<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 June 30, 1999
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
----- -----
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------- ---------------------
<S> <C> <C>
Assets
Real Estate Leased to Others:
Accounted for under the operating method,
at cost, net of accumulated depreciation of
$1,906 (1999) and $1,874 (1998) $ 3,744 $ 3,776
Accounted for under the operating method
and held for sale, net of accumulated depreciation
of $557 344 344
Accounted for under the financing method 1,700 1,850
--------------------- ---------------------
5,788 5,970
Other Assets:
Cash and cash equivalents 1,715 1,713
Other assets, net of accumulated amortization of
$92 (1999) and $97 (1998) 100 94
--------------------- ---------------------
Total Assets $ 7,603 $ 7,777
===================== =====================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 1,395 $ 1,559
Accounts payable and accrued expenses 35 23
Distributions payable to partners 181 167
--------------------- ---------------------
Total Liabilities 1,611 1,749
--------------------- ---------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized
issued and outstanding - 10,005 Units 6,105 6,057
General Partners' Deficit (113) (29)
--------------------- ---------------------
Total Partners' Capital 5,992 6,028
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 7,603 $ 7,777
===================== =====================
</TABLE>
See notes to financial statements.
2 of 13
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Statements of Income (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For The Three Months Ended For The Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Income:
Rental income from real estate leases
accounted for under the operating method $ 189 $ 170 $ 548 $ 503
Interest on short-term investments 20 16 40 27
Interest income on real estate leases
accounted for under the financing method 49 78 101 158
------------------ ------------------- ------------------ ------------------
Total income 258 264 689 688
------------------ ------------------- ------------------ ------------------
Expenses:
Operating 13 17 23 25
Interest 37 50 76 100
Depreciation and amortization 20 24 44 49
Management fees 5 5 12 12
General and administrative 24 16 37 32
------------------ ------------------- ------------------ ------------------
Total expenses 99 112 192 218
------------------ ------------------- ------------------ ------------------
Net income $ 159 $ 152 $ 497 $ 470
================== =================== ================== ==================
Net income allocated to general partners $ 13 $ 13 $ 40 $ 38
================== =================== ================== ==================
Net income allocated to limited partners $ 146 $ 139 $ 457 $ 432
================== =================== ================== ==================
Net income per Unit of Limited Partnership
Interest $ 14.59 $ 13.89 $ 45.68 $ 43.18
================== =================== ================== ==================
Distributions per Unit of Limited Partnership
Interest $ 16.69 $ - $ 40.88 $ -
================== =================== ================== ==================
</TABLE>
See notes to financial statements.
3 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Statement of Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Units of
Limited General Limited Total
Partnership Partners' Partners' Partners'
Interest Deficit Capital Capital
------------------ ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Balance - January 1, 1999 10,005 $ (29) $ 6,057 $ 6,028
Net income 40 457 497
Distributions (124) (409) (533)
------------------ ------------------- ------------------ -------------------
Balance - June 30, 1999 10,005 $ (113) $ 6,105 $ 5,992
================== =================== ================== ===================
</TABLE>
See notes to financial statements.
4 of 13
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For The Six Months Ended
June 30, June 30,
1999 1998
--------------------- ---------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 497 $ 470
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 32 43
Amortization 12 6
Changes in assets and liabilities:
(Increase) decrease in other assets (18) 82
Increase in accounts payable
and accrued expenses 12 5
--------------------- ---------------------
Net cash provided by operating activities 535 606
--------------------- ---------------------
Cash Flows From Investing Activities:
Minimum lease payments received, net of interest income
earned, on leases accounted for under the financing method 150 166
--------------------- ---------------------
Cash provided by investing activities 150 166
--------------------- ---------------------
Cash Flows From Financing Activities:
Principal payments on mortgage notes (164) (149)
Cash distributions (519) -
Loan costs - (7)
--------------------- ---------------------
Cash used in financing activities (683) (156)
--------------------- ---------------------
Net increase in cash and cash equivalents 2 616
Cash and cash equivalents, beginning of period 1,713 769
--------------------- ---------------------
Cash and cash equivalents, end of period $ 1,715 $ 1,385
===================== =====================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 76 $ 97
===================== =====================
Supplemental Disclosure of Non-Cash Financing Activities:
Accrued distribution to partners $ 181 $ -
===================== =====================
</TABLE>
See notes to financial statements.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
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, 1998.
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. The balance sheet at
December 31, 1998, was derived from audited financial statements at
such date.
The results of operations for the six months ended June 30, 1999
and 1998, 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 $12,000 during each of the
six months ended June 30, 1999 and 1998.
3. Contract for Sale of Property
On February 19, 1999, the Partnership entered into an agreement to
sell the University City, Missouri property to an unaffiliated
third party for $600,000. There is no debt outstanding associated
with this property. If the sale is consummated, the Partnership
will recognize a gain for financial reporting purposes and tax
reporting purposes of approximately $250,000.
6 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
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
Of the Partnership's remaining eight properties, seven are leased
to one or more tenants pursuant to net or modified net leases with
remaining lease terms, subject to extensions, ranging between
approximately one and six years. Three of these properties,
however, have lease terms that expire by January 31, 2001. The
eighth property was vacated when the tenant's lease expired on May
31, 1999 and is currently under contract for sale. 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. With respect to the
vacated property, the Partnership is now responsible for all
operating expenses.
The level of liquidity based on cash and cash equivalents
experienced a $2,000 increase at June 30, 1999, as compared to
December 31, 1998. The Partnership's $535,000 of cash provided by
operating activities and $150,000 of lease payments received under
financing leases (net of interest income) were significantly offset
by $683,000 of cash used in financing activities. Financing
activities consisted of $164,000 of mortgage principal payments and
$519,000 of partner distributions. At June 30, 1999, the
Partnership had approximately $1,715,000 in cash and cash
equivalents which has been invested primarily in money market
mutual funds. At June 30, 1999, the Partnership recorded an accrued
distribution of $181,000, which consisted of distributions of
$14,000 to the general partners and $167,000 to the limited
partners. In addition, the Partnership made a distribution of
$352,000, which consisted of distributions of $110,000 to the
general partners and $242,000 to the limited partners. The $110,000
of distributions to the general partners included "catch up"
distributions that were subordinated to a cumulative priority
distribution to the limited partners in accordance with the
partnership agreement.
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 six
months ended June 30, 1999, and is expected to be sufficient until
the current leases expire, to pay the Partnership's operating
expenses and debt service. Upon expiration of tenant leases, the
Partnership will be required to either extend the leases, 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.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operations
(Continued)
Liquidity and Capital Resources (Continued)
In February 1999, J.C. Penney notified the Partnership that they
have elected to exercise their option to extend the term of their
lease for five additional years commencing September 1, 1999. The
mortgage note secured by the J.C. Penney property (Batavia, NY),
matures on August 31, 1999, with a balloon payment of approximately
$377,000. The Partnership anticipates that it will satisfy this
balloon payment from cash reserves.
In May 1999, Toys "R" Us notified the Partnership that they have
elected to exercise their options to extend their leases for five
additional years commencing August 1, 2000 on the properties
located in Fort Worth and San Antonio, Texas.
On May 13, 1998, Walgreen Co. ("Walgreens") which occupied the
Partnership's University City, Missouri property exercised their
right to cancel the lease effective February 28, 1999. Walgreens
signed a three month extension to their lease at $18,550 per month.
The extension expired on May 31, 1999, was not extended and
Walgreens vacated the property. On February 19, 1999, the
Partnership entered into a Purchase Agreement to sell this property
to an unaffiliated third party for $600,000. The sale is subject to
the purchaser's completion of its due diligence review as well as
other customary closing conditions. It is expected that this sale
will occur, if at all, during the third quarter of 1999. If the
sale is consummated, the Partnership will recognize a gain for
financial reporting purposes and tax reporting purposes of
approximately $250,000.
Year 2000
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. The Registrant is dependent upon the Managing General Partner
and its affiliates for management and administrative services. 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 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.
During the first half of 1998, the Managing General Partner and its
affiliates completed their assessment of the various computer
software and hardware used in connection with the management of the
Registrant. This review indicated that significantly all of the
computer programs used by the Managing General Partner and its
affiliates are off-the-shelf "packaged" computer programs which are
easily upgraded to be Year 2000 compliant. In addition, to the
extent that custom programs are utilized by the Managing General
Partner and its affiliates, such custom programs are Year 2000
compliant.
8 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operations
(Continued)
Year 2000 (Continued)
Following the completion of its assessment of the computer software
and hardware, the Managing General Partner and its affiliates began
upgrading those systems which required upgrading. To date,
significantly all of these systems have been upgraded. The
Registrant has to date not borne, nor is it expected that the
Registrant will bear, any significant costs in connection with the
upgrade of those systems requiring remediation.
To date, the Managing General Partner is not aware of any external
agent with a Year 2000 issue that would materially impact the
Registrant'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 Registrant. However, the effect of non-compliance
by external agents is not readily determinable.
Results of Operations
Net income increased by $27,000 for the six months ended June 30,
1999, as compared to the comparable period in 1998, due to an
increase in income of $1,000 and a decrease in expenses of $26,000.
The increase in income was due to an increase in rental income of
$45,000 and an increase in interest on short-term investments of
$13,000 which was substantially offset by a decrease in interest
income on leases accounted for under the financing method of
$57,000. Rental income increased primarily due to the receipt of
$177,000 of percentage rents in 1999, as compared to $163,000 in
1998 and an increase in rent from the extension of the lease with
Walgreens. Interest income increased by $13,000 due to higher cash
reserves. Interest income on leases accounted for under the
financing method decreased by $57,000 partly due to the sale of the
Chippewa Falls, WI property in 1998 and partly due to the
amortization of the other leases accounted for under the financing
method. Expenses declined by $26,000 primarily due to a reduction
in interest expense of $24,000, due to a lower interest rate from
the renewal of the mortgage note payable on the J.C. Penney
property and the amortization of principal balances. All other
items of income and expense remained relatively constant.
9 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
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:
No reports on Form 8-K were filed during the six months ended
June 30, 1999.
10 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
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/ Thomas C. Staples
------------------------------------
Thomas C. Staples
Chief Financial Officer
Dated: August 12, 1999
11 of 13
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
12 of 13
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Exhibit 99
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three
months ended June 30, 1999:
<TABLE>
<S> <C>
Net income $ 159,000
Add: Depreciation and amortization charged to income not
affecting cash available for distribution 20,000
Minimum lease payments received, net of interest
income earned, on leases accounted for under the
financing method 76,000
Cash from reserves 6,000
Less: Mortgage principal payments (80,000)
Cash Available for Distribution $ 181,000
=============
Distributions Allocated to General Partners $ 14,000
=============
Distributions Allocated to Limited Partners $ 167,000
=============
</TABLE>
2. Fees and other compensation paid or accrued by the Partnership
to the General Partners, or their affiliates, during the three
months ended June 30, 1999:
<TABLE>
<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 $ 83
One Winthrop Properties, Inc. Interest in Cash Available for Distribution $ 5,000
(General Partner)
Linnaeus-Hampshire Realty
Limited Partnership
(General Partner) Interest in Cash Available for Distribution $ 9,000
</TABLE>
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<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,715,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,251,000
<DEPRECIATION> (2,463,000)
<TOTAL-ASSETS> 7,603,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,395,000
<COMMON> 0
0
0
<OTHER-SE> 5,992,000
<TOTAL-LIABILITY-AND-EQUITY> 7,603,000
<SALES> 0
<TOTAL-REVENUES> 649,000
<CGS> 0
<TOTAL-COSTS> 79,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,000
<INCOME-PRETAX> 497,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 497,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 497,000
<EPS-BASIC> 45.68
<EPS-DILUTED> 45.68
</TABLE>
