<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, 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
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(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
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FORM 10-QSB SEPTEMBER 30, 1999
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
September 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
$1,923 (1999) and $1,874 (1998) $ 3,727 $ 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 1,622 1,850
------- -------
5,693 5,970
Other Assets:
Cash and cash equivalents 1,350 1,713
Other assets, net of accumulated amortization of
$96 (1999) and $97 (1998) 40 94
------- -------
Total Assets $ 7,083 $ 7,777
======= =======
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Mortgage notes payable $ 934 $ 1,559
Accounts payable and accrued expenses 18 23
Distributions payable to partners 152 167
------- -------
Total Liabilities 1,104 1,749
------- -------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized
issued and outstanding - 10,005 Units 6,093 6,057
General Partners' Deficit (114) (29)
------- -------
Total Partners' Capital 5,979 6,028
------- -------
Total Liabilities and Partners' Capital $ 7,083 $ 7,777
======= =======
</TABLE>
See notes to financial statements.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Statements of Income (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Rental income from real estate leases accounted
for under the operating method $ 151 $ 166 $ 699 $ 669
Interest on short-term investments 20 26 60 53
Interest income on real estate leases accounted
for under the financing method 47 63 148 221
Gain on sale of property - 138 - 138
Other income 4 - 4 -
------ ------ ------ ------
Total income 222 393 911 1,081
------ ------ ------ ------
Expenses:
Operating 8 14 31 39
Interest 31 43 107 143
Depreciation and amortization 21 27 65 76
Management fees 4 5 16 17
General and administrative 19 18 56 50
------ ------ ------ ------
Total expenses 83 107 275 325
------ ------ ------ ------
Net income $ 139 $ 286 $ 636 $ 756
====== ====== ====== ======
Net income allocated to general partners $ 11 $ 22 $ 51 $ 60
====== ====== ====== ======
Net income allocated to limited partners $ 128 $ 264 $ 585 $ 696
====== ====== ====== ======
Net income per Unit of Limited Partnership Interest $12.79 $26.39 $58.47 $69.57
====== ====== ====== ======
Distributions per Unit of Limited Partnership Interest $13.99 $96.35 $54.87 $96.35
====== ====== ====== ======
</TABLE>
See notes to financial statements.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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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 51 585 636
Distributions (136) (549) (685)
------- ------- ------- -------
Balance - September 30, 1999 10,005 $ (114) $ 6,093 $ 5,979
======= ======= ======= =======
</TABLE>
See notes to financial statements.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 636 $ 756
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 49 65
Amortization 16 11
Gain on sale of property - (138)
Changes in assets and liabilities:
Decrease in other assets 38 75
(Decrease) increase in accounts payable
and accrued expenses (5) 4
------- -------
Net cash provided by operating activities 734 773
------- -------
Cash Flows From Investing Activities:
Minimum lease payments received, net of interest income
earned, on leases accounted for under the financing method 228 241
Net proceeds from sale of property - 964
------- -------
Cash provided by investing activities 228 1,205
------- -------
Cash Flows From Financing Activities:
Principal payments on mortgage notes (625) (225)
Cash distributions (700) -
Loan costs - (11)
------- -------
Cash used in financing activities (1,325) (236)
------- -------
Net (decrease) increase in cash and cash equivalents (363) 1,742
Cash and cash equivalents, beginning of period 1,713 769
------- -------
Cash and cash equivalents, end of period $ 1,350 $ 2,511
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 110 $ 141
======= =======
Supplemental Disclosure of Non-Cash Financing Activities:
Accrued distribution to partners $ 152 $ 964
======= =======
</TABLE>
See notes to financial statements.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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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 nine months ended September 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 $16,000 and $17,000 for
the nine months ended September 30, 1999 and 1998, respectively.
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. However, upon completion of its due
diligence review of the property, the prospective purchaser elected
to terminate the contract. As a result, the property is currently
being re-marketed for sale.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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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 being marketed 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. On October 29, 1999, the Partnership received a
notice from Wal-Mart Stores that it has elected not to exercise its
option to extend its lease at the Partnership's Mexia, Texas
property. Accordingly, the lease will expire in accordance with its
terms effective October 1, 2001. If the Partnership cannot sell the
property or find a new tenant prior to such date, the Partnership
will be responsible for all costs associated with the property.
The level of liquidity based on cash and cash equivalents
experienced a $363,000 decrease at September 30, 1999, as compared
to December 31, 1998. The Partnership's $734,000 of cash provided
by operating activities and $228,000 of lease payments received
under financing leases (net of interest income) were more than
offset by $1,325,000 of cash used in financing activities.
Financing activities consisted of $625,000 of mortgage principal
payments and $700,000 of partner distributions. At September 30,
1999, the Partnership had $1,350,000 in cash and cash equivalents
which has been invested primarily in money market mutual funds. At
September 30, 1999, the Partnership recorded an accrued
distribution of $152,000, which consisted of distributions of
$12,000 to the general partners and $140,000 to the limited
partners. In addition, the Partnership made distributions of
$533,000 during the nine months ended September 30, 1999, which
consisted of distributions of $124,000 to the general partners and
$409,000 to the limited partners. The $124,000 of distributions to
the general partners included previously unpaid distributions that
were subordinated to a cumulative priority distribution to the
limited partners in accordance with the partnership agreement.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Item 2. Management's Discussion and Analysis or Plan of Operations
----------------------------------------------------------
(Continued)
-----------
Liquidity and Capital Resources (Continued)
-------------------------------------------
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, 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.
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),
matured on August 31, 1999, with a balloon payment of approximately
$377,000. The Partnership satisfied 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, at the same annual
rent.
On May 13, 1998, Walgreen Co. ("Walgreens") which occupied the
Partnership's University City, Missouri property exercised its
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. However, upon
completion of its due diligence review of the property, the
prospective purchaser elected to terminate the contract. As a
result, the property is currently being re-marketed for sale.
Tender Offer
-------------
On October 26, 1999, an affiliate of the General Partner commenced
a tender offer to purchase up to 3,305 of the outstanding units of
limited partnership interest in the Partnership for a purchase
price of $500 per Unit, pursuant to the terms and conditions of an
Offer to Purchase dated October 26, 1999. The offer is scheduled to
expire on November 30, 1999.
Results of Operations
---------------------
The Registrants net income decreased by $120,000 for the nine
months ended September 30, 1999, as compared to the comparable
period in 1998, due to a decrease in income of $170,000 which was
partially offset by a decrease in expenses of $50,000.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Item 2. Management's Discussion and Analysis or Plan of Operations
----------------------------------------------------------
(Continued)
-----------
Results of Operations (Continued)
---------------------------------
The decrease in income was due to a decrease in interest income on
leases accounted for under the financing method of $73,000 which
was partially offset by an increase in rental income of $30,000 and
an increase in interest on short-term investments of $7,000. The
decrease in income is also attributable to a gain on sale of the
Chippewa Falls, WI property in the comparative period in 1998 of
$138,000. Rental income increased primarily due to the receipt of
$177,000 of percentage rents in 1999, as compared to $159,000 in
1998 and an increase in rent from the extension of the lease with
Walgreens. Interest income increase by $7,000 due to higher cash
reserves. Interest income on leases accounted for under the
financing method decreased by $73,000 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 $50,000 primarily due to a reduction
in interest expense of $36,000, 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.
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.
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.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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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 period ended
September 30, 1999.
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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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: November 10, 1999
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
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Exhibit 99
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1999
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Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
<TABLE>
<S> <C>
1. Statement of Cash Available for Distribution for the three
months ended September 30, 1999:
Net income $ 139,000
Add: Depreciation and amortization charged to income not
affecting cash available for distribution 21,000
Minimum lease payments received, net of interest
income earned, on leases accounted for under the
financing method 78,000
Cash from reserves 375,000
Less: Mortgage principal payments (461,000)
Cash Available for Distribution $ 152,000
==========
Distributions Allocated to General Partners 12,000
==========
Distributions Allocated to Limited Partners $ 140,000
==========
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, 1999:
</TABLE>
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
---------------- ------------ ------
<S> <C> <C>
Winthrop
Management LLC Property Management Fees $4,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 70
One Winthrop Properties, Inc. Interest in Cash Available for Distribution $4,000
(General Partner)
Linnaeus-Hampshire Realty
Limited Partnership
(General Partner) Interest in Cash Available for Distribution $8,000
</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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,350,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,173,000
<DEPRECIATION> (2,480,000)
<TOTAL-ASSETS> 7,083,000
<CURRENT-LIABILITIES> 0
<BONDS> 934,000
0
0
<COMMON> 0
<OTHER-SE> 6,131,000
<TOTAL-LIABILITY-AND-EQUITY> 7,083,000
<SALES> 0
<TOTAL-REVENUES> 851,000
<CGS> 0
<TOTAL-COSTS> 112,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,000
<INCOME-PRETAX> 636,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 636,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 636,000
<EPS-BASIC> 58.47
<EPS-DILUTED> 58.47
</TABLE>
