As filed with the Securities and Exchange Commission on March 4, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) February 29, 1996
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
(State or Other Jurisdiction of organization)
0-9224 04-2654152
(Commission File Number) (I.R.S. Employer Identification No.)
One International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices) (Zip Code)
(617) 330-8600
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
Pursuant to the terms of Registrant's partnership
agreement, Registrant is mailing to its limited partners its
financial statements for the year ended December 31, 1995.
Item 7 Financial Statements, Pro Forma Financial Statements
and Exhibits.
(c) Exhibits.
19. Letter to Limited Partners dated February
29, 1996
SIGNATURES
Pursuant to the requirement of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
WINTHROP PARTNERS 79 LIMITED
PARTNERSHIP
By: One Winthrop Properties, Inc.,
Managing General Partner
Date: March 4, 1996 By:_/s/ Carol C.J. Mills___
Carol C.J. Mills
Vice President
To the Limited Partners of
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP:
Enclosed is your distribution check for the quarter ended December 31, 1995 (the
"Fourth Quarter"). This Report describes the activities of WINTHROP PARTNERS 79
LIMITED PARTNERSHIP, summarizes the results achieved by the Partnership through
1995 and contains its audited financial statements for the year ended December
31, 1995.
Cash distributions from the Partnership in 1995 resulted in an annual return on
investment of approximately 8.0%. The cash distributions provided by the
Partnership since its inception in August 1979 through 1995 are summarized on
Page 3 of this Report. The Partnership's cash reserves are approximately
$260,000 as of December 31, 1995.
Cash Distribution/State Withholding Tax Requirements
The Partnership's net cash flow generated in the Fourth Quarter is $12.89 per
$1,000 unit. However, the actual amount distributed will be $12.86 per unit as a
result of the withholding requirements of South Carolina. To ensure the
collection of state income taxes, several states now require that partnerships,
rather than the limited partners, pay withholding tax on a partnership's share
of income and/or distributions earned in those states. Winthrop Partners 79 must
pay withholding tax for 1995 to South Carolina because the Partnership owns
property that generated income in that state. Cash distributions will continue
to be reduced by such withholding requirements. Please consult your tax advisor
or the Department of Taxation in South Carolina regarding any filings a limited
partner needs to make, and the possibility of obtaining a tax refund.
For those limited partners who elected the monthly method of distribution, the
enclosed check is one-third of the quarterly distribution. Your second and third
monthly installments will be mailed to you in 30 and 60 days, respectively.
Please note that your share of the Partnership's cash distribution for 1995 is
not taxable in and of itself. The amount of passive income and other items
necessary to complete your 1995 income tax returns are reported on your Schedule
K-1 which was distributed to you in February.
Status of the Partnership's Properties
The table on Page 4 provides summary information concerning the ten properties
owned by the Partnership. All lease payments due to the Partnership are current.
The leasing status of each property is described in detail below:
1. Floors, Inc. and B&G, Inc., d.b.a. Splash Pools and Spas (the "New
Tenants"), Hurst, TX. The original tenant in the property was Handy
Dan Hardware, Inc. Handy Dan's successor, Channel Home Centers,
defaulted on its lease in December 1990 and the Partnership released
the property to Creative Paint and Wallpaper, Inc. and B&G, Inc.,
d.b.a. Splash Pools and Spas in 1991. On August 31, 1995, Creative
Paint assigned its lease to Floors, Inc. The leases with the New
Tenants have original terms which expire on January 31, 2001. The
maturity date for the property's mortgage is July 2010.
2. Gordy's Food & Liquor, Inc., doing business as Gordy's IGA, Chippewa
Falls, WI. The original term of the lease expires June 17, 2000.
National Supermarket, Inc assigned the lease to Gateway Foods which in
turn sublet the property to Gordy's IGA. Annual sales at the store
remain low; thus, no additional rent was paid to the Partnership in
1995. There is no mortgage debt on this property.
3. Frank's Nursery Sales, Inc., Hillside, IL. The original term of the lease
expires December 31, 2004. Annual sales at the store remain low, thus, no
additional rent was paid to the Partnership in 1995. The maturity date for
the property's mortgage is December 2004.
<PAGE>
4. J.C. Penney Co., Inc., Batavia, NY. The original term of the lease
expires on June 1, 1998. Annual sales at the store remain low; thus, no
additional rent was paid to the Partnership in 1995. As indicated by
the lack of additional rent payments, economic conditions in Batavia
remain weak. The maturity date for the property's mortgage of
approximately $523,000 was extended from July 1, 1995 to February 1,
1998. The Partnership marketed this property for sale but received no
offers in excess of the mortgage balance.
5. Piedmont Clarklift, Inc. ("Piedmont"), Greenville County, SC. The
original term of the lease with J.W. Burress, Incorporated ("Burress")
expires December 27, 1999. The maturity date for the property's first
mortgage is May 1999. The property is sublet by Piedmont. Piedmont was
originally an affiliate of Burress but is now a separate corporation.
Burress remains liable for all obligations under the lease agreement.
6. Rockwell-Collins ("Rockwell"), Cedar Rapids, IA. The original term of
the lease with Lucky Stores, Inc. ("Lucky Stores") expires June 2,
2000. The property is sublet by Rockwell. Lucky Stores remains liable
for all obligations under the lease agreement. Rockwell uses the
property for its corporate graphic design department rather than as a
retail sales operation; therefore, no additional rent is paid to the
Partnership. There is no mortgage debt on this property.
7. Toys R Us, Fort Worth, TX. The original term of the lease expires
January 31, 2000. The maturity date for the property's mortgage is
September 2000.
8. Toys R Us, San Antonio, TX. The original term of the lease expires
January 31, 2000. The maturity date for the property's mortgage is
September 2000.
9. Walgreen Co.,("Walgreen") University City, MO. The original term of the
lease expires December 31, 2008. However, Walgreen has the option to
terminate the lease as of December 31, 1998 and December 31, 2003,
respectively. The tenant has paid a percentage of gross sales as
additional rent in each of the last five years. There is no mortgage
debt on this property.
10. Wal-Mart Stores, Inc., Mexia, TX. The original term of the lease
expires October 31, 2000. The tenant has paid a percentage of gross
sales as additional rent in each of the last five years. There is no
mortgage debt on this property.
The Partnership's future cash distributions will include ongoing distributions
from rental income and one-time distributions of sale proceeds. Cash flow will
be affected by, among other things, the terms of any new leases, any tenant
improvements and leasing costs associated with renewing leases with existing
tenants or signing leases with new tenants, the loss of rent and increased
expense during any period when a property is not under lease and the loss of
rent after a property is sold as well as on-going Partnership administrative
expenses.
Distributions of sale proceeds will be made as a return of capital until limited
partners have received their original Capital Contribution. Per the Partnership
Agreement, sale proceeds are distributed 100% to limited partners until they
have received their $1,000 per unit Capital Contribution. The general partners'
8% share of sale proceeds would be paid subsequently.
<PAGE>
The following table outlines the per unit cash distribution amounts for 1995 and
the cumulative results of the investment to date:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of 1995 Investor
Benefits Total Annualized Total Total
Cash Pre-Tax Passive Portfolio
Distributions(1 Return(2) Income(3) Income(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 79.72* 8.0% $76.98 $1.25
1st Quarter paid 5/30/95 $24.23
2nd Quarter paid 8/29/95 $23.19
3rd Quarter paid 11/29/95 $19.41
4th Quarter paid 2/29/96 $12.89
</TABLE>
*The actual amount distributed was $79.22 per unit as a result of South Carolina
state withholding requirements.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Results Through December 31, 1995
Total
Limited Partner Cash
Admission Date Distributions(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
August 30, 1979 $1,243.27
September 21, 1979 $1,238.63
October 24, 1979 $1,230.39
November 27, 1979 $1,221.48
December 21, 1979 $1,215.19
January 17, 1980 $1,208.23
February 21, 1980 $1,199.67
March 25, 1980 $1,190.91
April 16, 1980 $1,185.59
</TABLE>
1 Represents one $1,000 unit's share of cash flow generated from Partnership
operations prior to deductions for state withholding requirements.
2 Represents the annualized pre-tax return based upon cash distributions only.
Due to the Tax Reform Act of 1986, the Partnership is unable to provide
accurate after-tax returns as a result of investors' varying Federal income
tax situations. Please consult your financial advisor.
3 Represents one $1,000 unit's share of passive income generated from
Partnership operations. Passive losses generated from similar sources may be
used to offset against this passive income, subject to limitations.
4 Rental income and funds held in Partnership reserves are invested in
short-term money market instruments prior to their distribution. This
portfolio income represents the interest income earned on these investments.
<PAGE>
<TABLE>
The following table presents information regarding the Partnership's
investments:
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Partnership
Investments
Tenant/Location Date of Total Cost of Mortgage Balance
Purchase the Property as of
12/31/95
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Floors, Inc. and B & G Inc.
Hurst, TX 6/10/80 $ 1,636,061 $ 686,406
Gordy's Food & Liquor, Inc.
Chippewa Falls, WI 6/17/80 1,380,816 N/A
Frank's Nursery Sales, Inc.
(a wholly-owned subsidiary of
General Host Corp.)
Hillside, IL 1/30/80 706,008 192,298
J.C. Penney Co., Inc.
Batavia, NY 8/01/79 1,092,598 496,365
Piedmont-Clarklift,
Inc.
Greenville 12/27/79 1,555,899 477,420
County, SC
Rockwell Collins/International
Cedar Rapids, IA 6/2/80 1,522,908 N/A
Toys "R" Us, Inc.
Fort Worth, TX 1/25/80 1,873,769 494,339
Toys "R" Us, Inc.
San Antonio, TX 1/25/80 1,987,129 524,531
Walgreen Co.
University City, MO 8/3/79 901,294 N/A
Wal-Mart Stores,
Mexia, TX 10/31/80 977,665 N/A
----------- ----------
$13,634,147 $2,871,359
</TABLE>
<TABLE>
The following table presents information regarding the Partnership's
investments:
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Partnership
Investments
Tenant/Location Maturity Date Tenant Use Type of 1995 Base Rent Lease
of of the Lease/ Expirations
Mortgage Property Terms
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Floors, Inc. and B & G Inc.
Hurst, TX 7/01/2010 Paint & Modified $ 165,852 1/31/2001
Wallpaper Net Step/%
Store; Bath Rent
&
Spa Store
Gordy's Food & Liquor, Inc.
Chippewa Falls, WI N/A Retail Food Triple Net 145,200 6/17/2000
& % Rent
Beverage
Store
Frank's Nursery Sales, Inc.
(a wholly-owned subsidiary of
General Host Corp.)
Hillside, IL 12/01/2004 Retail Triple Net 67,000 12/31/2004
Nursery % Rent
and Crafts
Store
J.C. Penney Co., Inc.
Batavia, NY 2/01/98 Retail Dept. Modified 116,160 6/01/98
Store Net % Rent
Piedmont-Clarklift,
Inc.
Greenville 5/01/99 Equipment Triple Net 205,000 12/27/99
County, SC Dealership Step Rent
Rockwell Collins/International
Cedar Rapids, IA N/A Graphic Arts Triple Net 117,200 6/2/2000
Toys "R" Us, Inc.
Fort Worth, TX 9/01/2000 Retail Triple Net 243,046 1/31/2000
Toy Store Step Rent
Toys "R" Us, Inc.
San Antonio, TX 9/01/2000 Retail Triple Net 248,191 1/31/2000
Toy Store Step Rent
Walgreen Co.
University City, MO N/A Retail Double Net 75,525(1) 12/31/2008
Drugstore % Rent
Wal-Mart Stores,
Mexia, TX N/A Retail Dept. Triple Net 111,206(2) 10/31/2000
Store % Rent
1,494,380
1 An additional rental payment of $62,111 was included in the First Quarter of 1995 cash distribution.
2 An additional rental payment of $62,984 was included in the Second Quarter of 1995 cash distribution.
</TABLE>
Definitions
Modified Net-most operating expenses are paid by tenant; structural repairs are
paid by owner. Double Net-all operating expenses are paid by tenant; structural
repairs are paid by owner.
Triple Net-all operating expenses are paid by tenant. Step Rent-the rent payable
by tenant periodically increases over time.
% Rent-additional rent payable by tenant in excess of base rent if annual sales
exceed certain minimum levels.
<PAGE>
Closing Comments
Your distribution check and Partnership Report for the First Quarter of 1996
will be mailed on May 30, 1996. In the meantime, please contact a representative
at Gemisys, our investor services agent, at (303) 705-3220 with any questions.
Very truly yours,
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
By: One Winthrop Properties, Inc.
Managing General Partner
/s/ Richard J. McCready
-----------------------------
Richard J. McCready
Chief Operating Officer
February 29, 1996
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WINTHROP PARTNERS 79 LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of WINTHROP PARTNERS 79 LIMITED
PARTNERSHIP (a Massachusetts limited partnership) as of December 31, 1995 and
1994, and the related statements of income, changes in partners' capital and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements 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 financial statements referred to above present fairly, in
all material respects, the financial position of WINTHROP PARTNERS 79 LIMITED
PARTNERSHIP as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 31, 1996
<PAGE>
<TABLE>
STATEMENTS OF INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years Ended
December 31, 1995, 1994 and 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental income from real estate leases accounted
for under the operating method.............................................. $ 984,600 $ 940,291 $ 927,066
Interest on short-term investments............................................ 13,551 11,751 10,687
Interest income on real estate leases accounted
for under the financing method.............................................. 400,237 423,839 444,133
------- ------- -------
1,398,388 1,375,881 1,381,886
--------- --------- ---------
Expenses:
Interest.................................................................... 330,627 346,778 370,169
Depreciation and amortization............................................... 149,670 189,547 180,376
Management fees............................................................. 23,662 23,403 23,194
General and administrative.................................................. 88,380 82,276 34,586
------ ------ ------
592,339 642,004 608,325
------- ------- -------
Net income...................................................................... $ 806,049 $ 733,877 $ 773,561
= ======= = ======= = =======
Net income allocated to General Partners........................................ $ 64,484 $ 58,710 $ 61,885
= ====== = ====== = ======
Net income allocated to Limited Partners........................................ $ 741,565 $ 675,167 $ 711,676
= ======= = ======= = =======
Net income per Unit of Limited Partnership
Interest...................................................................... $ 74.12 $ 67.48 $ 71.13
= ===== = ===== = =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 and 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Real Estate Leased to Others:
Accounted for under the operating method, at cost, net of accumulated
depreciation of $3,208,557 and $3,068,851 as of December 31, 1995 and 1994,
respectively................................................................ $ 5,377,665 $ 5,504,371
Accounted for under the financing method...................................... 3,090,312 3,322,188
---------- ---------
8,467,977 8,826,559
Other Assets:
Cash and cash equivalents, at cost, which
approximates market value................................................... 244,593 193,224
Other, net of accumulated amortization of
$56,864 and $46,900 as of December 31, 1995 and
1994, respectively.......................................................... 142,732 214,954
-------- -------
$ 8,855,302 $ 9,234,737
= ========== = =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable........................................................ $ 2,871,359 $ 3,124,047
Accounts payable and accrued expenses......................................... 30,179 28,956
Distributions payable to Partners............................................. 141,551 208,566
-------- -------
3,043,089 3,361,569
---------- ---------
Partners' Capital (Deficit):
Limited Partners -
Units of Limited Partnership Interest, $1,000 stated value per Unit;
authorized - 10,005 Units; issued
and outstanding - 10,005 Units............................................ 6,057,027 6,113,106
General Partners.............................................................. (244,814) (239,938)
--------- --------
5,812,213 5,873,168
$ 8,855,302 $ 9,234,737
= ========== = =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
UNITS OF
LIMITED GENERAL LIMITED
For the Years Ended PARTNERSHIP PARTNERS' PARTNERS' TOTAL
December 31, 1995, 1994 and 1993 INTEREST DEFICIT CAPITAL CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992..................... 10,005 $ (223,346) $ 6,303,864 $ 6,080,518
Cash distributions paid or
accrued....................................... (64,590) (747,086) (811,676)
Net income..................................... 61,885 711,676 773,561
---------- -------- ------- -------
Balance, December 31, 1993..................... 10,005 (226,051) 6,268,454 6,042,403
Cash distributions paid or
accrued....................................... (72,597) (830,515) (903,112)
Net income..................................... 58,710 675,167 733,877
---------- ------ ------- -------
Balance, December 31, 1994..................... 10,005 (239,938) 6,113,106 5,873,168
Cash distributions paid or
accrued....................................... (69,360) (797,644) (867,004)
Net income..................................... 64,484 741,565 806,049
---------- ------ ------- -------
Balance, December 31, 1995..................... 10,005 $ (244,814) $ 6,057,027 $ 5,812,213
====== = ======== = ========= = =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years Ended
December 31, 1995, 1994 and 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income........................................................... $ 806,049 $ 733,877 $ 773,561
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization........................................ 149,670 189,547 180,376
Minimum lease payments received, net of
interest income earned, on leases accounted
for under the financing method..................................... 227,931 204,329 184,035
Changes in assets and liabilities:
Increase (decrease) in accounts payable and
accrued expenses................................................... 1,223 (73,102) 86,177
Decrease (increase) in other assets................................ 66,203 (71,554) (33,627)
------- -------- -------
Net cash provided by operating activities.......................... 1,251,076 983,097 1,190,522
---------- -------- ---------
Cash flows from investing activities:
Capital improvements................................................. (13,000) - (72,793)
-------- ----- -------
Net cash used by investing activities.............................. (13,000) - (72,793)
-------- ----- -------
Cash flows from financing activities:
Principal payments on mortgage notes................................. (252,688) (225,067) (201,393)
Cash distributions paid.............................................. (934,019) (865,623) (832,932)
--------- --------- --------
Net cash used by financing activities.............................. (1,186,707) (1,090,690) (1,034,325)
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents................... 51,369 (107,593) 83,404
Cash and cash equivalents, beginning of period......................... 193,224 300,817 217,413
-------- -------- -------
Cash and cash equivalents, end of period............................... $ 244,593 $ 193,224 $ 300,817
= ======== = ======== = =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. ORGANIZATION
Winthrop Partners 79 (the Partnership), a limited partnership, was
organized under the Uniform Limited Partnership Act of the Commonwealth
of Massachusetts on November 30, 1978 for the purpose of owning and
leasing commercial and industrial real properties. The Partnership will
terminate on December 31, 2008, or sooner, in accordance with the terms
of the Partnership Agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
Financial Statements - The financial statements of the Partnership are
prepared on the accrual basis of accounting in accordance with generally
accepted accounting principles.
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.
Income Taxes - No provision has been made for federal, state or local
income taxes in the financial statements of the Partnership. Partners
are required to report on their individual tax return their allocable
share of income, gains, losses, deductions and credits of the
Partnership. The Partnership files its tax returns on the accrual basis.
On June 15, 1979, the Internal Revenue Service issued a ruling that the
Partnership will be classified as a partnership for federal income tax
purposes.
Distributions to Partners - The cash distribution due Partners for the
three months ended December 31, 1995 is recorded in the accompanying
financial statements as a liability and a reduction of Partners'
capital. As provided in the Partnership Agreement, quarterly
distributions are payable to Partners within 60 days after the end of
the quarter.
Cash and Cash Equivalents - Cash and cash equivalents consist of a
mutual fund that invests in treasury bills and repurchase agreements
maturing in three months or less. Cash equivalents are valued at cost,
which approximates market value.
Percentage Rent - The Partnership has entered into several leases that
provide for a minimum annual rent plus additional rent based on
percentages of sales at the properties (percentage rent). These
percentage rents are recorded on a cash basis. For the years ended
December 31, 1995, 1994 and 1993, the Partnership received percentage
rent totaling approximately $125,095, $116,785 and $117,118,
respectively.
Leases - The Partnership leases its real properties and accounts for
such leases in accordance with the provisions of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases," as amended. This
statement sets forth specific criteria for determining whether a lease
should be accounted for as a financing lease or an operating lease.
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Financing Method
Under this method, minimum lease payments to be received plus the
estimated value of the property at the end of the lease are
considered to be the Partnership's gross investment in the lease.
Unearned income, representing the difference between gross
investment and actual cost of the leased property, is amortized
over the lease term using the interest rate implicit in the lease
to provide a level rate of return over the lease term.
(b) Operating Method
Under this method, revenue is recognized as rentals become due,
which does not materially differ from the straight-line method.
Expenses (including depreciation) are charged to operations as
incurred.
Depreciation - Component depreciation on real estate leased to others,
accounted for under the operating method, is computed using the
straight-line method over the estimated useful life of each class of
asset, which ranges from 5 to 40 years. The cost of the properties
represents the purchase price of the properties plus acquisition and
closing costs, or, to the extent that the property had previously been
accounted for under the financing method, the depreciable base is the
fair market value at the date of implementation of operating lease
accounting.
Certain amounts from prior years have been reclassified to remain
consistent with the current year's presentation.
3. TRANSACTIONS WITH RELATED PARTIES
One Winthrop Properties, Inc. (One Winthrop), the Managing General
Partner, Winthrop Securities Co., Inc. (Winthrop Securities), the
selling agent for the public offering and Winthrop Management, the
manager of the properties, are wholly owned subsidiaries of First
Winthrop Corporation, which in turn is wholly owned by Winthrop
Financial Associates, A Limited Partnership (WFA).
Winthrop Management, an affiliate of WFA, is entitled to annual property
management fees equal to 1.5% of the excess of cash receipts over cash
expenditures (excluding debt service, property management fees and
capital expenditures) from each property managed by it. For the years
ended December 31, 1995, 1994 and 1993, Winthrop Management earned
$23,662, $23,403 and $23,180, respectively, for managing the real
properties of the Partnership.
The General Partners are entitled to 8% of Cash Available for
Distribution, subordinated to a cumulative priority quarterly
distribution to the Limited Partners as provided in the Partnership
Agreement. For the years ended December 31, 1995, 1994 and 1993, the
Partnership has paid or accrued distributions from Cash Available for
Distributions, as defined in the Partnership Agreement, totaling
$69,360, $72,597 and $64,590, respectively, to the General Partners.
During the liquidation stage of the Partnership, the General Partners
and their affiliates are entitled to receive certain fees and
distributions, subordinated to specified minimum returns to the Limited
Partners as described in the Partnership Agreement.
<PAGE>
4. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE OPERATING METHOD
Real estate leased to others, at cost, accounted for under the operating
method as of December 31, 1995 and 1994 is summarized as follows:
<TABLE>
1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land........................................................ $ 3,826,072 $ 3,826,072
Commercial buildings........................................ 4,760,150 4,747,150
Less: Accumulated depreciation............................. (3,208,557) (3,068,851)
---------- ----------
$ 5,377,665 $ 5,504,371
= ========= = =========
</TABLE>
As of December 31, 1995 and 1994, properties (and related operating
leases) with a total original cost of $3,144,090 were pledged to
collateralize payment of mortgage notes payable.
The following is a summary of the minimum anticipated future rental
receipts, excluding percentage rents, by year, under the noncancelable
portion of the operating leases:
<TABLE>
<S> <C>
1996.............................................................. $ 874,000
1997.............................................................. 874,000
1998.............................................................. 874,000
1999.............................................................. 758,000
2000.............................................................. 357,000
Thereafter........................................................ 719,000
</TABLE>
5. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE FINANCING METHOD
Real estate leased to others, accounted for under the financing method
as of December 31, 1995 and 1994 is summarized as follows:
<TABLE>
--------------------------------------------------------------------------------------------------------------
1995 1994
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Minimum lease payments receivable........................... $ 3,076,358 $ 3,704,527
Unguaranteed residual value................................. 2,006,453 2,006,453
--------- ---------
5,082,811 5,710,980
Less: Unearned income...................................... (1,992,499) (2,388,792)
---------- ----------
$ 3,090,312 $ 3,322,188
= ========= = =========
</TABLE>
5. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE FINANCING METHOD
(Continued)
As of December 31, 1995 and 1994, respectively, real estate and the
related lease payments with a net investment in financing leases of
$1,547,000 and $1,687,000 were pledged to collateralize the payment of
mortgage notes payable.
The following is a summary of the approximate minimum anticipated future
rental receipts, excluding percentage rents, by year, under the
noncancelable portion of the financing leases:
<TABLE>
<S> <C>
1996.............................................................. $ 647,000
1997.............................................................. 647,000
1998.............................................................. 647,000
1999.............................................................. 647,000
2000.............................................................. 237,000
Thereafter........................................................ 169,000
</TABLE>
6. MORTGAGE NOTES PAYABLE
The mortgage notes payable by the Partnership at December 31, 1995 and
1994 are as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Prime rate plus 1.5% mortgage note, due in monthly installments of
$1,442 for principal plus interest through July 1, 1995; and monthly
principle installments of $2,980 plus interest beginning on January 1,
1996 through February 1, 1998, at which time the remaining
principal and any unpaid interest is due........................................ $ 496,365 $ 520,800
9-5/8% mortgage note, due in quarterly
installments of $20,720 for principal and
interest with a final payment of $325,880
due at maturity on May 1, 1999.................................................. 477,420 512,227
10.115% mortgage note, due in monthly
installments of $2,730 for principal and
interest, maturing on December 1, 2004.......................................... 192,298 204,578
12% mortgage note, due in monthly
installments of $12,618 for principal
and interest, maturing on July 1, 2000.......................................... 524,531 607,516
12% mortgage note, due in monthly
installments of $11,892 for principal
and interest, maturing on July 1, 2000.......................................... 494,339 572,543
10-1/4% mortgage note, due in monthly
installments of $7,662 for principal
and interest, maturing on July 1, 2010.......................................... 686,406 706,383
------- -------
................................................................................ $ 2,871,359 $ 3,124,047
= ========= = =========
Based on the borrowing rates currently available to the Partnership for
mortgage notes with similar terms, the fair value of the Partnership's
aggregate mortgage note payable at December 31, 1995 is approximately
$2,930,000.
</TABLE>
6. MORTGAGE NOTES PAYABLE (Continued)
As of December 31, 1995, anticipated future principal payments by year
are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 292,000
1997.............................................................. 322,000
1998.............................................................. 746,000
1999.............................................................. 660,000
2000.............................................................. 196,000
Thereafter........................................................ 655,000
</TABLE>
7. TAXABLE INCOME
The Partnership's taxable income for 1995 differs from net income for
financial reporting purposes primarily due to the differences in the
methods used for the recognition of depreciation and the accounting for
certain real property leases under the financing method for financial
reporting purposes and the operating method for tax return purposes.
Taxable income for 1995 is as follows:
<TABLE>
<S> <C>
Net income for financial reporting purposes.................................................. $ 806,049
Plus: Minimum lease payments received, net of interest
income earned, on leases accounted for under
the financing method.......................................................... 227,931
Minus: Depreciation on leases accounted for under the
financing method and tax depreciation
adjustment.................................................................... (183,275)
---------
Taxable income............................................................................... $ 850,705
=========
</TABLE>
8. STATEMENT OF CASH FLOWS
In accordance with Statement of Financial Accounting Standards No. 95,
the following details supplemental cash flow information:
<TABLE>
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Cash paid for interest $331,185 $347,286 $370,631
======== ======== ========
</TABLE>
<PAGE>
SUPPLEMENTARY INFORMATION
REQUIRED PURSUANT TO SECTION 9.4 OF THE PARTNERSHIP AGREEMENT
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 Three Months Ended Year Ended
(Unaudited) December 31, 1995 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
1. Statement of Cash Available for Distribution:
<S> <C> <C>
Net income........................................................... $ 146,848 $ 806,049
Add: Depreciation and amortization charges
to income not affecting Cash Available
for Distribution............................................. 37,417 149,670
Minimum lease payments received, net of
interest income earned, on leases
accounted for under the financing
method....................................................... 59,381 227,931
Rent Receivable............................................... 14,921 (22,885)
Prepaid mortgage ............................................. (22,467) (22,467)
Less: Mortgage principal payments................................... (95,899) (271,294)
------- --------
Cash Available for Distribution.............................................. $ 140,201 $ 867,004
- ------- - -------
Distributions allocated to General Partners.................................. $ 11,216 $ 69,360
- ------ - ------
Distributions allocated to Limited Partners.................................. $ 128,985 $ 797,644
- ------- - -------
</TABLE>
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners or their affiliates during the three months ended
December 31, 1995:
<TABLE>
---------------------------------------------------------------------------------------------------------------------
Entity Receiving Form of (Unaudited)
Compensation Compensation Amount
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Winthrop Management Property management fees $ 5,805
General Partners Interest in Cash Available
for Distribution $ 11,216
WFC Realty Co., Inc. Interest in Cash Available
for Distribution $ 64
</TABLE>
All other information required pursuant to Section 9.4 of the Partnership
Agreement is set forth in the attached Financial Statements and related notes or
Annual Partnership Report.
WINTHROP PARTNERS 79
REAL ESTATE AND ACCUMULATED DEPRECIATION
(ACCOUNTED FOR UNDER THE OPERATING METHOD)
DECEMBER 31, 1995
SCHEDULE XI
1 of 2
<TABLE>
Initial cost to Partnership & gross amount at
which carried as of Dec. 31, 1995 (A,B,&C) Accumulated Life on which
------------------------------------------
Depreciation Date of Depreciation
Encumbrance Buildings & as of Dec. 31, Construction Date Expense
Description (F) Land Improvements Total 1995 (D) Completion Acquired is Computed
- ----------- ---------- ---- ------------ ----- -------------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land and retail
store,
Batavia, NY $ 496,365 $ 120,186 $ 972,412 $1,092,598 $ 721,101 1979 Aug. 1979 10-40 yrs.
Land and retail
drug store,
University City,
MO - 239,924 661,370 901,294 515,002 1979(E) Aug. 1979 12-35 yrs.
Land and equip-
ment dealer-
ship, Greenville
County, SC 477,420 144,699 1,411,200 1,555,899 1,029,349 1979 Dec. 1979 5-40 yrs.
Land, San
Antonio, TX (G) - 735,238 - 735,238 - - Jan. 1980 -
Land, Fort
Worth, TX (G) - 487,180 - 487,180 - - Jan. 1980 -
Land, Hillside,
IL (G) - 261,223 - 261,223 - - Jan. 1980 -
Land, Hurst, TX 686,406 1,537,585 - 1,537,585 - - June 1980 -
Retail Store,
Hurst, TX - - 479,297 479,297 114,465 1980 June 1980 7-40 yrs.
Land & super-
market, Cedar
Rapids, IA - 300,037 1,222,871 1,522,908 831,225 1980 June 1980 5-40 yrs.
---------- ---------- ---------- ---------- ----------
$1,660,191 $3,826,072 $4,747,150 $8,573,222 $3,208,557
========== ========== ========== ========== ==========
</TABLE>
(A) The cost of the properties represents the purchase price of the
properties plus miscellaneous acquisition and closing costs. Included in
the costs are property acquisition fees totaling $119,740 paid to the
Managing General partner (See Note 3 of Notes to Financial Statements).
Construction of the buildings and improvements was completed prior to
their acquisition by the Partnership.
(B) The cost of real estate owned at December 31, 1995 is the same for
financial statement and income tax reporting purposes.
(C) Reconciliation of real estate owned:
<TABLE>
<S> <C>
Balance as of December 31, 1994...................... $ 8,573,222
Additions during 1995................................ 0
-----------
Balance as of December 31, 1995...................... $ 8,573,222
===========
</TABLE>
(D) Reconciliation of accumulated depreciation:
<TABLE>
<S> <C>
Balance as of December 31, 1994...................... $ 3,068,851
Depreciation expense during 1995..................... 139,706
--------
Balance as of December 31, 1995...................... $ 3,208,557
===========
</TABLE>
(E) Building was originally constructed in mid-1950's. During 1979 the
building was substantially remodeled in order to adapt it for its
current rental use as a retail drug store.
(F) See Note 6 of Notes to Financial Statements for information regarding the
terms of the various encumbrances.
(G) The total encumbrance for these properties is disclosed on Schedule XI,
2 of 2 - Real estate and Interest Income Earned as the buildings
and improvements are accounted for under the financing method.
<PAGE>
REAL ESTATE AND ACCUMULATED DEPRECIATION
(ACCOUNTED FOR UNDER THE FINANCING METHOD)
DECEMBER 31, 1995
SCHEDULE XI
2 of 2
<TABLE>
Minimum Lease
Net Investment payments received
in financing net of interest Length of lease
Encumbrance leases at point income earned at Date of Date on which interest
Description (A) of purchase (B) December 31, 1995 (C) Completion Acquired income is computed
- ----------- ----------- --------------- --------------------- ----------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Retail store,
San Antonio, TX $ 524,531 $1,251,891 $ 711,381 1980 Jan. 1980 20.5 years
Retail store,
Fort Worth, TX 494,339 1,386,589 754,406 1980 Jan. 1980 20.5 years
Retail nursery,
Hillside, IL 192,298 444,785 70,205 1980 Jan. 1980 25 years
Land and super-
market,
Chippewa Falls, WI - 1,380,816 406,618 1980 June 1980 20 years
Land and retail
store, Mexia, TX - 977,665 404,879 1980 Oct. 1980 20 years
---------- ---------- ----------
$1,211,168 $5,441,746 $2,347,489
========== ========== ==========
</TABLE>
(A) See Note 6 of Notes to Financial Statements for information regarding the
terms of the various encumbrances.
(B) The net investment in financing leases at the point of purchase reflects
the purchase price of the properties plus miscellaneous acquisition and
closing costs. Included in the costs are property acquisition fees
totaling $180,260 paid to the Managing General Partner (See Note 3 of
Notes to Financial Statement). The net investment at the point of
purchase is as follows:
<TABLE>
<S> <C>
Minimum lease payments receivable........... $ 14,266,894
Plus: Unguaranteed residual................ 2,006,453
Minus: Unearned income..................... (10,831,601)
------------
Net Investment.............................. $ 5,441,746
============
</TABLE>
(C) Reconciliation of minimum lease payments received net of interest income
earned:
<TABLE>
<S> <C>
Balance as of December 31, 1994............. $ 2,119,558
Minimum lease payments received net of
interest income earned during 1994......... 227,931
------------
Balance as of December 31, 1995............. $ 2,347,489
============
</TABLE>
