-----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, LnXT27s6+JZBD6suGfRw903MfYzXt9Gb2mOsEhgg1Qtv4DMFElBT/0NnV6GP5q0x oIxdLW87uRXLOnWsiCaxwQ== 0000812564-98-000030.txt : 19981118 0000812564-98-000030.hdr.sgml : 19981118 ACCESSION NUMBER: 0000812564-98-000030 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINTHROP GROWTH INVESTORS I LP CENTRAL INDEX KEY: 0000722565 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042797919 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13389 FILM NUMBER: 98751135 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 FORMER COMPANY: FORMER CONFORMED NAME: WINTHROP INCOME PROPERTIES I LTD PARTNERSHP DATE OF NAME CHANGE: 19840124 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 (IRS Employer incorporation or organization) Identification No.) 55 Beattie Place P. O. 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 a) WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (Unaudited) September 30, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 1,752 Receivables and deposits 686 Restricted escrows 925 Other assets 1,351 Investment properties: Land $ 4,015 Buildings and related personal property 40,428 44,443 Less accumulated depreciation (22,976) 21,467 $ 26,181 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 341 Tenant security deposit liabilities 150 Other liabilities 591 Mortgage notes payable 21,144 Partners' (Deficit) Capital General Partners' $ (1,274) Limited Partners' (23,139 units issued and outstanding) 5,229 3,955 $ 26,181 See Accompanying Notes to Consolidated Financial Statements b) WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 Revenues: Rental income $ 1,710 $ 1,657 $ 5,162 $ 5,030 Other income 102 99 261 277 Total revenues 1,812 1,756 5,423 5,307 Expenses: Operating 793 866 2,284 2,411 General and administrative 56 36 135 134 Depreciation 467 478 1,364 1,271 Interest 464 466 1,403 1,414 Property taxes 134 139 400 420 Total expenses 1,914 1,985 5,586 5,650 Net loss $ (102) $ (229) $ (163) $ (343) Net loss allocated to general partner (10%) $ (10) $ (23) $ (16) $ (34) Net loss allocated to limited partners (90%) (92) (206) (147) (309) $ (102) $ (229) $ (163) $ (343) Net loss per limited partnership unit: $ (3.97) $ (8.91) $ (6.34) $ (13.34) Distributions per limited partnership unit $ -- $ 2.16 $ 4.32 $ 6.48 See Accompanying Notes to Consolidated Financial Statements c) WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partners' Partners' Total Original capital contributions 23,149 $ 2,000 $ 23,149 $ 25,149 Partners' (deficit) capital at December 31, 1997 23,139 $ (1,258) $ 5,476 $ 4,218 Distributions to partners -- -- (100) (100) Net loss for the nine months ended September 30, 1998 -- (16) (147) (163) Partners' (deficit) capital at September 30, 1998 23,139 $ (1,274) $ 5,229 $ 3,955 See Accompanying Notes to Consolidated Financial Statements d) WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1998 1997 Cash flows from operating activities: Net loss $ (163) $ (343) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,364 1,271 Amortization of loan costs and deferred costs 88 82 Change in accounts: Receivables and deposits (93) (511) Other assets (112) 33 Accounts payable 192 (12) Tenant security deposit liabilities 3 (11) Other liabilities 149 180 Net cash provided by operating activities 1,428 689 Cash flows from investing activities: Property improvements and replacements (1,040) (625) Net withdrawals from restricted escrows 143 186 Net cash used in investing activities (897) (439) Cash flows from financing activities: Payments on mortgage notes payable (187) (172) Distributions paid to partners (100) (150) Net cash used in financing activities (287) (322) Net increase (decrease) in cash and cash equivalents 244 (72) Cash and cash equivalents at beginning of period 1,508 1,348 Cash and cash equivalents at end of period $ 1,752 $ 1,276 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,332 $ 1,346 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 financial statements of Winthrop Growth Investors 1 Limited Partnership, (the "Partnership") 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. In the opinion of Two Winthrop Properties, Inc. (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 month periods ended September 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1997. Reclassification Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership paid property management fees based upon collected gross rental revenues for property management services as noted below for the nine month periods ended September 30, 1998 and 1997. Such fees are included in operating expenses on the consolidated statements of operations and are reflected in the following table. The Partnership Agreement provides for reimbursement to the Managing General Partner and its affiliates for certain expenses incurred in connection with the administration of Partnership activities. The Managing General Partner and its affiliates received reimbursements and fees as reflected in the following table: For the Nine Months Ended September 30, (in thousands) 1998 1997 Property management fees $272 $256 Reimbursements for services of affiliates 45 71 In addition, the Partnership paid approximately $14,000 during the nine month period ended September 30, 1998 to an affiliate of the Managing General Partner for construction oversight reimbursements related to capital improvements and major repair projects. There were no similar expenses paid during the corresponding period in 1997. On February 6, 1997, LON-WGI Associates, L.L.C. ("LON-WGI"), an affiliate of the Managing General Partner, commenced a tender offer to purchase up to 11,000 units of limited partnership interest in the Partnership, at $275 per unit. Upon the completion of the offer, LON-WGI acquired 4,792.34 units or approximately 20.7% of the total limited partnership units of the Partnership. LON-WGI entered into an agreement to sell its limited partnership units to an affiliate of Insignia Financial Group, Inc. ("Insignia") on October 28, 1997. The sale was completed in April 1998. On October 28, 1997, Insignia acquired 100% of the Class B stock of First Winthrop Corporation ("FWC"), the sole shareholder of the Managing General Partner. In connection with this transaction, a nominee of Insignia was elected as a director of the Managing General Partner. The nominee has the authority to appoint members to a newly created residential committee of the board of directors of the Managing General Partner (the "Residential Committee"). The Residential Committee is generally authorized to act on behalf of the General Partner in managing the business activities of the Partnership. On October 28, 1997, the Partnership terminated Winthrop Management as the managing agent, and appointed an affiliate of Insignia to assume management of the property. On October 1, 1998, Insignia completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO has the right to appoint a director of the Managing General Partner who, in turn, has the right to appoint the members of the Residential Committee. In addition, the property manager became an affiliate of AIMCO. The Managing General Partner does not believe this transaction will have a material effect on the affairs and operations of the Partnership. NOTE C - SUPPLEMENTARY INFORMATION REQUIRED PURSUANT TO SECTION 9.4 OF THE PARTNERSHIP AGREEMENT Statement of Cash Available for Distribution: Three Months Ended Nine Months Ended September 30, 1998 September 30, 1998 Net Loss $ (102,000) $ (163,000) Add: Amortization expense 28,000 88,000 Depreciation expense 467,000 1,364,000 Less: Cash to reserves (393,000) (1,189,000) Cash Available for Distribution $ -- $ 100,000 Distributions allocated to Limited Partners $ -- $ 100,000 General Partners' interest Cash Available for distribution $ -- $ -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of four apartment complexes. The following table sets forth the average occupancy of the properties for the nine month periods ended September 30, 1998 and 1997: Average Occupancy 1998 1997 Meadow Wood Apartments 87% 87% Jacksonville, Florida Stratford Place Apartments 96% 97% Gaithersburg, Maryland Stratford Village Apartments 82% 87% Montgomery, Alabama Sunflower Apartments 98% 95% Dallas, Texas Occupancy at Sunflower Apartments has increased due to stronger marketing efforts. The occupancy rate at Stratford Village Apartments continues to be affected by move-outs due to military transfers and job loss/transfers. Additionally, market conditions in the Montgomery area continue to be soft due to low interest rates and new construction. Although low, occupancy at Meadow Wood Apartments is comparable to the average occupancy in the surrounding area. In addition, renovations to the exterior building and pool area along with other improvements have been undertaken in 1998 to increase overall curb appeal. Results of Operations The Partnership realized a net loss of approximately $163,000 for the nine months ended September 30, 1998, compared to a net loss of approximately $343,000 for the same period in 1997. The Partnership's net loss for the three months ended September 30, 1998 was approximately $102,000 compared to a net loss of approximately $229,000 for the same period in 1997. The decrease in net loss for the three and nine month periods ended September 30, 1998 is primarily due to an increase in rental income combined with a decrease in operating expense partially offset by an increase in depreciation expense. Rental income increased due to overall rental rate increases at a majority of the Partnership's investment properties partially offset by occupancy decreases at two of the Partnership's four properties. Operating expenses decreased primarily due to decreases in repairs and maintenance and insurance costs in 1998 as compared to 1997. Depreciation expense increased due to the addition of approximately $1,334,000 of capital improvements and replacements at the Partnership's investment properties over the last twelve months. Included in operating expense for the nine months ended September 30, 1998 is approximately $16,000 of major repairs and maintenance, which is comprised primarily of parking lot repairs and construction services costs. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of each 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, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 1998, the Partnership had cash and cash equivalents of approximately $1,752,000 as compared to approximately $1,276,000 at September 30, 1997. The net increase in cash and cash equivalents for the nine months ended September 30, 1998 is approximately $244,000 compared to a net decrease in cash and cash equivalents of approximately $72,000 for the corresponding period of 1997. Net cash provided by operating activities increased due to the decrease in net loss, as discussed above, as well as reductions in the use of cash for receivables and deposits and accounts payable due to the timing of receipts and payments. Partially offsetting these decreases is an increase in other assets due to the timing of payments. Net cash used in investing activities increased during the nine months ended September 30, 1998 due to an increase in property improvements and replacements combined with a decrease in withdrawals from restricted escrows. Net cash used in financing activities decreased due to a decrease in distributions to partners during the nine months ended September 30, 1998, compared to the prior year. 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 the other operating needs of the Partnership and to comply with federal, state and local legal and regulatory requirements. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The Managing General Partner is currently assessing the need for capital improvements at each of the Partnership's properties. To the extent that additional capital improvements are required, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The mortgage indebtedness of approximately $21,144,000 is being amortized over varying periods with balloon payments due at maturity of approximately $4,000,000 in 2000 and $8,000,000 in 2006. The Managing General Partner will attempt to refinance such indebtedness or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such properties through foreclosure. Distributions of approximately $100,000 and $150,000 were paid to the limited partners during the nine months ended September 30, 1998 and 1997, respectively. The Partnership's distribution policy will be reviewed on a quarterly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations to permit further distributions to its partners in 1998 or subsequent periods. Transfer of Control - Subsequent Event On October 1, 1998, Insignia completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO has the right to appoint a director of the Managing General Partner who, in turn, has the right to appoint the members of the Residential Committee. In addition, the property manager became an affiliate of AIMCO. The Managing General Partner does not believe this transaction will have a material effect on the affairs and operations of the Partnership. Year 2000 General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Partnership is dependent upon the Managing General Partner and its affiliates for management and administrative services ("Managing Agent"). Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 Issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Managing Agent and the Partnership. Status of Progress in Becoming Year 2000 Compliant The Managing Agent's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing Agent has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phase on both hardware and software systems. Assessments are continuing in regards to embedded systems in operating equipment. The Managing Agent anticipates having all phases complete by June 1, 1999. In addition to the areas the Partnership is relying on the Managing Agent to verify compliance with, the Partnership has certain operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. The focus of the Managing General Partner was to the security systems, elevators, heating-ventilation-air-conditioning systems, telephone systems and switches, and sprinkler systems. The Managing General Partner is currently engaged in the identification of all non-compliant operational systems, and is in the process of estimating the costs associated with any potential modifications or replacements needed to such systems in order for them to be Year 2000 compliant. It is not expected that such costs would have a material adverse affect upon the operations of the Partnership. Risk Associated with the Year 2000 The Managing General Partner believes that the Managing Agent has an effective program in place to resolve the Year 2000 issue in a timely manner and has appropriate contingency plans in place for critical applications that could affect the Partnership's operations. To date, the Managing General Partner is not aware of any external agent with a Year 2000 issue that would materially impact the Partnership's results of operations, liquidity or capital resources. However, the Managing General Partner has no means of ensuring that external agents will be Year 2000 compliant. The Managing General Partner does not believe that the inability of external agents to complete their Year 2000 resolution process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. (b) Reports on Form 8-K: None filed during the quarter ended September 30, 1998. 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: Two Winthrop Properties, Inc. Managing General Partner By: /s/Patrick Foye Patrick Foye Residential Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Residential Vice President - Accounting (Duly Authorized Officer) Date: November 16, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Winthrop Growth Investors 1 Limited Partnership 1998 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000722565 WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP 1,000 9-MOS DEC-31-1998 SEP-30-1998 1,752 0 686 0 0 0 44,443 (22,976) 26,181 0 21,144 0 0 0 3,955 26,181 0 5,423 0 0 5,586 0 1,403 0 0 0 0 0 0 (163) (6.34) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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