner Partnership received notice of default from its  
lender, Aetna Life Insurance Company ("Aetna"), due to the Owner Partnership's  
failure to escrow real estate taxes with Aetna as required under the Mortgage   
and Security Agreement (the "Mortgage") secured by Assembly Square. On account  
of such default, and pursuant to its rights and remedies under the Mortgage,    
Aetna declared the entire outstanding mortgage loan balance immediately due and 
payable. On November 26, 1996, Aetna commenced advertising for a public         
nonjudicial foreclosure sale to be held on December 20, 1996. On December 20,   
1996, Aetna acquired Assembly Square at the foreclosure sale.                   

Subsequent to the foreclosure date, Aetna advised the Partnership that it would 
pursue environmental remediation claims for land contamination under the terms  
of the Mortgage. On September 3, 1997, the Partnership and Aetna entered into a 
Settlement Agreement whereby the Partnership paid $400,000 to Aetna for a       
complete release from the Mortgage's loan covenants. The release excludes       
environmental claims already made by Aetna regarding existing environmental     
conditions and environmental claims which could arise in the future because of  
existing conditions. The Partnership separately funded approximately $500,000 to
pay for work performed to address environmental conditions at Assembly Square.  
Accordingly, the Partnership recognized a provision of $900,000 for             
environmental remediation and settlement costs in the accompanying consolidated 
statements of operations for the year ended December 31, 1997.                  

                                                                           F-8

10-K
22nd Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 22nd
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

The Partnership agreed to in 1998, and collected in 1999, a $300,000            
contribution from a prior owner of the Assembly Square property for the amounts 
the Partnership expended during 1998 in connection with the environmental site  
remediation. The Partnership also collected in 1999 a $25,000 contribution from 
another former owner for costs associated with the environmental remediation at 
the property. The Commonwealth of Massachusetts performed a statutorily-required
audit on the remediation performed at Assembly Square; it is uncertain whether  
that audit will require additional remediation to be performed. The Partnership 
has negotiated an agreement with the current owner of Assembly Square Mall,     
under which that owner assumed responsibility for responding to the audit and   
indemnified the Partnership from any liability arising from that audit or       
environmental conditions on the property.                                       

4.   Partnership Agreement                                                      
The Partnership has a 98% interest in the operating income, profits and cash    
distributions, and a 99% interest in the operating losses, of the Owner         
Partnership. The Limited Partnership Agreement provides that all operating      
income, operating losses and cash distributions are generally allocated 1% to   
the General Partner and 99% to the Unitholders.                                 

5.   Construction Escrow                                                        
In 1990, the Partnership borrowed $3,775,000 to fund the expansion of Montgomery
Ward at Cranberry. During 1991, $3,425,000 of the funds were released. The      
remaining proceeds of $491,246 and $473,246, inclusive of interest income,      
remain in a construction escrow account as of December 31, 1999 and 1998,       
respectively.                                                                   

6.   Mortgages Payable                                                          

                                                        [Enlarge/Download Table]

                                                                  1999            1998
--------------------------------------------------------------------------------------
                                                                                      
Secured by Cranberry. Interest only, at 7.25%,                                        
  payable monthly, and repaid in full on April 3, 2000     $27,250,000     $27,250,000
Secured by Cranberry. Interest only, at 7.25%,                                        
  payable monthly, and repaid in full on April 3, 2000       3,775,000       3,775,000
--------------------------------------------------------------------------------------
                                                           $31,025,000     $31,025,000
                                                           ===========     ===========

The original notes secured by Cranberry matured on November 1, 1993. The lender,
Metropolitan Life Insurance Company, agreed to extend the maturity date of the  
notes to May 1, 1994. During the extension period, the General Partner and      
Metropolitan Life Insurance Company agreed to modify and extend the notes on    
mutually acceptable terms. Under the terms of the agreement, the amended notes, 
effective April 1, 1994, require payments of interest only at an interest rate  
of 7.25% per annum until their maturity on April 1, 1999. In March 1999,        
Metropolitan Life Insurance Company agreed to allow the Partnership to defer the
payment of the notes to April 1, 2000, provided that the Partnership continued  
to pay interest at the same rate and times set forth in the notes. The maturity 
date of the notes was further extended to the date the Mall was sold. The notes 
were repaid from the Cranberry sale proceeds. Interest expense for each of the  
years ended December 31, 1999, 1998 and 1997 was $2,249,312.                    

Based on the borrowing rates currently available to the Partnership for mortgage
loans with similar terms, the fair value of the Cranberry notes approximates its
carrying value as of the balance sheet date.                                    

7.   Transactions With Related Parties                                          
Under the terms of the Partnership Agreement, the Partnership reimburses the    
General Partner and affiliates, at cost, for certain administrative expenses.   
For the years ended December 31, 1999, 1998 and 1997, such costs incurred were  
$271, $3,702 and $3,495, respectively.                                          

Commencing January 1, 1997, the Partnership began reimbursing certain expenses  
incurred by the General Partner and its affiliates in servicing the Partnership 
to the extent permitted by the partnership agreement. For the years ended       
December 31, 1999 and 1998, costs were $111,561 and $54,771 of which $45,500 and
$25,549 were unpaid at December 31, 1999 and 1998, respectively. In prior years,
affiliates of the General Partner had voluntarily absorbed these expenses.      

                                                                           F-9

10-K
23rd Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 23rd
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

8.   Management Agreement                                                       
On May 1, 1997 the Partnership withdrew from its former management agreement    
with Shopco Management Corporation, an affiliate of the Owner Partnership, and  
entered into an agreement with Insignia Retail Group, Inc. ("Insignia").        
Insignia receives an annual fee equal to 4% of the gross rents collected from   
Cranberry Mall. The agreement was terminated on the date the Mall was sold. For 
the year ended December 31, 1997, management fees earned by Shopco Management   
Corporation were $69,849. The management fee earned by Insignia during 1999 and 
1998 was $156,540 and $160,364, respectively.                                   

9.   Distributions to Limited Partners                                          
Distributions to the limited partners for 1998 were $5,246,992 ($74.69 per      
limited partnership unit).                                                      

10.  Reconciliation of Consolidated Financial Statement Basis Net Income (Loss) 
and Partners' Capital To Federal Income Tax Basis Net Income (Loss) and         
Partners' Capital                                                               
Reconciliations of consolidated financial statement basis net income (loss) and 
partners' capital to federal income tax basis net income (loss) and partners'   
capital follow:                                                                 

                                                        [Enlarge/Download Table]

                                                               1999           1998           1997 
------------------------------------------------------------------------------------------------- 
                                                                                                  
Consolidated financial statement basis net loss         $(1,801,326)   $(2,583,615)   $(7,594,087)
Tax basis depreciation over financial statement                                                   
  depreciation                                           (1,706,709)    (1,038,377)      (211,566)
Tax basis recognition of deferred income over (under)                                             
  financial statement recognition of deferred income       (170,859)        17,128         18,224 
Tax basis recognition of real estate taxes under (over)                                           
  financial statement recognition of real estate taxes       62,377         (6,542)       (14,115)
Tax basis recognition of rental income over (under)                                               
  financial statement recognition of rental income               --        (75,111)      (143,936)
Financial statement loss on write-down of properties      2,890,000      4,145,677      7,497,111 
Other                                                        72,470        (53,420)            -- 
                                                        ----------------------------------------- 
Federal income tax basis net income (loss)              $  (654,047)   $   405,740    $  (448,369)
------------------------------------------------------------------------------------------------- 

                                                        [Enlarge/Download Table]

                                                               1999           1998           1997
-------------------------------------------------------------------------------------------------
                                                                                                 
Financial statement basis partners' capital             $ 9,325,732    $11,127,058    $19,010,665
Current year financial statement net income (loss)                                               
  over federal income tax basis                                                                  
  net income (loss)                                       1,147,279      2,989,355      7,145,718
Cumulative federal income tax basis net loss over                                                
  (under) cumulative financial statement net loss        10,931,039      7,941,684        795,966
                                                        -----------------------------------------
Federal income tax basis partners' capital              $21,404,050    $22,058,097    $26,952,349
-------------------------------------------------------------------------------------------------

Because many types of transactions are susceptible to varying interpretations   
under Federal and state income tax laws and regulations, the amounts reported   
above may be subject to change at a later date upon final determination by the  
respective taxing authorities.                                                  

11.  Litigation                                                                 
On or about June 9, 1999, a purported class action, Rice, et al. v. Regional    
Malls, Inc., et al., was commenced on behalf of all Unitholders in the Court of 
Chancery for New Castle County, Delaware, against the General Partner of the    
Partnership, the Partnership, and Lehman Brothers Inc. (the "Defendants"). The  
complaint alleges, among other things, that the General Partner failed to       
protect the Partnership's assets and the interests of the Unitholders in        
connection with the default on the mortgage encumbering Assembly Square, the    
foreclosure sale of Assembly Square and the efforts to sell Cranberry. The      
complaint purports to assert claims for breach of fiduciary duty and breach of  
contract and seeks an accounting. The Defendants have filed a motion to dismiss 
the complaint and intend to defend the action vigorously.                       

                                                                            F-10

10-K
24th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 24th
SHOPCO REGIONAL MALLS, L.P.                                                     
AND CONSOLIDATED PARTNERSHIP                                                    

12.  Subsequent Event                                                           
On April 3, 2000, Cranberry Mall was sold to an unaffiliated entity for a gross 
sale price of $33,500,000. The sale proceeds were used to pay off the           
Partnership's mortgage notes and accrued interest payable, which totaled        
$31,231,187. The General Partner intends to distribute the remaining proceeds   
from the sale and the Partnership's additional cash reserves (after payment of a
provision for the Partnership's liabilities and expenses, and establishment of  
reserves for contingencies, if any), and terminate the Partnership in 2000.     

                                                                            F-11

10-K
25th Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 25th
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Partners                                                                    
Shopco Regional Malls, L.P.:                                                    

We have audited the consolidated financial statements of Shopco Regional Malls, 
L.P. (a Delaware limited partnership) and consolidated partnership as listed in 
the accompanying index. In connection with our audits of the consolidated       
financial statements, we also have audited the financial statement schedules as 
listed in the accompanying index. These consolidated financial statements and   
financial statement schedules are the responsibility of the Partnership's       
management. Our responsibility is to express an opinion on these consolidated   
financial statements and the financial statement schedules based on our audits. 

We conducted our audits 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 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 Shopco Regional     
Malls, L.P. and consolidated partnership as of December 31, 1999 and 1998, and  
the results of their operations and their cash flows for each of the years in   
the three-year period ended December 31, 1999, in conformity with generally     
accepted accounting principles. Also, in our opinion, the related financial     
statement schedules, when considered in relation to the basic consolidated      
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.                                              

KPMG LLP                                                                        

Boston, Massachusetts                                                           
March 3, 2000                                                                   
except for the matters discussed in Note 12                                 
which is as of April 3, 2000                                                

                                                                            F-12

10-K
Last Page of 26
TOC
1st
Previous
Next
↓Bottom
Just 26th
                                                        [Enlarge/Download Table]

Schedule II - Valuation and Qualifying Accounts                                                   

                                              Balance at    Charged to                  Balance at
                                               Beginning     Costs and                      End of
                                               of Period      Expenses    Deductions        Period
--------------------------------------------------------------------------------------------------
                                                                                                  
Allowance for doubtful accounts:                                                                  
Year ended December 31, 1997:                  $ 160,393     $ 207,803     $   1,328     $ 366,868
Year ended December 31, 1998:                  $ 366,868     $ 130,876     $ 365,834     $ 131,910
Year ended December 31, 1999:                  $ 131,910     $ (36,899)    $  81,621     $  13,390
--------------------------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Schedule III - Real Estate Assets and Accumulated Depreciation                                 
December 31, 1999                                                                              
                                                                      Cranberry Mall           
                                                                     Shopping Center           
------------------------------------------------------------------------------------           

                                                                                               
Location                                                             Westminster, MD           
Construction date                                                               1980           
Acquisition date                                                               10-88           
Life on which depreciation in latest income statements is computed               (3)           
Encumbrances                                                            $ 31,025,000           
                                                                        ------------           
Initial cost to Partnership(1):                                                                
  Land                                                                  $  6,610,235           
  Buildings and improvements                                              47,649,669           
Costs capitalized subsequent to acquisition:                                                   
  Land, buildings and improvements                                         5,712,175           
  Deferred rent                                                              544,832           
  Net leasing costs                                                          240,790           
Write-off of accumulated depreciation                                    (13,709,186)          
Writedown of real estate                                                 (14,608,515)          
                                                                        ------------           
                                                                        $ 32,440,000           
                                                                        ============           
Gross amount at which carried at close of period(2):                                           
  Land                                                                  $  5,401,132           
  Buildings and improvements                                              27,038,868           
                                                                        ------------           
                                                                        $ 32,440,000           
                                                                        ============           

------------------------------------------------------------------------------------           

<FN>                                                                                           
(1) The initial cost to the Partnership represents the original purchase price of the property.
(2) For Federal income tax purposes, the costs basis of the land, building and improvements at 
    December 31, 1999 is $62,331,945.                                                          
(3) Buildings - 40 years; personal property - 12 years; tenant improvements - 7 years.         
</FN>                                                                                          

A reconciliation of the carrying amount of real estate and accumulated          
depreciation for the years ended December 31, 1999, 1998 and 1997 follows:      

                                                        [Enlarge/Download Table]

                                                          1999              1998              1997 
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Real estate investments:                                                                           
Beginning of year                                 $ 35,280,000      $ 39,275,000      $ 59,709,985 
Additions                                               50,000            36,094           176,000 
Deferred rent                                               --           544,832                -- 
Net leasing commissions                                     --           240,790                -- 
Writedown of real estate                            (2,890,000)       (4,816,716)      (20,610,985)
                                                  ------------------------------------------------ 
End of year                                       $ 32,440,000      $ 35,280,000      $ 39,275,000 
                                                  ------------------------------------------------ 
Accumulated depreciation:                                                                          
Beginning of year                                 $         --      $         --      $ 11,512,517 
Depreciation expense                                        --           671,039         1,525,630 
Writedown of real estate                                    --          (671,039)      (13,038,147)
                                                  ------------------------------------------------ 
End of year                                       $         --      $         --      $         -- 
-------------------------------------------------------------------------------------------------- 

                                                                            F-13

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		3/4/02		4		20
		4/30/00		4
Filed on:		4/14/00		14
		4/3/00		2		25
		4/1/00		2		22
		3/8/00		13					8-K
		3/3/00		25
		2/29/00		3		21			8-K
		2/1/00		13					DEFM14A
For Period End:		12/31/99		1		26			NT 10-K
		9/11/99		3		21
		8/2/99		4
		6/9/99		6		23
		4/1/99		2		22
		3/19/99		13
		1/22/99		5		20
		12/31/98		5		26			10-K
		10/19/98		6
		7/1/98		9		10
		5/10/98		8		20
		12/31/97		9		26			10-K
		10/10/97		4
		9/3/97		5		21
		7/7/97		4		20			8-K
		5/1/97		4		23
		1/1/97		11		22
		12/31/96		15					10-K
		12/20/96		2		21			8-K
		11/26/96		21
		11/1/96		4
		10/15/96		21
		9/18/95		8		20
		6/30/94		13
		5/31/94		13
		5/1/94		22
		4/1/94		22
		11/1/93		2		22
		10/29/93		18
		7/31/93		11		18
		12/31/92		13
									List all Filings