Shopco Regional Malls LP · 10-K · For 12/31/96

Filed On 3/31/97   ·   SEC Files 1-10217, 33-20614   ·   Accession Number 928790-97-53

This Filing was Corrected by the SEC on 2/15/0.

Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         32±   145K 
 2: EX-27       Financial Data Schedule for 1996 Form 10-K Shopco      1      6K 
                          Regional Malls, L.P.                                   
 3: EX-99       Complete Appraisal of Real Property for Cranberry     92±   358K 
                          Mall as of January 1997                                

10-K   ·   Annual Report
Document Table of Contents

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, 1996     

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 Identification No. 
incorporation or organization                                                   

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) 526-3237              

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.             
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 sole      
limited partner of the Partnership is Regional Malls Depositary Corp.,          
(formerly Shearson Regional Malls Depositary Corp., the "Assignor Limited       
Partner").  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 previously 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.  Please refer to "Item 2.                 
Properties", "Item 7. Management's Discussion and Analysis of Financial         
Condition" and Note 3 of the Notes to the Consolidated Financial Statements     
included herein for discussions regarding the foreclosure on Assembly           
Square.  As of December 31, 1996 the Owner Partnership owned only Cranberry     
Mall.  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 only 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 in the initial principal         
amounts of $28,000,000 (the "Assembly Note") from the Aetna Life Insurance      
Company ("Aetna") and $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.  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 "Cranberry Note"; the Assembly Note and Cranberry       
Note will be referred to collectively as the "First Mortgage Loans").  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 modified and extended until 1999.  See Note 6 to the          
Consolidated Financial Statements and Item 7 for a description of the terms     
of the Assembly and Cranberry notes.                                            

The Owner Partnership's business, as an owner of mall properties, 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 mall properties.                                     

(c) Narrative Description of Business                                           

The Partnership's primary business is acting as general partner for the         
Owner Partnership.  As of December 31, 1996, the Owner Partnership's sole       
business is the ownership and operation of Cranberry Mall (See Item 2 for a     
description of Cranberry Mall and its operations).  The Partnership's           
investment objectives are to:                                                   

(1) provide quarterly cash distributions, a substantial portion of      
which should not be subject to Federal income tax on a current basis    
by reason of available tax deductions (See Item 5 for a description of  
the Partnership's policy concerning distributions);                     

(2) realize capital appreciation of Cranberry Mall; and                 

(3) preserve and protect the capital of the Partnership and the Owner   
Partnership.                                                            

There is no assurance that these objectives will be achieved.                   

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 Shopco Management Corp., (the "Property Manager") an affiliate of      
The Shopco Group and Shopco L.P.  See Item 13 and Note 8 to the                 
Consolidated Financial Statements for the terms of the Management Agreement     
and amounts paid thereunder.                                                    

Item 2.  Properties                                                             

The Mall at Assembly Square                                                     
Assembly Square, located in Somerville, Massachusetts, was originally an        
assembly plant for Ford Motor Company that was renovated into a shopping        
center and opened in 1980.  The mall is a single level, enclosed regional       
shopping mall anchored by two major department stores, Macy's (formerly         
Jordan Marsh) and Kmart.  Assembly Square contains approximately 322,000        
square feet of gross leasable area (including kiosk space) and has parking      
for 1,588 automobiles.  Macy's and Kmart collectively leased 167,040 square     
feet of gross leasable space from the Partnership.                              

As of May 1, 1996, cash flow from Assembly Square was not sufficient to         
meet all of the property's obligations and only a partial payment of real       
estate taxes due was made by the Owner Partnership, thereby constituting a      
default under the mortgage encumbering the property.  The remainder of the      
outstanding real estate taxes due were paid on July 24, 1996, thereby           
curing the default.  On October 15, 1996, the Owner Partnership received        
notice of default from Aetna due to the Owner Partnership's failure to          
escrow real estate taxes with Aetna after the initial default as required       
under the Assembly Note.  On account of such default, and pursuant to its       
rights and remedies under the Assembly Note, Aetna declared the entire          
outstanding mortgage loan balance (as such term is defined in the Assembly      
Note) immediately due and payable, without any further presentment, demand      
or notice.  On November 26, 1996, Aetna commenced advertising for a public      
nonjudicial foreclosure sale to be held on December 20, 1996.  The Owner        
Partnership continued to hold negotiations with Aetna concerning                
restructuring the mortgage in default.  In addition to such negotiations,       
the Owner Partnership considered alternatives available to it with respect      
to such potential foreclosure sale.  On December 20, 1996, Aetna bid $15        
million to obtain title to Assembly Square at the foreclosure sale.  As a       
result, the Partnership recorded a loss provision of $7,910,126 to reduce       
Assembly Square's carrying value to its estimated fair value of $15             
million.  In addition, the Partnership recognized a gain on foreclosure of      
$9,336,544 due to the cancellation of mortgage debt on the property.  Both      
the loss on write-down and the gain on foreclosure were allocated in            
accordance with the Partnership Agreement.  As a result of the foreclosure      
sale, the Owner Partnership was absolved of its mortgage obligation under       
the Assembly Note.  While the Assembly Note is generally a non-recourse         
obligation, certain exceptions exist.  There can be no assurance that the       
Partnership would not be liable under those exceptions.                         

Cranberry Mall                                                                  
Cranberry is 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 health club, a six-theater cinema complex and four anchor     
stores; Sears, Caldor, Belk (formerly Leggett) and Montgomery Ward.             
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.                                                       

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

Total                               530,119       100%                  

(a)  Outparcel Store is an auto service center leased to Montgomery Ward.       

Mall Tenants - As of December 31, 1996, Cranberry Mall had approximately 65     
mall tenants (excluding anchor tenants) occupying gross leasable area of        
approximately 184,000 square feet.  As of December 31, 1996, Cranberry Mall     
had 25 vacant mall stores containing approximately 40,300 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 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, the tenant may assign or sublet the premises with the               
landlord's consent, not to be unreasonably withheld.                            

Caldor leases 81,200 square feet of gross leasable building area and pays       
an annual minimum rent of $574,000.  The initial term of Caldor's lease         
expires in 2008.  Four successive five-year renewal options are available       
at specified rents.  In addition, Caldor pays an annual percentage rent of      
2% of gross sales between $18,000,000 and $24,000,000, and 1.25% of gross       
sales above $24,000,000.  During each option period, each of the percentage     
rent figures increases by $1,200,000.  Pursuant to its lease, Caldor is         
required to pay for its own fire insurance and a portion of common area         
maintenance. Caldor obtains and pays for all utilities directly from the        
public utilities.  During the first 15 years of the lease, ending March 4,      
2002, the tenant is required to use the premises continuously as a Caldor's     
retail department store or under such other trade name as all Caldor            
department stores in the Baltimore area are then operating.  For the five       
years following the initial 15 years of the lease, the tenant may use the       
premises for a retail department store under any trade name.  The tenant        
may assign or sublet the premises during the first 15 years of its lease,       
provided that the assignee or sublessee complies with the covenants stated      
above.                                                                          

On September 18, 1995, Caldor filed for protection under the U.S. Federal       
Bankruptcy Code.  Caldor has been current with its rental payments to the       
Partnership since the bankruptcy filing.  Pursuant to the provisions of the     
Federal Bankruptcy Code, Caldor may, with court approval, choose to reject      
or accept the terms of its lease.  Should Caldor exercise its right to          
reject the lease, this would have an adverse impact on cash flow generated      
by Cranberry Mall and revenues received by the Partnership.  Until Caldor       
files a plan of reorganization, it is uncertain what effect this situation      
will have on the Caldor department store located at Cranberry Mall or on        
Cranberry Mall itself.  At Caldor's request, and in recognition of Caldor's     
precarious financial state, Caldor and the Partnership negotiated an            
agreement that provides Caldor with rent relief over the next five years.       
Pursuant to the terms of the mortgage loan secured by Cranberry Mall, the       
Owner Partnership has submitted to the lender for its approval the              
agreement with Caldor.  The material terms of this agreement reduce             
Caldor's rent from the original lease terms at the Mall by $175,000 in the      
first year and by $125,000 in each of the four successive years, after          
which the rent returns to the original amount indicated in Caldor's lease.      

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.                                       

Historical Occupancy -  The following table sets forth the historical           
occupancy rates for Cranberry Mall at December 31 for the years indicated.      

                  1996      1995      1994      1993      1992
Including Anchor Stores      93%       93%       91%       92%       93%        

Excluding Anchor Stores      84%       83%       80%       80%       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 and a Sam's Club store is under construction.  In addition,       
in 1996, a Target store opened approximately one mile southeast of              
Cranberry.  In the secondary trade area there are three competitive             
shopping centers; Hunt Valley Mall, Carrolltowne Mall and Owings Mill Mall.     
Hunt Valley Mall is a bi-level enclosed shopping center located                 
approximately 25 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 and is adding a J.C. Penney         
store.  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                                                      

On March 7, 1996, a purported class action, Ressner v. Lehman Brothers,         
Inc., was commenced on behalf of, among others, all Unitholders in the          
Court of Chancery for New Castle County, Delaware, against the General          
Partner of the Partnership, Lehman Brothers, Inc. and others (the               
"Defendants").  The complaint alleges, among other things, that the             
Unitholders were induced to purchase Units based upon misrepresentation         
and/or omitted statements in the sales materials used in connection with        
the offering of Units in the Partnership.  The complaint purports to assert     
a claim for breach of fiduciary duty based on the foregoing.  The               
Defendants intend to defend the action vigorously.                              

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

No matters were submitted to a vote of the Unitholders at a meeting or          
otherwise during the year for which this report has been filed.                 

PART II           

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

(a) Market Price Information                                                    

The Partnership has issued no common stock. 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, 1996, there were 5,161 Unitholders.                          

(c) Distribution of Net Cash Flow                                               

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

Following the completion of the Cranberry mortgage refinancing in May 1994,     
the General Partner evaluated the Partnership's cash flow and anticipated       
funding needs to determine if and when cash distributions could be resumed.     
Based on this evaluation, the General Partner reinstated cash distributions     
commencing with the first quarter of 1995.  The per Unit quarterly cash         
distributions paid by the Partnership during 1995 were as follows:  1st         
quarter, $3.70; 2nd quarter, $3.74; 3rd quarter, $3.78; and 4th quarter,        
$3.78.                                                                          

During the first quarter of 1996, and taking into consideration the             
significant decline in occupancy and sales at Assembly Square and estimates     
of future cash flow from Assembly Square, the General Partner suspended         
cash distributions beginning with the 1996 first quarter.                       

Item 6.  Selected Financial Data                                                

(dollars in thousands except per Unit data)                                     

As of and for the years ended December 31,                                      

                      1996        1995        1994        1993        1992

Total Income         $ 13,022    $ 13,806    $ 13,985    $ 13,157    $ 12,395   

Gain on foreclosure                                                             
of property (b)    $  9,337          --          --          --          -- 

Net Income (Loss)    $  1,008    $(17,536)   $    693    $   (447)   $ (1,563)  

Net Income (Loss)                                                               
per Unit           $   9.88    $(247.13)   $   9.77    $  (6.30)   $ (22.03)

Cash Distributions                                                              
per Unit           $     --    $  15.00    $     --    $   8.23(a) $     -- 

Real Estate, net of                                                             
accumulated                                                                   
depreciation        $ 48,197    $ 73,162    $ 92,807    $ 94,363    $ 94,055  

Mortgages Payable    $ 31,025    $ 55,323    $ 55,887    $ 56,455    $ 58,970   

Total Assets         $ 58,266    $ 81,655    $100,542    $100,436    $104,011   

(a)  A special distribution was made from funds previously escrowed for the     
expansion of the Macy's (formerly Jordan Marsh) store at Assembly Square,   
which did not occur, and did not represent the resumption of regular        
quarterly distributions.                                                    

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

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                                                 

At December 31, 1996, the Partnership had cash and cash equivalents             
totaling $8,318,465, compared with $6,315,688 at December 31, 1995.  The        
increase is primarily due to net cash provided by operating activities          
exceeding net cash used for investing activities and financing activities.      

As of May 1, 1996, cash flow from Assembly Square was not sufficient to         
meet all of the property's obligations and only a partial payment of real       
estate taxes due was made by the Owner Partnership, thereby constituting a      
default under the mortgage encumbering the property.  The remainder of the      
outstanding real estate taxes were paid on July 24, 1996, thereby curing        
the default.  On October 15, 1996, the Owner Partnership received notice of     
default from Aetna due to the Owner Partnership's failure to escrow real        
estate taxes with Aetna after the initial default as required under the         
Assembly Note.  On account of such default, and pursuant to its rights and      
remedies under the Assembly Note, Aetna declared the entire outstanding         
mortgage loan balance (as such term is defined in the Assembly Note)            
immediately due and payable, without any further presentment, demand or         
notice.  On November 26, 1996, Aetna commenced advertising for a public         
nonjudicial foreclosure sale to be held on December 20, 1996.  The Owner        
Partnership continued to hold negotiations with Aetna concerning                
restructuring the mortgage in default.  In addition to such negotiations,       
the Owner Partnership considered alternatives available to it with respect      
to such potential foreclosure sale.  On December 20, 1996, Aetna bid $15        
million to obtain title to Assembly Square at the foreclosure sale.  As a       
result, the Partnership recorded a loss provision of $7,910,126 to reduce       
Assembly Square's carrying value to its estimated fair value of $15             
million.  In addition, the Partnership recognized a gain on foreclosure of      
$9,336,544 due to the cancellation of mortgage debt on the property.  Both      
the loss on write-down and the gain on foreclosure was allocated in             
accordance with the Partnership Agreement.  In accordance with the              
foreclosure on Assembly Square, real estate, at cost, decreased from            
$73,161,792 at December 31, 1995 to $48,197,468 at December 31, 1996.  As a     
result of the foreclosure sale, the Owner Partnership was absolved of its       
mortgage obligation under the Assembly Note.  While the Assembly Note is        
generally a non-recourse obligation, certain exceptions exist.  There can       
be no assurance that the Partnership would not be liable under those            
exceptions.                                                                     

Accounts receivable decreased from $708,687 at December 31, 1995 to             
$306,352 at December 31, 1996 primarily due to the foreclosure sale of          
Assembly Square in December 1996.                                               

Deferred rent receivable increased from $193,387 at December 31, 1995 to        
$322,799 at December 31, 1996.  Deferred rent receivable represents rental      
income which is recognized on a straight-line basis over the lease terms        
which will not be received until later periods.  The increase is due to         
additional tenant income added to deferred rent receivable.  The balance at     
December 31, 1996 represents only Cranberry Mall due to the foreclosure on      
Assembly Square in December 1996.                                               

Deferred charges decreased from $404,321 at December 31, 1995 to $291,684       
at December 31, 1996 reflecting the amortization and write-off of deferred      
charges related to Assembly Square as a result of the December 1996             
foreclosure on Assembly Square.                                                 

Accounts payable and accrued expenses decreased from $213,949 at December       
31, 1995 to $108,210 at December 31 1996 reflecting the December 1996           
foreclosure on Assembly Square.                                                 

Mortgages payable decreased from $55,323,013 at December 31, 1995 to            
$31,025,000 at December 31, 1996 due to the satisfaction of the Assembly        
Note pursuant to the foreclosure on Assembly Square in December 1996.           

Accrued interest payable decreased from $172,111 at December 31, 1995 to $0     
at December 31, 1996 due to the payment of the December 1995 Assembly           
Square mortgage payment in January 1996 and the satisfaction of the             
Assembly Note pursuant to the foreclosure on Assembly Square in December        
1996.                                                                           

Distributions payable decreased from $265,603 at December 31, 1995, which       
represented an accrual for the Partnership's 1995 fourth quarter cash           
distribution paid on February 9, 1996 in the amount of $3.78 per Limited        
Partnership Unit, to $0 at December 31, 1996.  The General Partner              
suspended cash distributions to the limited partners beginning with the         
first quarter of 1996 in an effort to facilitate payment of the                 
Partnership's debt and other property obligations.                              

On September 18, 1995, Caldor, an anchor tenant at Cranberry Mall, filed        
for protection under the U.S. Bankruptcy Code.  Caldor has been current         
with its rental payments to the Partnership since the bankruptcy filing.        
Pursuant to the provisions of the Federal Bankruptcy Code, Caldor may, with     
court approval, choose to reject or accept the terms of its lease.  Should      
Caldor exercise its right to reject the lease, this would have an adverse       
impact on cash flow generated by Cranberry Mall and revenues received by        
the Partnership.  Until Caldor files a plan of reorganization, it is            
uncertain what effect this situation will have on the Caldor department         
store located at Cranberry Mall or on Cranberry Mall itself, although           
Caldor could affirm or reject its lease prior to filing a plan.  At             
Caldor's request, Caldor and the Partnership negotiated an agreement that       
provided Caldor with rent relief over the next five years.  Pursuant to the     
terms of the mortgage loan secured by Cranberry Mall, the Owner Partnership     
has submitted to the lender for its approval the agreement with Caldor.         
The material terms of this agreement reduce Caldor's rent from the original     
lease terms at the Mall by $175,000 in the first year and by $125,000 in        
each of the four successive years, after which the rent returns to the          
original amount indicated in Caldor's lease.  As of December 31, 1996, two      
other tenants at Cranberry Mall, occupying 4,693 square feet, had filed for     
bankruptcy protection.                                                          

Results of Operations                                                           

1996 versus 1995                                                                
For the year ended December 31, 1996, the Partnership generated net income      
of $1,007,864 compared to a net loss of $17,536,302 in 1995.  The change        
from a net loss to net income is primarily due to the $17,903,567 write-        
down in 1995 of Assembly Square to its estimated fair market value and the      
$9,336,544 gain recognized in 1996 on the foreclosure of Assembly Square.       

Escalation income, which represents billings to tenants for their               
proportional share of common area maintenance, operating and real estate        
tax expenses, totaled $4,421,035 during 1996 compared to $5,071,283 during      
1995.  The decrease in escalation income is primarily due to a lower            
anticipated recovery rate from the Assembly Square tenants for operating        
expenses during 1996 as a result of a decline in occupancy.                     

Total expenses for the year ended December 31, 1996 totaled $20,858,011         
compared to $31,518,669 during 1995.  The decrease in total expenses is         
primarily due to the write-down in 1995 of Assembly Square to its estimated     
fair market value, decreases in property operating expenses and lower           
depreciation and amortization.  Property operating expenses decreased from      
$5,015,637 for the year ended December 31, 1995 to $4,738,799 in 1996           
primarily due to lower security, maintenance and payroll expenses at            
Assembly Square.                                                                

Depreciation and amortization decreased from $2,619,786 during 1995 to          
$2,194,527 during 1996 primarily due to the write-down of Assembly Square       
to its estimated fair market value at December 31, 1995.                        

Cranberry Mall - Mall tenant sales for the year ended December 31, 1996         
were $34,155,000, approximately 1% ahead of sales of $33,985,000 for year       
ended December 31, 1995.  Mature tenant sales for the year ended December       
31, 1996 were $29,962,000, approximately 3% behind sales of $30,987,000 for     
the year ended December 31, 1995.  The General Partner attributes the           
decrease in mature tenant sales at Cranberry to a turnover of tenants in        
the normal course of business.  As of December 31, 1996 and 1995, Cranberry     
was 84% and 83% occupied, respectively (exclusive of anchor and outparcel       
tenants).  For the year ended December 31, 1996, Cranberry generated net        
operating income of $4,720,000 on revenues of $7,640,000 and expenses of        
$2,920,000.                                                                     

1995 versus 1994                                                                
Net cash from operating activities totaled $3,041,866 for the year ended        
December 31, 1995 compared with $2,322,015 during 1994.  The increase was       
primarily due to a decrease in accounts receivable.                             

For the year ended December 31, 1995, the Partnership generated a net loss      
of $17,536,302 compared to net income of $693,491 in 1994.  The change from     
net income to net loss was primarily due to the write-down in 1995 of           
Assembly Square to its estimated fair market value and, to a lesser degree,     
higher property operating, general and administrative and depreciation          
expense along with a decrease in escalation income.                             

Rental income for the year ended December 31, 1995 totaled $8,156,792,          
varying only slightly from $8,234,058 during 1994.  Escalation income,          
which represents billings to tenants for their proportional share of common     
area maintenance, operating and real estate tax expenses, totaled               
$5,071,283 during 1995 compared to $5,322,613 during 1994.  The decrease in     
escalation income was primarily due to an overaccrual in 1994 for common        
area maintenance expense recognized in 1995 in addition to an overall           
decrease in common area maintenance expense in 1995.                            

Interest income for the year ended December 31, 1995 totaled $396,102           
compared to $229,131 during 1994.  The increase in interest income was the      
result of higher interest rates earned on higher cash balances maintained       
by the Partnership.                                                             

Total expenses for the year ended December 31, 1995 totaled $31,518,669         
compared to $13,273,682 during 1994.  The increase in total expenses was        
primarily due to the write-down in 1995 of Assembly Square to its estimated     
fair market value and increases in property operating expenses.  Property       
operating expenses increased from $4,576,316 for the year ended December        
31, 1994 to $5,015,637 in 1995.  The increase in property operating             
expenses was primarily due to increased legal expense related to the            
proposed Stop&Shop development adjacent to Assembly Square and increased        
bad debt expense related to several tenants at both Malls.                      

Interest expense for the year ended December 31, 1995 decreased $244,165        
compared to the year ended December 31, 1994.  The decrease in interest         
expense was primarily due to the refinancing of the Cranberry Note at a         
lower rate in the second quarter of 1994 and principal payments made on the     
Assembly Note.                                                                  

Assembly Square - Mall tenant sales for the years ended December 31, 1995       
and 1994 totaled $23,830,000 and $27,737,000, respectively, representing a      
14% decrease.  Mature tenant sales for the years ended December 31, 1995        
and 1994 totaled $19,486,000 and $22,402,000, respectively, representing a      
13% decrease.  A mature tenant is defined as a tenant that has been open        
for business and operating out of the same store for twelve months or more.     
The General Partner attributes the decrease in sales to a decline in            
consumer spending on softgoods, particularly apparel, a trend experienced       
by retailers across the country, especially in the Northeast region, and        
increased competition in the trade area.  In addition, sales results            
reflect intensified competition from area retailers and lower occupancy at      
the property.  As of December 31, 1995, Assembly Square was 85% occupied        
(exclusive of anchor tenants) compared with a 90% occupancy rate at             
December 31, 1994.  Subsequent to December 31, 1995, occupancy at Assembly      
Square declined to 88% including anchor stores and 76% excluding anchor         
stores.                                                                         

Cranberry Mall - Mall tenant sales for the year ended December 31, 1995         
were $33,985,000, approximately 6% ahead sales of $31,923,000 for year          
ended December 31, 1994.  Mature tenant sales for the year ended December       
31, 1995 were $30,987,000, approximately 4% ahead sales of $29,827,000 for      
the year ended December 31, 1994.  As of December 31, 1995 and 1994,            
Cranberry was 83% and 80% occupied, respectively (exclusive of anchor and       
outparcel tenants).                                                             

Property Appraisals                                                             

The appraised fair market value of Cranberry at January 1, 1997, as             
determined by Cushman & Wakefield, Inc., an independent, third-party            
appraisal firm, was $42,700,000 compared with $44,000,000, on January 1,        
1996.                                                                           

It should be noted that appraisals are only estimates of current value and      
actual values realizable upon sale may be significantly different.  A           
significant factor in establishing an appraised value is the actual selling     
price for properties which the appraiser believes are comparable.  Because      
of the nature of the Partnership's property and the limited market for such     
property, there can be no assurance that the other properties reviewed by       
the appraiser are comparable.  Additionally, the low level of liquidity as      
a result of the current restrictive capital environment has had the effect      
of limiting the number of transactions in real estate markets and the           
availability of financing to potential purchasers, which may have a             
negative impact on the value of an asset.  Further, the appraised value         
does not reflect the actual costs which would be incurred in selling the        
property.  As a result of these factors and the illiquid nature of an           
investment in Units of the Partnership, the variation between the appraised     
value of the Partnership's property and the price at which Units of the         
Partnership could be sold is likely to be significant.  Fiduciaries of          
Limited Partners which are subject to ERISA or other provisions of law          
requiring valuation of Units should consider all relevant factors,              
including, but not limited to the net asset value per Unit, in determining      
the fair market value of the investment in the Partnership for such             
purposes.                                                                       

Item 8.  Financial Statements and Supplementary Data                            

See Item 14a 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, 1996:                                                      

Name                         Office                                   

Paul L. Abbott               Director & Chief Executive Officer       
Robert J. Hellman            President                                
Joan B. Berkowitz            Vice President & Chief Financial Officer 
Robert J. Sternlieb          Vice President                           

Paul L. Abbott, 51, is a Managing Director of Lehman Brothers Inc.              
("Lehman").  Mr. Abbott joined Lehman in August 1988, and is responsible        
for investment management of residential, commercial and retail real            
estate.  Prior to joining Lehman, Mr. Abbott was a real estate consultant       
and a senior officer of a privately held company specializing in the            
syndication of private real estate limited partnerships.  From 1974 through     
1983, Mr. Abbott was an officer of two life insurance companies and a           
director of an insurance agency subsidiary.  Mr. Abbott received his formal     
education in the undergraduate and graduate schools of Washington               
University in St. Louis.                                                        

Robert J. Hellman, 42, is a Senior Vice President of Lehman and is              
responsible for investment management of retail, commercial and residential     
real estate.  Since joining Lehman in 1983, Mr. Hellman has been involved       
in a wide range of activities involving real estate and direct investments      
including origination of new investment products, restructurings, asset         
management and the sale of commercial, retail and residential properties.       
Prior to joining Lehman, Mr. Hellman worked in strategic planning for Mobil     
Oil Corporation and was an associate with an international consulting firm.     
Mr. Hellman received a bachelor's degree from Cornell University, a             
master's degree from Columbia University and a law degree from Fordham          
University.                                                                     

Joan B. Berkowitz, 37, is a Vice President of Lehman Brothers, responsible      
for investment management of retail, commercial and residential real estate     
within the Diversified Asset Group.  Ms. Berkowitz joined Lehman Brothers       
in May 1986 as an accountant in the Realty Investment Group.  From October      
1984 to May 1986, she was an Assistant Controller to the Patrician Group.       
From November 1983 to October 1984, she was employed by Diversified             
Holdings Corporation.  From September 1981 to November 1983, she was            
employed by Deloitte Haskins & Sells.  Ms. Berkowitz, a Certified Public        
Accountant, received a B.S. degree from Syracuse University in 1981.            

Robert Sternlieb, 32, is an Assistant Vice President of Lehman Brothers and     
is responsible for asset management within the Diversified Asset Group.         
Mr. Sternlieb joined Lehman Brothers in April 1989 as an asset manager.         
From May 1986 to April 1989, he was a systems analyst at Drexel Burnham         
Lambert.  Mr. Sternlieb received a B.S. degree in Finance from Lehigh           
University in 1986.                                                             

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, 1996, 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, 1996.        

(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.  For amounts paid to such          
affiliates, see 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."                                                                  
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

Independent Auditors' Report                               F-1      

Consolidated Balance Sheets                                         
At December 31, 1996 and 1995                              F-2      

Consolidated Statements of Partners' Capital (Deficit)              
For the years ended December 31, 1996, 1995 and 1994       F-2      

Consolidated Statements of Operations                               
For the years ended December 31, 1996, 1995 and 1994       F-3      

Consolidated Statements of Cash Flows                               
For the years ended December 31, 1996, 1995 and 1994       F-4      

Notes to Consolidated Financial Statements                 F-5      

Schedule II - Valuation and Qualifying Accounts            F-12     

Schedule III - Real Estate and Accumulated Depreciation    F-13     

(b) Exhibits                                                                    

Subject to Rule 12b-32 of the Securities 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.                                     

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.                                                   

27     Financial Data Schedule                                            

 99     Complete Appraisal of Real Property for Cranberry Mall as of January
1997 as prepared by Cushman & Wakefield, Inc.               

(c)       Reports on Form 8-K filed during the fourth quarter of 1996:          

         On October 23, 1996, the Partnership filed a Form 8-K disclosing that
  the Partnership had received a notice of default from Aetna on
October 15, 1996 with respect to the Assembly Note.         

         On December 6, 1996, the Partnership filed a Form 8-K disclosing that
    Aetna had commenced advertising Assembly Square for public, non-
judicial foreclosure sale to be held on December 20, 1996.  

        On January 3, 1997, the Partnership filed a Form 8-K disclosing that
         Aetna had obtained title to Assembly Square pursuant to a foreclosure
sale on December 20, 1996.                                  

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.             

Dated:  March 28, 1997                                                          
SHOPCO REGIONAL MALLS, L.P.   

BY:    Regional Malls, Inc.   
General Partner 

BY:     /s/ Paul L. Abbott    
Name:       Paul L. Abbott    
                Title:      Director & Chief Executive 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:  March 28, 1997                                                           
BY: /s/ Paul L. Abbott        
Paul L. Abbott
                    Director & Chief Executive Officer

Date:  March 28, 1997                                                           
BY: /s/ Robert J. Hellman     
   Robert J. Hellman
President     

Date:  March 28, 1997                                                           
BY: /s/ Joan Berkowitz        
Joan Berkowitz
                          Vice President & Chief Financial Officer

Date:  March 28, 1997                                                           
BY: /s/ Robert J. Sternlieb   
     Robert J. Sternlieb
Vice President

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 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, 1996       
and 1995, and the results of their operations and their cash flows for each     
of the years in the three-year period ended December 31, 1996, 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 PEAT MARWICK LLP

Boston, Massachusetts                                                           
March 21, 1997                                                                  

Consolidated Balance Sheets           At December 31,      At December 31,      
                                         1996                 1995
Assets                                                                          
Real estate (notes 3, 5 and 6):                                                 
Land                                  $   6,442,555        $  11,329,547      
Building                                 51,207,886           69,255,697      
Improvements                              2,059,544            2,706,206      
                                   59,709,985           83,291,450
Less accumulated depreciation                                                 
and amortization                      (11,512,517)         (10,129,658)   
                                   48,197,468           73,161,792

Cash and cash equivalents                  8,318,465            6,315,688       
Construction escrows (note 5)                437,346              416,568       
Accounts receivable, net of allowance                                           
of $160,393 in 1996 and $797,783                                            
in 1995                                    306,352              708,687     
Deferred rent receivable                     322,799              193,387       
Deferred charges, net of accumulated                                            
amortization of $46,055 in 1996                                             
and $122,757 in 1995                       291,684              404,321     
Prepaid expenses                             391,501              454,533       
Total Assets                          $ 58,265,615         $ 81,654,976     

Liabilities, Minority Interest and                                              
Partners' Capital (Deficit)                                                 
Liabilities:                                                                    
Accounts payable and accrued expenses  $    108,210         $    213,949      
Mortgages payable (note 6)               31,025,000           55,323,013      
Accrued interest payable                         --              172,111      
Due to affiliates (notes 7 and 8)               531                2,007      
Security deposits payable                     4,771               13,771      
Deferred income                             439,166              454,667      
Distributions payable                            --              265,603      
Total Liabilities                       31,577,678           56,445,121     
Minority interest                             83,185             (397,677)      
Partners' Capital (Deficit) (note 4):                                           
General Partner                              84,589             (218,681)     
Limited Partners (70,250 limited                                              
partnership units authorized issued                                       
and outstanding)                       26,520,163           25,826,213    
Total Partners' Capital                 26,604,752           25,607,532     
Total Liabilities, Minority Interest                                        
and Partners' Capital               $ 58,265,615         $ 81,654,976   

Consolidated Statement of Partners' Capital (Deficit)                           
For the years ended December 31, 1996, 1995 and 1994                            

                  Limited          General
                                  Partners         Partner           Total
Balance at December 31, 1993     $ 43,554,346    $    (50,253)   $ 43,504,093   
Net income                            686,556           6,935         693,491   
Balance at December 31, 1994     $ 44,240,902    $    (43,318)   $ 44,197,584   
Net loss                          (17,360,939)       (175,363)    (17,536,302)  
Distributions (note 9)             (1,053,750)             --      (1,053,750)  
Balance at December 31, 1995     $ 25,826,213    $   (218,681)   $ 25,607,532   
Net income                            693,950         313,914       1,007,864   
Distributions                              --         (10,644)        (10,644)  
Balance at December 31, 1996     $ 26,520,163    $     84,589    $ 26,604,752   

Consolidated Statements of Operations                                           
For the years ended December 31,         1996           1995          1994      
Income                                                                          
Rental income (note 3)            $ 7,954,473   $  8,156,792   $  8,234,058     
Escalation income (note 3)          4,421,035      5,071,283      5,322,613     
Interest income                       401,786        396,102        229,131     
Miscellaneous income                  244,659        182,214        198,712     
Total Income                     13,021,953     13,806,391     13,984,514   
Expenses                                                                        
Interest expense                    4,225,832      4,339,057      4,583,222     
Property operating expenses         4,738,799      5,015,637      4,576,316     
Loss on write-down of real estate   7,910,126     17,903,567             --     
Depreciation and amortization       2,194,527      2,619,786      2,512,580     
Real estate taxes                   1,504,074      1,434,129      1,433,544     
General and administrative            284,653        206,493        168,020     
Total Expenses                   20,858,011     31,518,669     13,273,682   
Income (Loss) before                                                            
extraordinary item and minority                                             
interest                         (7,836,058)   (17,712,278)       710,832   
Extraordinary Item:                                                             
Gain on foreclosure of property     9,336,544             --             --     
Income (Loss) before minority                                                   
interest                          1,500,486    (17,712,278)       710,832   
Minority interest                    (492,622)       175,976        (17,341)    
Net Income (Loss)               $ 1,007,864   $(17,536,302)  $    693,491   
Net Income (Loss) Allocated:                                                    
To the General Partner            $   313,914   $   (175,363)  $      6,935     
To the Limited Partners               693,950    (17,360,939)       686,556     
                             $ 1,007,864   $(17,536,302)  $    693,491
Per limited partnership unit                                                    
(70,250 outstanding):                                                           
Net income (loss) from operations                                               
before extraordinary item         $ (109.33)    $  (247.13)       $  9.77   
Extraordinary item                     119.21             --             --     
Net Income (Loss)                 $    9.88     $  (247.13)       $  9.77   

Consolidated Statements of Cash Flows                                           
For the years ended December 31,            1996           1995           1994  
Cash Flows From Operating Activities:                                           
Net income (loss)                   $  1,007,864  $ (17,536,302)  $    693,491  
Adjustments to reconcile net income                                             
(loss) to net cash provided by                                              
operating activities:                                                       
  Minority interest                    492,622       (175,976)        17,341
Extraordinary gain on foreclosure                                       
   of property                      (9,336,544)            --             --
Depreciation and amortization         2,194,527      2,619,786      2,512,580 
Loss on write-down of real estate     7,910,126     17,903,567             -- 
Increase (decrease) in cash                                                   
arising from changes in operating                                         
assets and liabilities:                                                   
    Accounts receivable                 308,490        381,703       (864,015)
   Deferred rent receivable           (129,412)        25,259         28,245
   Deferred charges                     (5,292)      (320,172)            --
Prepaid expenses and                                                  
      other assets                      (25,529)       (56,742)       (28,538)
Accounts payable and                                                  
     accrued expenses                  206,131        (13,089)        31,873
   Accrued interest payable            272,797        172,111             --
   Due to affiliates                    (1,476)         1,423            584
 Security deposits payable                   --         (2,200)       (17,733)
 Deferred income                         25,089         42,498        (51,813)
Net cash provided by                                                            
operating activities                 2,919,393      3,041,866      2,322,015
Cash Flows From Investing Activities:                                           
Additions to real estate                 (55,212)      (836,706)      (916,855) 
Construction escrows                     (20,778)       (28,043)       (45,699) 
Net cash used for investing activities   (75,990)      (864,749)      (962,554) 
Cash Flows From Financing Activities:                                           
Deferred charges                              --             --         (4,968) 
Payment of mortgage principal           (552,618)      (564,483)      (567,814) 
Release of construction escrow                --             --        955,915  
Distributions paid - minority interest   (11,761)       (23,225)            --  
Distributions paid - general partner     (10,644)            --             --  
Distributions paid - limited partners   (265,603)      (788,147)            --  
Net cash provided by (used for)                                                 
financing activities                  (840,626)    (1,375,855)       383,133
Net increase in cash and                                                        
cash equivalents                     2,002,777        801,262      1,742,594
Cash and cash equivalents,                                                      
beginning of period                  6,315,688      5,514,426      3,771,832
Cash and cash equivalents,                                                      
end of period                      $ 8,318,465    $ 6,315,688    $ 5,514,426
Supplemental Disclosure of                                                      
Cash Flow Information:                                                      
Cash paid during the period                                                     
for interest                       $ 3,953,035    $ 4,166,946    $ 4,583,222
Supplemental Disclosure of                                                      
Non-Cash Operating Activities:                                              
The Owner Partnership transferred $146,241 of net operating liabilities of      
Assembly Square to Aetna pursuant to the foreclosure sale.                      

Supplemental Disclosure of Non-Cash Financing Activities:                       
In connection with the foreclosure sale of Assembly Square, Aetna released the  
Owner Partnership from the related $24,190,303 mortgage obligation.             

Notes to the Consolidated Financial Statements                                  
December 31, 1996, 1995 and 1994                                                

1. Organization                                                                 
Shopco Regional Malls, L.P. ("SRM" or 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 general partner of SRM 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 SRM have been                          
prepared on the accrual basis of accounting and include the accounts of SRM and 
the Owner Partnership.  All significant intercompany accounts and transactions  
have been eliminated.                                                           

Real Estate                                                                     
Real estate, which consists of buildings, land and improvements, is recorded at 
cost less accumulated depreciation and amortization or fair value. 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.                                        

Accounting for Impairment                                                       
In March 1995, the Financial Accounting Standards Board issued 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"),     
which requires impairment losses to be recorded on long-lived assets used in    
operations when indicators of impairment are present and the undiscounted cash  
flows estimated to be generated by those assets are less than the asset's       
carrying amount.  FAS 121 also addresses the accounting for long-lived assets   
that are expected to be disposed of.  The Partnership adopted FAS 121 in the    
fourth quarter of 1995.                                                         

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.                                                             

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 are being amortized  
over the life of the mortgages.  Leasing commissions are 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 (deficit).                                                              

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,  
will be paid on a quarterly basis to registered Unitholders on record dates     
established by the Partnership.  Distributions 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 consists of rental income which is      
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.  The Partnership     
invests available cash with high credit quality financial institutions.         

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 revenues 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                                                                  
SRM's real estate consists of one enclosed mall as of December 31, 1996 and two 
enclosed malls as of December 31, 1995.                                         

Cranberry Mall                                                                  
Cranberry Mall in Westminster, Maryland, 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 tenants: Sears, Caldor, Belk (formerly Leggett) and Montgomery      
Ward.                                                                           

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 leases approximately 81,200 square feet of gross leasable building area. 
During the first 15 years of the lease, ending March 4, 2002, Caldor is         
required to use the premises continuously as a Caldor retail department store   
or under such other trade name as all Caldor department stores in the Baltimore 
area are then operating.  For the five years following the initial 15 years of  
the lease, the tenant may use the premises for a retail department store under  
any trade name.                                                                 

On September 18, 1995, Caldor filed for protection under the U.S. Federal       
Bankruptcy Code.  Caldor has been current with its rental payments to the       
Partnership since the bankruptcy filing. Pursuant to the provisions of the      
Federal Bankruptcy Code, Caldor may, with court approval, choose to reject or   
accept the terms of its lease.  Should Caldor exercise its right to reject the  
lease, this would have an adverse impact on cash flow generated by Cranberry    
and revenues received by the Partnership.  Until Caldor files a plan of         
reorganization, it is uncertain what effect this situation will have on the     
Caldor department store located at Cranberry or on Cranberry itself.  At        
Caldor's request, Caldor and the Partnership negotiated an agreement that       
provided Caldor with rent relief over the next five years.  Pursuant to the     
terms of the mortgage loan secured by Cranberry Mall, the Owner Partnership has 
submitted to the lender for its approval the agreement with Caldor.  The        
material terms of this agreement reduce Caldor's rent from the original lease   
terms at the Mall by $175,000 in the first year and by $125,000 in each of the  
four successive years, after which the rent returns to the original amount      
indicated in Caldor's lease.  Caldor represented approximately 11% of           
Cranberry's rental income for the year ended December 31, 1996.                 

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.                                                          

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

Year ending                                       
December 31,            Amount                    
1997         $  3,915,189           
1998            3,427,061           
1999            3,125,929           
2000            2,873,427           
2001            2,635,005           
Thereafter           12,915,199                 
 $  28,891,810

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, 1996, 1995 and 1994,            
respectively, percentage rents amounted to $293,718, $269,609 and $205,473 for  
Cranberry; these amounts are included in rental income.  For the years ended    
December 31, 1996, 1995 and 1994, respectively, temporary tenant income         
amounted to $296,226, $330,111 and $217,545 for Cranberry; these amounts are    
included in rental income.                                                      

Cranberry generated net operating income of $4,720,000 on revenues of           
$7,640,000 and expenses of $2,920,000.                                          

The appraised fair market values, as determined by an independent, third party  
appraisal firm, at January 1, 1997 and 1996 were $42,700,000 and $44,000,000,   
respectively, for Cranberry.                                                    

Assembly Square                                                                 
The Mall at Assembly Square in Somerville, Massachusetts, which includes        
approximately 25.93 acres of land, was purchased on October 11, 1988 for        
$42,358,000.  Assembly Square contains approximately 322,000 square feet of     
gross leasable area (including kiosk space) including two anchor tenants:       
Macy's, formerly Jordan Marsh, and Kmart.                                       

For the years ended December 31, 1996, 1995 and 1994, respectively, percentage  
rents amounted to $151,981, $91,191 and $244,143 for Assembly Square.  For the  
years ended December 31, 1996, 1995 and 1994, respectively, temporary tenant    
income amounted to $267,757, $270,498 and $324,731 for Assembly Square.         

The appraised fair market values, as determined by an independent, third party  
appraisal firm, at January 1, 1996 and January 1, 1995 were $23,500,000 and     
$38,500,000, respectively, for Assembly Square.  No appraisal was obtained      
after January 1, 1996.                                                          

The decrease in the appraised fair market value of Assembly Square from         
December 31, 1994, to December 31, 1995, and the near term maturity date of the 
Assembly Square mortgage loan were determined by management to be indicators of 
impairment of the carrying value of Assembly Square.  Management completed a    
recoverability review of the carrying value of Assembly Square based upon an    
estimate of undiscounted future cash flows expected to result from its use and  
eventual disposition.  As of December 31, 1995, management concluded that the   
sum of the undiscounted future cash flows estimated to be generated by Assembly 
Square are less than its carrying value and, as a result, the Partnership       
recorded a loss provision of $17,903,567 to reduce Assembly Square's carrying   
value to its estimated fair value of $23,500,000 as of December 31, 1996.       

As a result of the continued decline in tenant sales and occupancy rates during 
1996, management determined that an additional adjustment to the carrying value 
was required to reflect the estimated  fair value of Assembly Square at the     
date of its foreclosure.  As a result, the Partnership recorded a loss          
provision of $7,910,126 to reduce Assembly Square's carrying value to its       
estimated fair value of $15,000,000 as of the date of foreclosure.              

Foreclosure Sale of Assembly Square                                             
On October 15, 1996, the Owner Partnership received notice of default from      
Aetna Life Insurance Company ("Aetna") due to the Owner Partnership's failure   
to escrow real estate taxes with the 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, the   
Aetna declared the entire outstanding mortgage loan balance (as such term is    
defined in the Mortgage) immediately due and payable, without any further       
presentment, demand or notice. On November 26, 1996, the Aetna commenced        
advertising for a public nonjudicial foreclosure sale to be held on December    
20, 1996.  The Owner Partnership continued to hold negotiations with the Aetna  
concerning restructuring the mortgage in default.  In addition to such          
negotiations, the Owner Partnership considered alternatives available to it     
with respect to such potential foreclosure sale.  On December 20, 1996, Aetna   
bid $15 million to obtain title to Assembly Square at the foreclosure sale. The 
Partnership recognized a gain on foreclosure of $9,336,544.  The gain was       
allocated in accordance with the Partnership Agreement.                         

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 $437,346, inclusive of interest income,    
remain in the construction escrow account as of December 31, 1996.              

6. Mortgages Payable                                                            
                                                 1996             1995
Secured by Assembly Square. Principal and                                       
interest, at 8.50%, payable monthly until                                   
maturity which was November 1, 1997         $         --    $  24,298,013   
Secured by Cranberry. Interest only, at 7.25%,                                  
payable monthly until maturity on                                           
April 1,1999                                  27,250,000       27,250,000   
Secured by Cranberry. Interest only, at 7.25%,                                  
payable monthly until maturity on                                           
April 1, 1999                                  3,775,000        3,775,000   
                                         $ 31,025,000    $  55,323,013

Assembly Square Mortgage                                                        
On January 15, 1993, the Owner Partnership amended the $28,000,000 Assembly     
Square mortgage payable which matured on November 1, 1992.  Under the terms of  
the agreement, the amended Assembly Square note, effective November 1, 1992,    
was to mature on November 1, 1997, bear interest at a rate of 8.5% per annum,   
and require monthly payments of principal and interest based upon a twenty-year 
amortization schedule.                                                          

As a condition of the modification of the Assembly Square note, the Partnership 
agreed to renovate the interior of Assembly Square.  In addition, a capital     
cost and leasing escrow (the "Escrow") was required to be established over the  
life of the amended Assembly Square note.  The Partnership expended             
approximately $2.7 million for capital improvements from Partnership cash       
reserves and the Escrow which was established at the closing.  As of December   
20, 1996, $955,915 had been released from the Assembly Capital Improvement      
Escrow to fund capital costs at Assembly Square.                                

On October 15, 1996, the Owner Partnership received notice of default from      
Aetna Life Insurance Company (the "Lender") due to the Owner Partnership's      
failure to escrow real estate taxes with the Lender 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, the Lender declared the entire outstanding Mortgage loan balance (as  
such term is defined in the Mortgage) immediately due and payable, without any  
further presentment, demand or notice.                                          

On November 6, 1996, the Owner Partnership received notice of default from the  
Lender for failing to permit the lender to enter the Property for failure to    
pay the November 1, 1996 monthly installment of principal and interest to the   
Lender.                                                                         

Aetna bid $15 million and obtained title to Assembly Square at the foreclosure  
sale. As a result, the outstanding balance of the Aetna loan of $24,190,303 was 
forgiven on December 20, 1996.                                                  

Cranberry Mall                                                                  
The note secured by Cranberry matured on November 1, 1993.  The lender,         
Metropolitan Life Insurance Company, agreed to extend the note at its current   
terms until May 1, 1994.  During the extension period (from November 1, 1993 to 
May 1, 1994) the General Partner and Metropolitan Life Insurance Co. continued  
discussions and reached an agreement to modify and extend the Note on mutually  
acceptable terms.  Under the terms of the agreement, the amended Cranberry      
Note, effective April 1, 1994, requires payments of interest only on the unpaid 
principal balance of $31,025,000 at an interest rate of 7.25% per annum until   
its maturity on April 1, 1999.                                                  

Based on the borrowing rates currently available to the Partnership for         
mortgage loans with similar terms, the fair value of the Cranberry note         
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, 1996, 1995, and 1994, costs were $5,719,       
$8,595, and $3,232, respectively.  At December 31, 1996 and 1995, $531 and      
$2,007 were due to the General Partner and affiliates for these expenses.       

Cash and Cash Equivalents                                                       
Certain cash accounts were on deposit with an affiliate of the General Partner  
during a portion of 1996 and all of 1995.  As of December 31, 1996, no cash and 
cash equivalents were on deposit with an affiliate of the General Partner or    
the Partnership.                                                                

8. Management Agreement                                                         
The Partnership entered into an agreement with Shopco Management Corporation,   
an affiliate of the Owner Partnership, for the management of the Malls through  
December 31, 1998.  The agreement provides for an annual fee equal to 3% of the 
gross rents collected from the Malls.  Effective January 1, 1995, the fee was   
increased to 4% of the gross rents collected from the Malls.  For the years     
ended December 31, 1996, 1995 and 1994, respectively, management fees earned by 
Shopco Management Corporation were $327,712, $321,379 and $248,659,             
respectively.                                                                   

9. Distributions to Limited Partners                                            
Distributions to the limited partners for 1995 were $1,053,750 ($15 per limited 
partnership unit).  Cash distributions declared payable to limited partners at  
December 31, 1996 and 1995 were $0 and $265,603 ($3.78 per limited partnership  
unit), respectively.                                                            

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

                                          1996          1995          1994
Consolidated financial statement                                                
net income (loss)                $    1,007,864 $ (17,536,302)  $   693,491 
Tax basis depreciation over                                                     
financial statement depreciation       (768,323)     (357,373)     (411,135)
Tax basis recognition of deferred                                               
income over (under) financial                                               
statement recognition of                                                    
deferred income                         (33,640)       (6,913)      (50,777)
Tax basis recognition of real estate                                            
taxes under (over) financial statement                                      
recognition of real estate taxes             --        (2,497)        2,258 
Tax basis recognition of rental income                                          
over (under) financial statement                                            
recognition of rental income           (128,118)       25,007        27,680 
Tax basis recognition of loss on                                                
sale over financial statement                                               
recognition of gain on sale         (23,612,844)           --            -- 
Financial statement loss on                                                     
write-down of real estate             7,910,126    17,903,567            -- 
Other                                     (26,177)        5,317       (15,680)  
Federal income tax basis                                                        
net income (loss)                  $(15,651,112)  $    30,806   $   245,837 

                                         1996            1995           1994
Financial statement basis                                                       
partners' capital                $ 26,604,752   $  25,607,532   $ 44,197,584
Current year financial statement                                                
net income (loss) over (under)                                              
federal income tax basis net                                                
 income (loss)                     (16,658,976)     17,567,108       (447,654)
Cumulative federal income tax                                                   
basis net loss over (under)                                                 
cumulative financial statement                                              
net loss                           17,454,942        (112,166)       335,488
Federal income tax basis                                                        
partners' capital                $ 27,400,718    $ 43,062,474   $ 44,085,418

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 March 7, 1996, a purported class action, Ressner v. Lehman Brothers, Inc.,   
was commenced on behalf of, among others, all Unitholders in the Court of       
Chancery for New Castle County, Delaware, against the General Partner of the    
Partnership, Lehman Brothers, Inc. and others (the "Defendants").  The          
Partnership was not named as a defendant.  The complaint alleges, among other   
things, that the Unitholders were induced to purchase Units based upon          
misrepresentation and/or omitted statements in the sales materials used in      
connection with the offering of Units in the Partnership.  The complaint        
purports to assert a claim for breach of fiduciary duty based on the foregoing. 
The Defendants intend to defend the action vigorously.                          

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, 1994:   $ 726,998   $ 112,131  $  234,531  $ 604,598    
Year ended December 31, 1995:     604,598     342,127     148,942    797,783    
Year ended December 31, 1996:   $ 797,783   $ 419,095  $1,056,485  $ 160,393    

Schedule III - Real Estate and Accumulated Depreciation                         
December 31, 1996                                                               
              Cranberry Mall
                          Shopping Center        Total

Location                               Westminster, MD           na             

Construction date                                 1980           na             
Acquisition date                                 10-88           na             
Life on which depreciation                                                      
in latest income statements                                                     
is computed                                        (3)           na             
Encumbrances                            $  31,025,000  $ 31,025,000             
Initial cost to Partnership:                                                    
Land                                   6,610,235     6,610,235        
Buildings and                                                         
improvements                          47,649,669    47,649,669        
Costs capitalized                                                               
subsequent to acquisition:                                                      
Land, buildings                                                       
and improvements                       5,450,081     5,450,081        

Gross amount at which                                                           
carried at close of period:                                                     
Land                               $   6,442,555  $  6,442,555        
Buildings and                                                         
improvements                          53,267,430    53,267,430        
                           $  59,709,985  $ 59,709,985

Accumulated depreciation                  (11,512,517)  (11,512,517)            

(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, 1996 is $62,119,850.                  
(3)  Buildings - 40 years; personal property - 12 years; tenant                 
improvements - 7 years.                                                         

A reconciliation of the carrying amount of real estate and accumulated          
depreciation for the years ended December 31, 1996, 1995, and 1994 follows:     

                      1996            1995          1994
Real estate investments:                                                        
Beginning of year          $83,291,450    $107,034,954  $ 106,118,099           
Additions                       55,212         836,706        916,855           
Write - Down                (8,636,677)    (24,522,234)            --           
Dispositions               (15,000,000)        (57,976)            --           
End of year                $59,709,985     $83,291,450  $ 107,034,954           

Accumulated depreciation:                                                       
Beginning of year          $10,129,658     $14,227,478  $  11,755,364           
Depreciation expense         2,109,410       2,520,847      2,472,114           
Write - Down                  (726,551)     (6,618,667)            --           
Dispositions                        --              --             --           
End of year                $11,512,517     $10,129,658  $  14,227,478           

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		11/1/92
		12/31/92
		1/15/93
		7/31/93
		10/29/93
		11/1/93
		12/31/93
		4/1/94
		5/1/94
		5/31/94
		6/30/94
		12/31/94
		1/1/95
		9/18/95
		12/31/95		10-K
		1/1/96
		2/9/96
		3/7/96
		5/1/96
		7/24/96
		10/15/96
		10/23/96		8-K
		11/1/96
		11/6/96
		11/26/96
		12/6/96		8-K
		12/20/96		8-K
For The Period Ended		12/31/96
		1/1/97
		1/3/97		8-K
		3/21/97
		3/28/97
Filed On / Filed As Of		3/31/97		10-Q
		11/1/97
		12/31/98		10-K
		4/1/99		10-K
Corrected On		2/15/0
		3/4/2
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