-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nd13FInJxc3Zj2CQaqqCbnyLFdlAkd77jPK3154r3HESY01Sqj4tHKsbwh0Fcu6C WyyNcl/imS3OkeRjyWL0RQ== 0000711642-04-000362.txt : 20041112 0000711642-04-000362.hdr.sgml : 20041111 20041112084727 ACCESSION NUMBER: 0000711642-04-000362 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041112 DATE AS OF CHANGE: 20041112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINTHROP GROWTH INVESTORS I LP CENTRAL INDEX KEY: 0000722565 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042839837 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13389 FILM NUMBER: 041135376 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: POST OFFICE BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: WINTHROP INCOME PROPERTIES I LTD PARTNERSHP DATE OF NAME CHANGE: 19840124 10QSB 1 wgi.txt WGI UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _________to _________ Commission file number 2-84760 WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) Massachusetts 04-2839837 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2004
Assets Cash and cash equivalents $ 1,481 Receivables and deposits 517 Restricted escrows 177 Other assets 487 Investment properties: Land $ 2,058 Buildings and related personal property 29,120 31,178 Less accumulated depreciation (20,926) 10,252 $ 12,914 Liabilities and Partners' Deficit Liabilities Accounts payable $ 169 Tenant security deposit liabilities 180 Accrued property taxes 223 Other liabilities 78 Mortgage notes payable 13,654 Partners' Deficit General partners $ (97) Limited partners (23,139 units issued and outstanding) (1,293) (1,390) $ 12,914 See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Nine Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Revenues: Rental income $ 1,390 $ 1,404 $ 4,071 $ 4,163 Other income 106 132 355 402 Casualty (loss) gain (Note D) (12) -- (12) 44 Total revenues 1,484 1,536 4,414 4,609 Expenses: Operating 763 638 1,946 1,775 General and administrative 31 67 121 175 Depreciation 353 362 1,081 1,107 Interest 274 281 832 854 Property tax 112 114 336 287 Total expenses 1,533 1,462 4,316 4,198 (Loss) income from continuing operations (49) 74 98 411 Gain on sale of discontinued operations (Note E) -- -- -- 78 Income from discontinued operations (Note A) -- -- -- 120 Net (loss) income $ (49) $ 74 $ 98 $ 609 Net (loss) income allocated to general partners (10%) $ (5) $ 7 $ 10 $ 61 Net (loss) income allocated to limited partners (90%) (44) 67 88 548 $ (49) $ 74 $ 98 $ 609 Per limited partnership unit: (Loss) income from continuing operations $ (1.90) $ 2.90 $ 3.80 $ 15.99 Gain on sale of discontinued operations -- -- -- 3.03 Income from discontinued operations -- -- -- 4.66 Net (loss) income per limited partnership unit $ (1.90) $ 2.90 $ 3.80 $ 23.68 Distributions per limited partnership unit $ -- $ -- $ -- $ 73.94 See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 23,149 $ 2 $23,149 $23,151 Partners' deficit at December 31, 2003 23,139 $ (107) $(1,381) $(1,488) Net income for the nine months ended September 30, 2004 -- 10 88 98 Partners' deficit at September 30, 2004 23,139 $ (97) $(1,293) $(1,390) See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2004 2003 Cash flows from operating activities: Net income $ 98 $ 609 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,081 1,107 Amortization of loan costs and deferred costs 38 13 Bad debt expense, net 105 127 Casualty loss (gain) 12 (44) Change in accounts: Receivables and deposits (220) 39 Other assets (46) (122) Accounts payable 4 (137) Tenant security deposit liabilities (2) 15 Accrued property taxes 223 133 Other liabilities (60) (59) Net cash provided by operating activities 1,233 1,681 Cash flows from investing activities: Property improvements and replacements (302) (373) Insurance proceeds received -- 44 Net (deposits to) withdrawals from restricted escrows (30) 14 Net cash used in investing activities (332) (315) Cash flows from financing activities: Payments on mortgage notes payable (305) (270) Distributions paid to partners -- (1,830) Net cash used in financing activities (305) (2,100) Net increase (decrease) in cash and cash equivalents 596 (734) Cash and cash equivalents at beginning of period 885 1,504 Cash and cash equivalents at end of period $ 1,481 $ 770 Supplemental disclosure of cash flow information: Cash paid for interest $ 849 $ 872 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 63 $ -- See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Winthrop Growth Investors 1 Limited Partnership (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The general partner of the Partnership is AIMCO/Winthrop Growth Investors I GP, LLC, a Delaware limited liability company ("AIMCO GP"), a wholly-owned subsidiary of AIMCO Properties, L.P., an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003. On September 30, 2004, AIMCO/GP acquired the general partner interests in the Partnership from Linnaeus-Lexington Associates Limited Partnership and Two Winthrop Properties, Inc. ("Two Winthrop") for an aggregate cash consideration of $1,023,000. Prior to the transfer of the general partner interests to AIMCO/GP, AIMCO/NHP Properties, Inc. ("AIMCO/NHP"), also an affiliate of AIMCO held 100% of the voting rights with respect to the Class B stock of FWC, which provided AIMCO/NHP with the right to elect one director to the board of directors of Two Winthrop. That one director had the power to appoint the sole member of the Residential Committee of Two Winthrop's board of directors. The Residential Committee was vested with the authority to elect certain officers, and subject to certain limitations, the Residential Committee and its appointed officers had the right to cause the managing general partner of the Partnership to take such actions as it deemed necessary and advisable in connection with the activities of the Partnership. Accordingly, although ownership of the general partner interests was transferred, the effective control of the day-to-day management of the Partnership remains vested in an affiliate of AIMCO. As used herein, the term "Managing General Partner" shall mean Two Winthrop, with respect to matters occurring prior to September 30, 2004 and AIMCO GP for matters occurring from and after September 30, 2004. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the consolidated statement of operations for the nine months ended September 30, 2003 reflect the operations of Stratford Village Apartments as income from discontinued operations due to the property's sale in November 2002. Note B - Transactions with Affiliated Parties The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Affiliates of the Managing General Partner are entitled to receive 5% of gross receipts from the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $219,000 and $222,000 during the nine months ended September 30, 2004 and 2003, respectively, which is included in operating expenses. An affiliate of the Managing General Partner earned reimbursements of accountable administrative expenses amounting to approximately $89,000 and $132,000 for the nine months ended September 30, 2004 and 2003, respectively, which is included in general and administrative expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the Managing General Partner of approximately $4,000 and $12,000 for the nine months ended September 30, 2004 and 2003, respectively. The construction management service fees are calculated based on a percentage of certain additions to investment properties. The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the nine months ended September 30, 2004 and 2003, the Partnership was charged by AIMCO and its affiliates approximately $74,000 and $69,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Supplementary Information Required Pursuant to Section 9.4 of the Partnership Agreement Statement of cash available for distribution for the three and nine months ended September 30, 2004 (in thousands): Three Months Nine Months Ended Ended September 30, September 30, 2004 2004 Net (loss) income $ (49) $ 98 Add: Amortization expense 13 38 Depreciation expense 353 1,081 Less: Cash to reserves (317) (1,217) Cash available for distribution $ -- $ -- Note D - Casualties During the nine months ended September 30, 2003, there was a casualty gain of approximately $44,000 recorded at Ashton Ridge Apartments related to a fire in April 2002 that damaged eight apartment units. This gain was the result of the receipt of remaining insurance proceeds of approximately $44,000. The write off of the damaged assets was completed during the year ended December 31, 2002. During the three months ended September 30, 2004 there was an estimated casualty loss of approximately $12,000 recorded at Ashton Ridge Apartments related to damages to the property caused by Hurricane Jeanne. This loss was the result of the write off of net fixed assets of approximately $12,000. No insurance proceeds are anticipated to cover this loss. In addition, the property incurred approximately $26,000 in clean up costs related to this hurricane. Note E - Sale of Investment Property On November 27, 2002, Stratford Village Apartments was sold to a third party for approximately $9,514,000. After closing costs and expenses related to the sale, the net proceeds received by the Partnership were approximately $9,214,000. The Partnership realized a gain on the sale of investment property of approximately $5,492,000 during the fourth quarter of 2002. During the nine months ended September 30, 2003, the Partnership recognized additional gain on the sale of approximately $78,000 due to the write-off of expense reserves. Additionally, during the nine months ended September 30, 2003, the Partnership received approximately $120,000 that was held by the trustee for the bonds underlying the mortgage encumbering Stratford Village Apartments. When the property's mortgage was paid off at closing and the underlying bonds were repaid, these remaining funds were released to the Partnership and are included in income from discontinued operations. Note F - Contingencies On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hoursworked in excess of forty per week. On March 5, 2004, the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business. As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission (the "SEC") is conducting a formal investigation relating to certain matters. Although the staff of the SEC is not limited in the areas that it may investigate, AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, capitalization of payroll and certain other costs, and tax credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict when the matter will be resolved. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations. ITEM 2. Management's Discussion and Analysis or Plan of Operation The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 2004 and 2003: Average Occupancy 2004 2003 Ashton Ridge Apartments Jacksonville, Florida 90% 97% Stratford Place Apartments Gaithersburg, Maryland 95% 95% The Managing General Partner attributes the decrease in occupancy at Ashton Ridge Apartments to military deployments in the local market and adhering to stricter credit guidelines in acceptance of tenant applications. The Partnership's financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership, such as the local economic climate and weather, can adversely or positively affect the Partnership's financial results. Transfer of General Partner Interests On September 30, 2004, AIMCO/Winthrop Growth Investors I GP, LLC, a Delaware limited liability company ("AIMCO GP") acquired the general partner interests in the Partnership from Linnaeus-Lexington Associates Limited Partnership and Two Winthrop Properties, Inc. ("Two Winthrop") for an aggregate cash consideration of $1,023,000. Prior to the transfer of the general partner interests to AIMCO/GP, AIMCO/NHP Properties, Inc. ("AIMCO/NHP"), also an affiliate of AIMCO held 100% of the voting rights with respect to the Class B stock of FWC, which provided AIMCO/NHP with the right to elect one director to the board of directors of Two Winthrop. That one director had the power to appoint the sole member of the Residential Committee of Two Winthrop's board of directors. The Residential Committee was vested with the authority to elect certain officers, and subject to certain limitations, the Residential Committee and its appointed officers had the right to cause the managing general partner of the Partnership to take such actions as it deemed necessary and advisable in connection with the activities of the Partnership. Accordingly, although ownership of the general partner interests was transferred, the effective control of the day-to-day management of the Partnership remains vested in an affiliate of AIMCO. As used herein, the term "Managing General Partner" shall mean Two Winthrop, with respect to matters occurring prior to September 30, 2004 and AIMCO GP for matters occurring from and after September 30, 2004. Results of Operations The Partnership's net income for the nine months ended September 30, 2004 was approximately $98,000 compared to net income of approximately $609,000 for the nine months ended September 30, 2003. The Partnership's net loss for the three months ended September 30, 2004 was approximately $49,000 compared to net income of approximately $74,000 for the three months ended September 30, 2003. The decrease in net income for the nine months ended September 30, 2004 is largely due to the income from discontinued operations and the gain on sale of discontinued operations in 2003 (as discussed below), as well as a decrease in total revenues and an increase in total expenses. The decrease in net income for the three months ended September 30, 2004 is due to a decrease in total revenues and an increase in total expenses. On November 27, 2002, Stratford Village Apartments was sold to a third party for approximately $9,514,000. After closing costs and expenses related to the sale, the net proceeds received by the Partnership were approximately $9,214,000. The Partnership realized a gain on the sale of investment property of approximately $5,492,000 during the fourth quarter of 2002. During the nine months ended September 30, 2003, the Partnership recognized additional gain on the sale of approximately $78,000 due to the write-off of expense reserves. Additionally, during the nine months ended September 30, 2003, the Partnership received approximately $120,000 that was held by the trustee for the bonds underlying the mortgage encumbering Stratford Village Apartments. When the property's mortgage was paid off at closing and the underlying bonds were repaid, these remaining funds were released to the Partnership and are included in income from discontinued operations. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the consolidated statement of operations for the nine months ended September 30, 2003 reflect the operations of Stratford Village Apartments as income from discontinued operations due to the property's sale in November, 2002. The Partnership recognized (loss) income from continuing operations for the three and nine months ended September 30, 2004 of approximately ($49,000) and $98,000, respectively, compared to income from continuing operations for the three and nine months ended September 30, 2003 of approximately $74,000 and $411,000, respectively. The decrease in income from continuing operations for both periods is due to a decrease in total revenues and an increase in total expenses. The decrease in total revenues for the three and nine months ended September 30, 2004 is due to decreases in rental and other income and a casualty loss during the three months ended September 30, 2004. For the nine months ended September 30, 2004 the decrease was also due to a casualty gain recognized in 2003. The decrease in rental income is due primarily to a decrease in occupancy at Ashton Ridge Apartments partially offset by an increase in average rental rates at Ashton Ridge Apartments and a decrease in bad debt expense at Stratford Place Apartments. Other income decreased during the three and nine months ended September 30, 2004 primarily due to a decrease in lease cancellation fees at Stratford Place Apartments and late charges at both of the Partnership's properties. During the three months ended September 30, 2004 there was an estimated casualty loss of approximately $12,000 recorded at Ashton Ridge Apartments related to damages to the property caused by Hurricane Jeanne. This loss was the result of the write off of net fixed assets of approximately $12,000. No insurance proceeds are anticipated to cover this loss. In addition, the property incurred approximately $26,000 in clean up costs related to this hurricane. The decrease in casualty gain is due to a casualty gain recorded at Ashton Ridge Apartments during the nine months ended September 30, 2003 related to a fire that damaged eight units during April 2002. This gain was the result of the receipt of remaining insurance proceeds of approximately $44,000. Total expenses increased during the three and nine months ended September 30, 2004 primarily due to an increase in operating expenses partially offset by a decrease in general and administrative expenses. The increase in total expenses for the nine months ended September 30, 2004 is also due to an increase in property tax expense. Property tax expense remained relatively constant for the three months ended September 30, 2004. Operating expenses increased primarily due to an increase in property expenses partially offset by a decrease in maintenance expenses. Property expenses increased primarily due to increases in salaries and other related benefits at Stratford Place Apartments, and courtesy patrol costs at both of the Partnership's properties partially offset by reduced utility expenses at both of the Partnership's properties. Maintenance expenses decreased primarily due to a decrease in contract services and snow removal costs at Stratford Place Apartments. Property tax expense increased due to increased assessed values at both of the Partnership's properties. General and administrative expenses decreased due to decreases in the costs of the services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement and the costs of professional services associated with the administration of the Partnership. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement. Liquidity and Capital Resources At September 30, 2004, the Partnership had cash and cash equivalents of approximately $1,481,000 compared to approximately $770,000 at September 30, 2003. Cash and cash equivalents increased approximately $596,000 since December 31, 2003 due to approximately $1,233,000 of cash provided by operating activities partially offset by approximately $332,000 and $305,000 of cash used in investing and financing activities, respectively. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrows maintained by the mortgage lenders. Cash used in financing activities consisted of principal payments made on the mortgages encumbering the Partnership's investment properties. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance. Capital improvements planned for each of the Partnership's properties are detailed below. Ashton Ridge Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $198,000 of capital improvements at Ashton Ridge Apartments, consisting primarily of floor covering replacements, exterior painting, appliance replacements, air conditioning upgrades and structural improvements. These improvements were funded from operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $70,000 in capital improvements during the remainder of 2004. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property. Stratford Place Apartments During the nine months ended September 30, 2004, the Partnership completed approximately $167,000 of capital improvements at Stratford Place Apartments, consisting primarily of floor covering replacements, water/sewer upgrades, exterior painting, air conditioning unit replacements, parking area improvements, and appliance replacements. These improvements were funded from replacement reserves and operating cash flow. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $26,000 in capital improvements during the remainder of 2004. Additional capital improvements may be considered and will depend on the physical condition of the property as well as the anticipated cash flow generated by the property and replacement reserves. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering Ashton Ridge Apartments of approximately $5,492,000 has a maturity date of January 2021 at which time the loan is scheduled to be fully amortized. The mortgage indebtedness encumbering Stratford Place Apartments of approximately $8,162,000 requires a balloon payment of approximately $7,739,000 in July 2006. The Managing General Partner will attempt to refinance such indebtedness and/or sell Stratford Place Apartments prior to its maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing the property through foreclosure. The Partnership distributed the following amounts during the nine months ended September 30, 2004 and 2003 (in thousands except per unit data):
Nine Months Per Nine Months Per Ended Limited Ended Limited September 30, Partnership September 30, Partnership 2004 Unit 2003 Unit Operations $ -- $ -- $ 1,191 $ 46.33 Sale (1) -- -- 639 27.61 $ -- $ -- $ 1,830 $ 73.94
(1) From the remaining undistributed sale proceeds of Stratford Village Apartments. The Partnership's cash available for distribution is reviewed on a monthly basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings and/or property sales. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit any distributions to its partners during the remainder of 2004 or subsequent periods. Other In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 10,969.25 limited partnership units (the "Units") in the Partnership representing 47.41% of the outstanding Units at September 30, 2004. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that would include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 47.41% of the outstanding units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets Investment properties are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of a property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment properties. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's assets. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Rental income attributable to leases is recognized monthly as it is earned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. Controls and Procedures (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004, the plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations. The Managing General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with this case will be material to the Partnership's overall operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 24, 2004, the Partnership sought the consent of its limited partners to the replacement of Linnaeus - Lexington Associates Limited Partnership ("Linnaeus") as the associate general partner of the Partnership with AIMCO GP. In order to effect such substitutions, the consent of two-thirds in interest of the limited partners is required. At the close of business on July 30, 2004, the requisite percentage of limited partners had consented to the replacement. ITEM 6. EXHIBITS See Exhibit Index Attached. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP By: AIMCO/Winthrop Growth Investors I, GP, LLC Managing General Partner By: /s/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: November 12, 2004 WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP Exhibit Index Exhibit Number Description of Exhibit 3.1 Amended and Restated Agreement of Limited Partnership of Winthrop Growth Investors I Limited Partnership dated May 11, 1984 (included as an exhibit to the Partnership's Registration Statement on Form S-11, File No. 2-84760 and incorporated herein by reference). 3.2 Amendment to Amended and Restated Agreement of Limited Partnership dated August 23, 1985 (Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 is incorporated herein by reference). 3.3 Amendment to the Amended and Restated Agreement of Limited Partnership, dated November 20, 2003, filed as an exhibit to the Registrant's Current Report on Form 8-K dated December 3, 2003 and incorporated herein by reference. 3.4 Amendment to Amended and Restated Agreement of Limited Partnership, dated September 30, 2004, filed as an exhibit to the Registrant's Current Report on Form 8-K dated September 30, 2004 and filed on October 5, 2004, incorporated herein by reference. 3.5 Certificate of Amendment to the Second Amended and Restated Certificate of Limited Partnership of Winthrop Growth Investors 1 Limited Partnership, filed as an exhibit to the Registrant's Current Report on Form 8-K dated September 30, 2004 and filed on October 5, 2004, incorporated herein by reference. 10.1 Replacement Reserve Agreement, filed as exhibit 10.20 to the Registrant's Current Report on Form 8-K dated December 22, 2000, and incorporated herein by reference. 10.2 Purchase Agreement between Linnaeus-Lexington Associates Limited Partnership and AIMCO/Winthrop Growth Investors 1 GP, LLC, dated September 30, 2004, filed as exhibit 10.22 to the Registrant's Current Report on Form 8-K dated September 30, 2004 and filed on October 5, 2004, incorporated herein by reference. 10.3 Assignment and Assumption of General Partner Interest in Winthrop Growth Investors 1 Limited Partnership, dated September 30, 2004, filed as exhibit 10.23 to the Registrant's Current Report on Form 8-K dated September 30, 2004 and filed on October 5, 2004, incorporated herein by reference. 10.4 Assignment and Assumption of General Partner Interest in Winthrop Growth Investors 1 Limited Partnership, dated September 30, 2004, filed as exhibit 10.24 to the Registrant's Current Report on Form 8-K dated September 30, 2004 and filed on October 5, 2004, incorporated herein by reference. 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Winthrop Growth Investors I Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of AIMCO/Winthrop Growth Investors I, GP, LLC, equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Winthrop Growth Investors I Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 12, 2004 /s/Stephen B. Waters Stephen B. Waters Vice President of AIMCO/Winthrop Growth Investors I, GP, LLC, equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-QSB of Winthrop Growth Investors I Limited Partnership (the "Partnership"), for the quarterly period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Martha L. Long Name: Martha L. Long Date: November 12, 2004 /s/Stephen B. Waters Name: Stephen B. Waters Date: November 12, 2004 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----