<PAGE>
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 SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-9224
------
Winthrop Partners 79 Limited Partnership
----------------------------------------
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2654152
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
--------------
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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_____
---
1 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
December 31,
September 30, 1997
1998 (As Restated)
------------- ---------------
<S> <C> <C>
Assets
Real Estate Leased to Others:
Accounted for under the operating method,
at cost, net of accumulated depreciation of
$2,404 (1998) and $2,339 (1997) $ 4,147 $ 4,212
Accounted for under the financing method 1,922 2,989
----------------- ------------------
6,069 7,201
Other Assets:
Cash and cash equivalents 2,511 769
Other assets, net of accumulated amortization of
$122 (1998) and $111 (1997) 100 175
----------------- ------------------
Total Assets $ 8,680 $ 8,145
================= ==================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 1,637 $ 1,862
Accounts payable and accrued expenses 26 22
Distribution payable 964 -
----------------- ------------------
Total Liabilities 2,627 1,884
----------------- ------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized
issued and outstanding - 10,005 Units 6,094 6,362
General Partners' Deficit (41) (101)
----------------- ------------------
Total Partners' Capital 6,053 6,261
----------------- ------------------
Total Liabilities and Partners' Capital $ 8,680 $ 8,145
================= ==================
</TABLE>
See notes to financial statements.
2 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Statements of Income (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Unit Data) For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Rental income from real estate leases accounted
for under the operating method $ 166 $ 170 $ 669 $ 656
Interest on short-term investments 26 9 53 23
Interest income on real estate leases accounted
for under the financing method 63 84 221 259
Gain on sale of property 138 -- 138 --
------ ------ ------ -----
Total income 393 263 1,081 938
------ ------ ------ -----
Expenses:
Operating 14 9 39 29
Interest 43 54 143 167
Depreciation and amortization 27 26 76 76
Management fees 5 6 17 18
General and administrative 18 13 50 57
------ ------ ------ ------
Total expenses 107 108 325 347
------ ------ ------ ------
Net income $ 286 $ 155 $ 756 $ 591
====== ====== ====== ======
Net income allocated to general partners $ 22 $ 12 $ 60 $ 47
====== ====== ====== ======
Net income allocated to limited partners $ 264 $ 143 $ 696 $ 544
====== ====== ====== ======
Net income per Unit of Limited
Partnership Interest $26.39 $14.29 $69.57 $54.37
====== ====== ====== ======
Distributions per Unit of Limited Partnership Interest $96.35 $ - $96.35 $31.48
====== ====== ====== ======
</TABLE>
See notes to financial statements.
3 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Statement of Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
----------- --------- --------- -------
<S> <C> <C> <C> <C>
Balance - January 1, 1998 (As restated) 10,005 $ (101) $ 6,362 $ 6,261
Net income 60 696 756
Distributions - (964) (964)
-------- ------------ ----------- ----------
Balance - September 30, 1998 10,005 $ (41) $ 6,094 $ 6,053
======== ============ =========== ==========
</TABLE>
See notes to financial statements.
4 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 756 $ 591
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 65 67
Amortization 11 9
Gain on sale of property (138) -
Changes in assets and liabilities:
Decrease in other assets 75 99
Increase (decrease) in accounts payable
and accrued expenses 4 (77)
------------ -----------
Net cash provided by operating activities 773 689
------------ -----------
Cash Flows From Investing Activities:
Minimum lease payments received, net of interest income
earned, on leases accounted for under the financing method 241 226
Net proceeds from sale of property 964 -
------------ -----------
Cash provided by investing activities 1,205 226
------------ -----------
Cash Flows From Financing Activities:
Principal payments on mortgage notes (225) (232)
Cash distributions - (520)
Loan costs (11) -
------------ -----------
Cash used in financing activities (236) (752)
------------ -----------
Net increase in cash and cash equivalents 1,742 163
Cash and cash equivalents, beginning of period 769 491
------------ -----------
Cash and cash equivalents, end of period $ 2,511 $ 654
============ ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 141 $ 167
============ ===========
Supplemental Disclosure of Non-Cash Financing Activities:
Accrued Distribution to Partners $ 964 $ -
============ ===========
</TABLE>
See notes to financial statements.
5 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions
should be read in conjunction with the financial statements,
related footnotes and discussions contained in the Partnership's
annual report on Form 10-KSB for the year ended December 31, 1997.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature, except as discussed
in Notes 4 and 5. Certain amounts have been reclassified to conform
to the September 30, 1998 presentation. The balance sheet at
December 31, 1997, was derived from audited financial statements at
such date.
The results of operations for the nine months ended September 30,
1998 and 1997, are not necessarily indicative of the results to be
expected for the full year.
2. Related Party Transactions
Management fees paid or accrued by the Partnership to an affiliate
of the Managing General Partner totaled 17,000 and $18,000 for the
nine months ended September 30, 1998 and 1997, respectively.
3. Mortgage Note Payable
The mortgage note encumbering the Batavia, NY property matured on
February 1, 1998, with a balloon payment of $419,000. On February
1, 1998, the Partnership obtained an extension on the mortgage
until May 1, 1998, which was further extended until May 15, 1998.
On May 29, 1998, the partnership renewed the note at a lower
interest rate of 8.32%. The note requires monthly payments of
$5,000 and is being amortized over 10 years. The note matures on
August 31, 1999 (the expiration date of the tenant's lease) with a
balloon payment of approximately $377,000.
4. Sale of Property
On August 7, 1998, the Partnership sold its Chippewa Falls, WI
property to the tenant of the property for $964,000 (net of closing
costs of $11,000), resulting in a gain of $138,000 for financial
reporting purposes. The net proceeds of $964,000 ($96.35 per unit)
will be distributed to limited partners during the fourth quarter
of 1998.
6 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. Pro Forma Financial Information
The following pro forma statements of operations for the nine months
ended September 30, 1998 and 1997, gives effect to the sale of the
Chippewa Falls, WI property. The adjustments to the pro forma condensed
statements of operations assumes the transaction was consummated at the
beginning of the year presented. The sale occurred on August 7, 1998.
These pro forma adjustments are not necessarily reflective of the
results that actually would have occurred if the sale had been in
effect, as of, and for the period presented or what may be achieved in
the future.
Pro Forma Condensed Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1998
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------------- ---------------- ----------------
<S> <C> <C> <C>
Income:
Rental income from real estate leases accounted
for under the operating method $ 669 $ - $ 669
Interest on short-term investments 53 - 53
Interest income on real estate leases accounted
for under the financing method 221 (49) 172
Gain on sale of property 138 (138) -
--------------- ---------------- ----------------
Total income 1,081 (187) 894
--------------- ---------------- ----------------
Expenses:
Operating and other expenses 106 - 106
Interest 143 - 143
Depreciation and amortization 76 - 76
--------------- ---------------- ----------------
Total expenses $ 325 $ - $ 325
--------------- ---------------- ----------------
Net income $ 756 $ (187) $ 569
=============== ================ ================
Net income allocated to general partners $ 60 $ (14) $ 46
=============== ================ ================
Net income allocated to limited partners $ 696 $ (173) $ 523
=============== ================ ================
</TABLE>
7 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. Pro Forma Financial Information (Continued)
Pro Forma Condensed Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1997
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
--------------- ---------------- ---------------
<S> <C> <C> <C>
Income:
Rental income from real estate leases accounted
for under the operating method $ 656 $ - $ 656
Interest on short-term investments 23 - 23
Interest income on real estate leases accounted
for under the financing method 259 (66) 193
--------------- ---------------- ---------------
Total income 938 (66) 872
--------------- ---------------- ---------------
Expenses:
Operating and other expenses 104 - 104
Interest 167 - 167
Depreciation and amortization 76 - 76
--------------- ---------------- ---------------
Total expenses $ 347 $ - $ 347
--------------- ---------------- ---------------
Net income $ 591 $ (66) $ 525
=============== ================ ===============
Net income allocated to general partners $ 47 $ (5) $ 42
=============== ================ ===============
Net income allocated to limited partners $ 544 $ (61) $ 483
=============== ================ ===============
</TABLE>
6. Prior Period Adjustment
The Partnership's financial statements have been restated to
correct an error relating to the reclassification of the
Partnership's Hurst, Texas property (the "Property") as an
operating lease from a direct financing lease at December 31, 1991.
This resulted in an overstatement in real estate accounted for
under the operating method and an understatement of real estate
accounted for under the financing method of approximately $500,000.
During 1996, a $500,000 loss due to impairment of value was
recognized by the Partnership, which reduced the Property's
carrying value (accounted for under the operating method) to an
amount equal to its estimated fair value. Partners capital at
December 31, 1997 was restated to reflect an increase of $527,000,
consisting of the reversal of the $500,000 loss due to impairment
of value and $27,000 of depreciation expensed during the period
January 1, 1992 through December 31, 1996. Net income for the nine
months ended September 30, 1997 was not restated since the
adjustment to depreciation expense resulted in a difference of
approximately $1,000.
8 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operations
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Partnership from time to time. The
discussion of the Partnership's liquidity, capital resources and
results of operations, including forward-looking statements
pertaining to such matters, does not take into account the effects
of any changes to the Partnership's operations. Accordingly, actual
results could differ materially from those projected in the
forward-looking statements as a result of a number of factors,
including those identified herein.
This Item should be read in conjunction with the financial
statements and other items contained elsewhere in the report.
Liquidity and Capital Resources
All of the Partnership's remaining eight properties are leased to
one or more tenants pursuant to net or modified net leases with
remaining lease terms, subject to extensions, ranging between
approximately nine months and ten years. The Partnership receives
rental income from its properties which is its primary source of
liquidity. Pursuant to the terms of the leases, the tenants are
responsible for substantially all of the operating expenses with
respect to the properties, including maintenance, capital
improvements, insurance and taxes. On August 7, 1998, the
Partnership sold its Chippewa Falls, WI property to the tenant of
the property for $964,000 (net of closing costs of $11,000),
resulting in a gain of $138,000 for financial reporting purposes.
The Partnership expects to distribute the net sale proceeds of
$964,000 ($96.35 per Unit) during the fourth quarter.
The level of liquidity based on cash and cash equivalents
experienced a $1,742,000 increase at September 30, 1998, as
compared to December 31, 1997. The Partnership's $773,000 of cash
provided by operating activities, $241,000 of lease payments
received under financing leases (net of interest income) and net
proceeds of $964,000 from the sale of the Chippewa Falls, WI
property (investing activities) were only partially offset by
$236,000 of cash used in financing activities. Financing activities
consisted of $225,000 of mortgage principal payments and $11,000 of
loan costs. At September 30, 1998, the Partnership had
approximately $2,511,000 in cash and cash equivalents which has
been invested primarily in money market mutual funds.
The Partnership requires cash primarily to pay principal and
interest on its mortgage indebtedness, management fees and general
and administrative expenses. Due to the net and long-term nature of
the original leases, inflation and changing prices have not
significantly affected the Partnership's revenues and net income.
As tenant leases expire, the Partnership expects that inflation and
changing prices will affect the Partnership's revenues. The
Partnership's rental and interest income was sufficient for the
nine months ended September 30,
9 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Liquidity and Capital Resources (Continued)
1998, and is expected to be sufficient in future periods, to pay
the Partnership's operating expenses and debt service. Upon
expiration of tenant leases, the Partnership will be required to
either sell the properties or procure new tenants. The Partnership
maintains cash reserves to enable it to make potential capital
improvements required in connection with the re-letting of the
properties.
During 1997, the Managing General Partner ceased making
distributions from operations in light of the J.C. Penney lease
expiration on August 31, 1999 and the related $419,000 balloon
payment due on the mortgage note secured by the J.C. Penney
property (Batavia, NY). The mortgage note matured on February 1,
1998, and was extended until May 15, 1998. On May 29, 1998, the
Partnership renewed the note at a lower interest rate of 8.32%. The
note requires monthly payments of $5,000 and is being amortized
over 10 years. The note matures on August 31, 1999, with a balloon
payment of approximately $377,000.
In addition, six of the Partnership's eight properties have primary
lease terms that expire by October 31, 2000. In light of this fact,
the Managing General Partner has decided to increase the
Partnership's reserves until such time that it is known whether or
not these tenants will renew their respective leases.
On May 13, 1998, Walgreen Co. ("Walgreens") which occupies the
Partnership's University City, Missouri property exercised their
right to cancel the lease effective February 28, 1999. Walgreens
has since contacted the Managing General Partner requesting that
they be allowed to holdover on a month to month basis. The terms
and conditions of this holdover request are currently being
negotiated. The Managing General Partner is marketing the property
for disposition using a local brokerage firm familiar with the
University City, Missouri sub-market.
Results of Operations
Net income increased by $165,000 for the nine months ended
September 30, 1998, as compared to 1997, due to an increase in
income of $143,000 and a decrease in expenses of $22,000.
The increase in income was primarily due to the $138,000 gain on
sale of the Chippewa Falls, WI property. With respect to the
remaining properties, revenues declined by $8,000 due to an
increase in rental income of $13,000 and a decrease in interest
income on leases accounted for under the financing method of
$21,000. Rental income increased due to the receipt of $159,000 of
percentage rents in 1998, as compared to $146,000 in 1997. Interest
income increased by $30,000 due to higher cash reserves from the
proceeds of the Chippewa Falls, WI property sale and the
Partnership ceasing distributions during 1997. Expenses declined by
$22,000, due to reductions in general and administrative expenses
of $7,000 and interest expense of $24,000, which were only
partially offset by an increase in operating costs of $10,000. All
other items of income and expense remained relatively constant.
10 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement.
(b) Reports on Form 8-K:
A Form 8-K was filed on August 7, 1998 to report the sale of
the Partnership's Chippewa Falls, WI property.
11 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
------------------------------------
Michael L. Ashner
Chief Executive Officer and Director
BY: /s/ Edward V. Williams
------------------------------------
Edward V. Williams
Chief Financial Officer
Dated: November 12, 1998
12 of 14
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Exhibit Index
Exhibit Page No.
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 14
13 of 14
<PAGE>
Exhibit 99
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three months
ended September 30, 1998:
<TABLE>
<S> <C>
Net income $ 286,000
Add: Depreciation and amortization charged to income not
affecting cash available for distribution 27,000
Minimum lease payments received, net of interest
income earned, on leases accounted for under the
financing method 75,000
Net proceeds from sale of property 964,000
Less: Mortgage principal payments (76,000)
Cash to Reserves (174,000)
Gain on sale of property (138,000)
----------------
Cash Available for Distribution $ 964,000
================
Distributions Allocated to Limited Partners $ 964,000
================
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended
September 30, 1998:
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
---------------- ------------ ------
<S> <C> <C>
Winthrop
Management LLC Property Management Fees $ 5,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 482
</TABLE>
14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Partners 79 Limited Partnership and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,511,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,473,000
<DEPRECIATION> (2,404,000)
<TOTAL-ASSETS> 8,680,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,637,000
<COMMON> 0
0
0
<OTHER-SE> 6,053,000
<TOTAL-LIABILITY-AND-EQUITY> 8,680,000
<SALES> 0
<TOTAL-REVENUES> 1,028,000 <F1>
<CGS> 0
<TOTAL-COSTS> 132,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143,000
<INCOME-PRETAX> 756,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 756,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 756,000
<EPS-PRIMARY> 69.57
<EPS-DILUTED> 69.57
<FN>
<F1>
Includes gain on sale of property of $138,000.
</FN>
</TABLE>
