<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File
For the year ended December 31, 1998 No. 0-9224
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WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
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(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2654152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Cambridge Center, Cambridge, Massachusetts 02142
--------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (617) 234-3000
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $1,329,000.
No market for the Limited Partnership Units exists and therefore, a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. Description of Business.
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Winthrop Partners 79 Limited Partnership (the "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 offered and sold
pursuant to a Registration Statement filed with the Securities and Exchange
Commission 10,000 Units of limited partnership interest ("Units") at a purchase
price of $1,000 per Unit for total capital contributions from Limited Partners
of $10,000,000.
The General Partners of the Partnership are One Winthrop Properties,
Inc., a Massachusetts corporation (the "Managing General Partner"), and
Linnaeus-Hampshire Realty Limited Partnership (formerly known as
Linnaeus-Hampshire Realty Company), a Massachusetts limited partnership (the
"Associate General Partner"). The Managing General Partner is a wholly-owned
subsidiary of First Winthrop Corporation ("First Winthrop"), a Delaware
corporation.
The Partnership's only business is owning and leasing improved real
estate.
The Partnership originally invested all of the net proceeds of the
Limited Partners' capital contributions, other than approximately $60,000 which
were originally set aside as reserves, in ten real properties. The Partnership
has sold two of these properties and has a third property under contract for
sale. See Item 2, "Description of Properties" for a description of Registrant's
remaining properties. The funds set aside in reserves were invested in money
market instruments and applied, over time, to repairs, improvements and other
items associated with Partnership's obligations in respect of the Properties.
The reserve balance as of December 31, 1998 net of accounts payable, accrued
expenses and distributions payable to Partners was approximately $1,523,000.
Rental income will be affected by the terms of any new leases, any tenant
improvement and leasing costs associated with renewing leases with existing
tenants or signing leases with new tenants, the loss of rent during any period
when a property is not under lease and the loss of rent after a property is
sold. Pursuant to the terms of the Partnership Agreement, so long as limited
partners have received aggregate distributions from inception equal to 6% of
their adjusted capital contributions on a cumulative basis, the general partner
is entitled to receive distributions in an amount equal to 6% of the total
distributions paid to the limited partners. See "Item
2
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7 Financial Statements, Note 2." Distributions of sale proceeds will be made as
a return of capital until investors have received a return of their original
capital contribution. Pursuant to the Partnership's partnership agreement, sale
proceeds are distributed 100% to investors until they have received their $1,000
per unit capital contribution. The general partners' 8% share of sale proceeds
would be paid subsequently. At December 31, 1998, Limited Partners had received
a return of capital equal to $146.60.
Property Matters
- ----------------
Gordy's Food & Liquor Inc., Chippewa Falls, Wisconsin. On August 7,
1998, the Partnership sold this property to the tenant 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) were
distributed to limited partners during the fourth quarter of 1998.
J.C. Penney Co., Inc., Batavia, New York. The mortgage note encumbering
this 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 original expiration date of the tenant's
lease) with a balloon payment of approximately $377,000. In February 1999, the
tenant elected to exercise its option to extend the lease term to August 31,
2004.
Walgreen Co., University City, Missouri. On May 13, 1998, the tenant at
this property, Walgreen Co. ("Walgreens"), exercised their right to cancel the
lease effective February 28, 1999. Walgreens, however, requested that they
remain as a holdover tenant for a period of three months at increased monthly
rent of $18,550. As a result, the lease with Walgreens is now scheduled to
expire on May 31, 1999. On February 19, 1999, the Partnership entered into an
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 second or third quarter of 1999.
J.W. Burress, Incorporated, Greenville, South Carolina. On August 1,
1996, the Partnership consummated the sale of this property to an affiliate of
the tenant. The purchase price for the property was $1,525,000 with net proceeds
to the Partnership
3
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of approximately $1,040,000. The sale resulted in a gain of $1,018,000. The net
proceeds from the sale were distributed to the limited partners in November,
1996.
Employees
The Partnership does not have any employees. Services are performed for
the Partnership by the Managing General Partner, and agents retained by it,
including an affiliate of the General Partners, Winthrop Management.
Item 2. Description of Properties.
- ------ -------------------------
A description of the Partnership's properties at February 1, 1999 is as
follows. All of Registrant's remaining properties are owned in fee.
Total Cost Original Size
Tenant/ Date of of the Portfolio Building/Land
Location Purchase Property(1) Percentage(2) (Sq. ft.)
- -------- -------- ----------- ------------- ---------
J.C. Penney
Batavia, NY 8/1/79 $ 1,092,598 8 38,720/38,720
Walgreen Co.(3)
University 8/3/79 $ 901,294 6.6 15,500/39,200
City, MO
Toys "R" Us
San Antonio, TX 1/25/80 $ 1,987,366 14.6 45,000/195,970
Toys "R" Us
Fort Worth, TX 1/25/80 $ 1,873,532 13.7 45,000/185,105
Frank's Nursery
Sales, Inc.
Hillside, IL 1/30/80 $ 706,008 5.2 14,920/122,000
Lucky Stores,
Inc. (4)
Cedar Rapids, IA 6/2/80 $ 1,522,908 11.2 36,856/133,110
Creative Paint
& Wallpaper, Inc.
and B&G, Inc. dba
Splash Pools & Spas,
fka Handy Dan(5)
Hurst, TX 6/10/80 $ 1,636,061 12.1 36,000/180,000
Wal-Mart Stores
Mexia, TX 10/31/80 $ 977,665 7.2 41,400/185,105
4
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- -------------------------
(1) Includes acquisition fees and expenses.
(2) Represents the percentage of original cash invested in the individual
property of the total cash invested in all properties.
(3) Property is currently under contract for sale. See "Item 1, Business -
Property Matters."
(4) During 1988, Lucky Stores, Inc. exercised its option to sublet the
premises to Graphics Division of Rockwell Collins International, an
avionics and defense communications company. Lucky Stores remains liable
for all obligations under its lease agreement.
(5) Due to default and bankruptcy of prior tenant Channel Homes, fka Handy
Dan, new leases with two new tenants (Creative Paint & Wallpaper, Inc.
and B&G, Inc.) were entered into as of February 1, 1991 for this
property. In 1995, Creative Paint & Wallpaper, Inc. sublet its space to
Floors, Inc.
The Partnership owns the fee interest in each of these properties. Five
of the properties are subject to first mortgages securing indebtedness which was
incurred or assumed by the Partnership in connection with the acquisition. See
"Item 7, Financial Statements, Note - 6" for information relating to the
mortgages encumbering the Partnership's properties. All of the properties are
commercial in nature. Each of the Properties is net leased to a single tenant
unaffiliated with the Partnership (with the sole exception of the Hurst, Texas
property which is now leased to two tenants, Floors, Inc. and B&G, Inc.). Each
of the tenants, other than Creative Paint and Wallpaper, Inc. and B&G, Inc., is
a public company or a subsidiary of a public company.
The tenants under the leases have exclusive control over the day-to-day
business operations conducted at the Properties as well as decisions with
respect to the initiation of any development or renovations at the Properties.
The Partnership has limited approval rights over any such renovation programs
proposed by the tenants. The San Antonio, Fort Worth, Hillside, Cedar Rapids and
Mexia Properties are triple net leased to the tenants. As a result, the
Partnership has no responsibility for any maintenance, repairs or improvements
associated with the Properties. In addition, the tenants at these properties are
responsible for all insurance requirements and the payment of real estate taxes
directly to the taxing authorities. The Partnership believes that each of the
properties are adequately insured. With respect to the lease with J.C. Penney
Co., Inc., Batavia, NY, the Partnership is responsible for all structural and
exterior repairs, carrying insurance, paying all real estate taxes up to a
specified maximum amount, repainting, varnishing or otherwise redecorating
certain exterior portions of the building every three years and paying certain
common facility maintenance charges up to a fixed amount. The Partnership spent
$21,589 and $17,076 for roof and HVAC repairs at this property in 1998 and 1997,
respectively. With respect to the lease with Walgreen Co.,
5
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St. Louis, MO, the Partnership is responsible for maintenance of the structural
portions of the building, all repairs required by reason of dry rot or termites
and the first $750 per year of roof repairs. No funds were spent by the
Partnership on these items in 1997 or 1998. With respect to the leases with
Creative Paint & Wallpaper and B&G, Inc., Hurst, TX, the Partnership is
responsible for structural maintenance of the premises. The Partnership spent no
amounts for these items in 1998 or 1997 respectively. Under both leases at this
Property, the Partnership is required to administer the payment of real estate
taxes and to procure and maintain insurance for the Property. The Partnership is
fully reimbursed for real estate taxes and for annual insurance premiums.
Each retail tenant is subject to competition from other companies
offering similar products in the locations of the property leased by such
tenant. In addition, the Partnership anticipates that it would be subject to
significant competition in attracting tenants upon the expiration or termination
of any of the leases of its properties. The Partnership has no control over the
tenants' responses to competitive conditions impacting the businesses operated
by the tenants at each of the properties.
Tenants with 1998 rental payments of 10% or more of the Partnership's
total rental revenue are as follows: Toys "R" Us, Inc., San Antonio, Texas, 18%,
Toys "R" Us, Inc., Ft. Worth, Texas, 17%; Wal-Mart, Mexia, Texas 13%; and
Walgreen Co., University City, Missouri 11%. The Partnership expects the rental
payments from the same tenants to amount to approximately the same respective
percentages of the Partnership's total income in 1999 other than with respect to
the Walgreen Co., University City, Missouri which is currently under contract
for sale.
The following table sets forth the tenant, business conducted by the
tenant, expiration date of the lease term, renewal options and the 1998 annual
base rent for the leases at the properties:
6
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1998
Tenant Business of Lease Renewal Annual
Property/Location Tenant Expiration Options(1) Rent
- ----------------- ------ ---------- ---------- ----
J.C. Penney
Batavia, NY Retail Dept. 8/31/04 4 - 5Yr. $116,160
Store
Walgreen Co.
University Retail 5/31/99 (2) $ 75,525(3)
City, MO Drugstore
Toys "R" Us
San Antonio, TX Toy Store 1/31/2000 6 - 5Yr. $262,532
Toys "R" Us
Fort Worth, TX Toy Store 1/31/2000 6 - 5Yr. $247,569
Frank's Nursery
Sales, Inc.
Hillside, IL Nursery and 12/31/2004 2 - 5Yr. $ 66,700
Crafts
Lucky Stores,
Inc. (4)
Cedar Rapids, IA Graphic Arts 6/2/2000 6 - 5Yr. $117,200
Creative Paint
& Wallpaper, Inc.
and B&G, Inc. dba
Splash Pools & Spas, Paint & 1/31/2001 1 - 7Yr. $184,280
fka Handy Dan(5) Wallpaper
Hurst, TX Store; Bath
& Spa Store
Wal-Mart Stores
Mexia, TX Dept. Store 10/31/2000 5 - 5Yr. $111,206 (6)
- -------------------------
(1) The first number represents the number of renewal options. The second
number represents the length of each option.
(2) Tenant has exercised its right to terminate this lease.
(3) Tenant paid additional percentage rent of $79,243 in 1998.
(4) During 1988, Lucky Stores, Inc. exercised its option to sublet the
premises to Graphics Division of Rockwell Collins International, an
avionics and defense communications company. The sublease is for a
three-year term with two three-year options to renew. Lucky Stores
remains liable for all obligations under its lease agreement.
(5) Due to default and bankruptcy of prior tenant Channel Homes, fka Handy
Dan, new leases with two new tenants were entered into as of February
1, 1991 for this property. In 1995, Creative Paint & Wallpaper, Inc.
sublet its space to Floors, Inc.
(6) An additional percentage rent of $79,836 was paid in 1998.
7
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Set forth below is a table showing the gross carrying value and
accumulated depreciation and federal tax basis of each of the Partnership's
properties as of December 31, 1998:
Gross
Carrying Accumulated Federal
Property Value(1) Depreciation(1) Rate Method Tax Basis
- -------- -------- --------------- ---- ------ ---------
Batavia, NY $1,092,598 $791,950 7/40 yr. S/L $ 300,648
University 901,294 557,499 7/40 yr. S/L 343,795
City, MO
San Antonio, TX 735,238 - - - 1,143,789
Fort Worth, TX 487,180 - - - 902,086
Hillside, IL 261,223 - - - 325,823
Cedar Rapids, IA 1,522,908 942,524 7/40 yr. S/L 580,384
Hurst, TX 1,551,060 139,039 7/40 yr. S/L 810,316
Mexia, TX - - - - 286,787
(1) As accounted for under Statement of Financial Accounting Standards No. 13
8
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Item 3. Legal Proceedings.
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The Partnership is not a party, nor are any of its properties, subject
to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
9
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PART II
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Item 5. Market for Registrant's Common Equity and Related
- ------ -------------------------------------------------
Stockholder Matters.
-------------------
There is no established public market for the Units. Trading in the
Units is sporadic and occurs solely through private transactions.
As of February 1, 1999, there were 863 holders of 10,005 outstanding
Units.
The Partnership Agreement requires that any Cash Available for
Distribution (as defined therein) be distributed quarterly to the Partners in
specified proportions and priorities. There are no restrictions on the
Partnership's present or future ability to make distributions of Cash Available
for Distribution. During the years ended December 31, 1998 and 1997, Registrant
has made the following cash distributions with respect to the Units to holders
thereof as of the dates set forth below in the amounts set forth opposite such
dates:
Amount of
Distribution
Per Unit
--------
Distribution with
Respect to
Quarter Ended 1998 1997
- ------------- ---- ----
March 31 - 18.06
June 30 - 13.44
September 30 96.25 -
December 31 16.69 -
10
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Item 6. Management's Discussion and Analysis or Plan of
- ------ -----------------------------------------------
Operations.
----------
The matters discussed in this Form 10-KSB 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-KSB 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.
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 five months and six
years. However, five of the Partnership's eight properties have lease terms that
expire by January 31, 2001. 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, 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 distributed 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
$944,000 increase at December 31, 1998, as compared to December 31, 1997. The
Partnership's $944,000 of cash provided by operating activities, $314,000 of
lease payments received under financing leases (net of interest income), and net
proceeds of $964,000 from the sale of Chippewa Falls, WI property (investing
activities) were significantly offset by $1,278,000 of financing activities.
Financing activities consisted of $303,000 of mortgage principal payments,
$11,000 of loan costs, and $964,000 of partner distributions. At December 31,
1998, the Partnership had approximately $1,713,000 in cash and cash equivalents
which has been invested primarily in money market mutual funds.
11
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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 year ended December 31, 1998,
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.
During 1997, the Managing General Partner ceased making quarterly
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). In February 1999, J.C.
Penney notified the Partnership that they have elected to exercise their option
to extend the term of the lease for five additional years commencing September
1, 1999. 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. Total distributions for 1998 and 1997
totaled $1,130,000 and $315,000, respectively. At December 31, 1998, $167,000 of
the $1,130,000 distributions for 1998 are recorded as a liability in the
accompanying financial statements.
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 signed a three month
extension to their lease at $18,550 per month. 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
second or third quarter of 1999. If the sale is consummated, the Partnership
will recognize a gain for financial reporting purposes.
12
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Results of Operations
- ---------------------
Net income increased by $150,000 for the year ended December 31, 1998,
as compared to 1997, due to an increase in income of $130,000 and a decrease in
expenses of $20,000.
The increase in income was primarily due to the $138,000 gain on sale
of the Chippewa Falls, WI property. Revenues, excluding the gain on sale,
declined by $8,000 due to a decrease in interest income on leases accounted for
under the financing method of $67,000 which was substantially offset by an
increase in rental income of $14,000 and an increase in interest on short-term
investments of $45,000. Rental income increased primarily due to the receipt of
$159,000 of percentage rents in 1998, as compared to $146,000 in 1997. Interest
income increased by $45,000 due to higher cash reserves from the proceeds of the
Chippewa Falls, WI property sale and the Partnership ceasing quarterly
distributions during 1997. Interest income on leases accounted for under the
financing method decreased by $67,000 partly due to the sale of the Chippewa
Falls, WI property and partly due to the amortization of the other leases
accounted for under the financing method. Expenses declined by $20,000 due to a
reduction in interest expense of $34,000, which was only partially offset by an
increase in operating costs of $8,000 and an increase in depreciation and
amortization of $7,000. 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 a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
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
13
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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 cost, in connection with the
upgrade of those systems to requiring remediation. It is expected that all
systems will be remediated, tested and implemented during the first half of
1999.
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.
14
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Item 7. Financial Statements
--------------------
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
FINANCIAL STATEMENTS
--------------------
YEARS ENDED DECEMBER 31, 1998 and 1997
--------------------------------------
INDEX
-----
Page
----
Independent Auditors' Report.............................................F - 2
Financial Statements:
Balance Sheets as of December 31, 1998 and 1997..........................F - 3
Statements of Income for the Years Ended
December 31, 1998 and 1997..........................................F - 4
Statements of Partners' Capital for the Years Ended
December 31, 1998 and 1997..........................................F - 5
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997..........................................F - 6
Notes to Financial Statements............................................F - 7
F-1
<PAGE>
Independent Auditors' Report
----------------------------
To the Partners
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, 1998 and
1997, and the related statements of income, partners' capital and cash flows for
the years then ended. 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, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Certified Public Accountants
New York, New York
February 19, 1999
F-2
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
BALANCE SHEETS
--------------
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1997
1998 (As Restated)
--------------------- ---------------------
ASSETS
- ------
<S> <C> <C>
Real Estate Leased to Others:
Accounted for under the operating method,
at cost, net of accumulated depreciation of
$1,874 (1998) and $2,339 (1997) $ 3,776 $ 4,212
Accounted for under the operating method,
and held for sale, net of accumulated
depreciation of $557 344 -
Accounted for under the financing method 1,850 2,989
--------------------- ---------------------
5,970 7,201
Other Assets:
Cash and cash equivalents 1,713 769
Other assets 94 175
--------------------- ---------------------
Total Assets $ 7,777 $ 8,145
===================== =====================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 1,559 $ 1,862
Accounts payable and accrued expenses 23 22
Distributions payable to partners 167 -
--------------------- ---------------------
Total Liabilities 1,749 1,884
--------------------- ---------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized,
issued and outstanding - 10,005 Units 6,057 6,362
General Partners Deficit (29) (101)
--------------------- ---------------------
Total Partners' Capital 6,028 6,261
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 7,777 $ 8,145
===================== =====================
</TABLE>
See notes to financial statements.
F-3
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
STATEMENTS OF INCOME
--------------------
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1998 1997
--------------------- --------------------
Income:
<S> <C> <C>
Rental income from real estate leases accounted
for under the operating method $ 839 $ 825
Interest on short-term investments 77 32
Interest income on real estate leases accounted
for under the financing method 275 342
Gain on sale of property 138 -
--------------------- --------------------
Total income 1,329 1,199
--------------------- --------------------
Expenses:
Operating 49 41
Interest 185 219
Depreciation and amortization 108 101
Management fees 21 22
General and administrative 69 69
--------------------- --------------------
Total expenses 432 452
--------------------- --------------------
Net income $ 897 $ 747
===================== ====================
Net income allocated to general partners $ 72 $ 60
===================== ====================
Net income allocated to limited partners $ 825 $ 687
===================== ====================
Net income per Unit of Limited Partnership Interest $ 82.46 $ 68.67
===================== ====================
Distributions per Unit of Limited Partnership Interest $ 112.94 $ 31.48
===================== ====================
</TABLE>
See notes to financial statements.
F-4
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(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, 1997 10,005 $ (203) $ 5,505 $ 5,302
(As previously reported)
Prior Period Adjustment 42 485 527
------------------ ------------------- ------------------- --------------------
Balance - January 1, 1997 10,005 (161) 5,990 5,829
(As restated)
Net income 60 687 747
Distributions - (315) (315)
------------------ ------------------- ------------------- --------------------
Balance - December 31, 1997 10,005 (101) 6,362 6,261
Net income 72 825 897
Distributions - (1,130) (1,130)
------------------ ------------------- ------------------- --------------------
Balance - December 31, 1998 10,005 $ (29) $ 6,057 $ 6,028
================== =================== =================== ====================
</TABLE>
See notes to financial statements.
F-5
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1998 1997
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 897 $ 747
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 92 89
Amortization 16 12
Gain on sale of property (138) -
Changes in assets and liabilities:
Decrease in other assets 76 6
Increase (decrease) in accounts payable and
accrued expenses 1 (82)
--------------------- ---------------------
Net cash provided by operating activities 944 772
--------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Minimum lease payments received, net of interest income
earned, on leases accounted for under the financing method 314 306
Proceeds from sale of property 964 -
--------------------- ---------------------
Cash provided by investing activities 1,278 306
--------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes (303) (280)
Cash distributions (964) (520)
Loan costs (11) -
--------------------- ---------------------
Cash used in financing activities (1,278) (800)
--------------------- ---------------------
Net increase in cash and cash equivalents 944 278
Cash and Cash Equivalents, Beginning of Year 769 491
--------------------- ---------------------
Cash and Cash Equivalents, End of Year $ 1,713 $ 769
===================== =====================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 182 $ 219
===================== =====================
Supplemental Disclosure of Non-cash Financing
Activities -
Distributions accrued to partners $ 167 $ -
===================== =====================
</TABLE>
See notes to financial statements.
F-6
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
Organization
------------
Winthrop Partners 79 Limited Partnership (the "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 owns and leases
eight properties, four of which are located in Texas with the other four in
various locations throughout the United States. With the exception of one
property, all are leased to single tenants under triple net lease
agreements.
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 amounts reported in the financial statements
and accompanying notes. Such estimates that are particularly susceptible to
change relate to the Partnership's estimate of the fair value of real
estate. Actual results could differ from those estimates.
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.
(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.
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, 1998 and 1997, the Partnership
received percentage rent totaling approximately $159,000 and $146,000,
respectively.
F-7
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
-----------------------------------------------------------------------
Real Estate
-----------
Real estate is carried at cost, adjusted for depreciation and impairment of
value. The Partnership records impairment losses for long-lived assets used
in operations when indicators of impairment are present and the
undiscounted cash flows are not sufficient to recover the asset's carrying
amount. The impairment loss is measured by comparing the fair value of the
asset to its carrying amount.
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 7 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 residual value at the date of implementation of
operating lease accounting.
Deferred Costs
--------------
Deferred costs of $125,000 consist of financing and leasing costs and are
included in other assets in the accompanying balance sheet. Deferred costs
are being amortized on a straight-line basis over the term of the
respective agreements. At December 31, 1998 and 1997, accumulated
amortization totaled $97,000 and $81,000, respectively.
Cash and Cash Equivalents
-------------------------
The Partnership considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash
equivalents.
Distributions to Partners
-------------------------
Distributions for 1998 and 1997 totaled $1,130,000 and $315,000
respectively. At December 31, 1998, $167,000 of the $1,130,000
distributions for 1998 are recorded as a liability in the accompanying
financial statements.
Net Income Per Limited Partnership Unit
---------------------------------------
Net income per limited partnership unit is computed by dividing net income
allocated to the limited partners by the 10,005 units outstanding.
F-8
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
------------
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made
in the financial statements of the Partnership.
Concentration of Credit Risk
----------------------------
Principally all of the Partnership's cash and cash equivalents consist of a
mutual fund that invests in U.S. treasury bills and repurchase agreements
with original maturity dates of three months or less.
Reclassifications
-----------------
Certain reclassifications have been made to 1997 balances to conform to the
1998 presentation.
Segment Reporting
-----------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which is effective for years beginning after December 15, 1997. SFAS 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. The Partnership has one reportable segment, net leased
commercial real estate. The Partnership evaluates performances based on net
operating income, which is income before depreciation, amortization,
interest and non-operating items.
2. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
One Winthrop Properties, Inc. ("One Winthrop") and Linnaeus-Hampshire
Realty Limited Partnership are the general partners of the Partnership.
Winthrop Management LLC, an affiliate of One Winthrop, 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, 1998 and 1997, Winthrop Management earned
$21,000 and $22,000, respectively, for managing the properties of the
Partnership.
As provided in the partnership agreement, the general partners are entitled
to 8% of Cash Available for Distribution (as defined in the partnership
agreement), subordinated to a cumulative priority quarterly distribution to
the limited partners. The general partners may also be entitled to a
percentage of sale or
F-9
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
2. TRANSACTIONS WITH RELATED PARTIES (Continued)
---------------------------------------------
refinancing proceeds (as defined in the partnership agreement), which are
subordinated to certain priority distributions to the limited partners.
There were no amounts due to the general partners for the years ended
December 31, 1998 and 1997. Profits or losses are allocated 8% to the
general partners and 92% to the limited 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.
3. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE OPERATING METHOD
---------------------------------------------------------------------
Real estate leased to others, at cost, accounted for under the operating
method is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1998 1997
---------------------- ----------------------
<S> <C> <C>
Land $ 3,303,000 $ 3,303,000
Commercial buildings 3,248,000 3,248,000
Accumulated depreciation (2,431,000) (2,339,000)
---------------------- ----------------------
$ 4,120,000 $ 4,212,000
====================== ======================
</TABLE>
During 1998, one of the Partnership's tenants exercised their right to
cancel their lease effective February 28, 1999. The tenant has requested
that they be allowed to hold over on a month to month basis. The terms and
conditions of this holdover request are currently being negotiated. The
Partnership is currently marketing this property for sale and has therefore
classified real estate of $344,000 as held for sale as of December 31,
1998, (see Note 11).
As of December 31, 1998 and 1997, properties (and related operating leases)
with a carrying value of $3,202,000 and $3,238,000, respectively, 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>
1999......................................................... $ 617,000
2000......................................................... 478,000
2001......................................................... 156,000
2002......................................................... 141,000
2003......................................................... 141,000
Thereafter................................................... 102,000
----------------
Total........................................................ $ 1,635,000
================
</TABLE>
F-10
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
4. REAL ESTATE LEASED TO OTHERS ACCOUNTED FOR UNDER THE FINANCING METHOD
---------------------------------------------------------------------
Real estate leased to others, accounted for under the financing method, is
summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1998 1997
----------------- ------------------
<S> <C> <C>
Minimum lease payments receivable $ 917,000 $ 1,782,000
Unguaranteed residual value 1,316,000 2,006,000
------------------ ------------------
2,233,000 3,788,000
Less: Unearned income (383,000) (799,000)
------------------ ------------------
$ 1,850,000 $ 2,989,000
================== ==================
</TABLE>
As of December 31, 1998 and 1997, respectively, real estate and the related
lease payments with a net investment in financing leases of $1,342,000 and
$1,563,000 were pledged to collateralize the payment of mortgage notes
payable.
The following is a summary of the minimum anticipated future rental
receipts, excluding percentage rents, by year, under the financing leases:
1999......................................... 502,000
2000......................................... 255,000
2001......................................... 42,000
2002......................................... 42,000
2003......................................... 42,000
Thereafter................................... 34,000
------------------
Total........................................$ 917,000
==================
5. SIGNIFICANT TENANTS
-------------------
For the years ended December 31, 1998 and 1997 approximately 75% and 72% of
revenue from rental operations was from six tenants, respectively.
F-11
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
6. MORTGAGE NOTES PAYABLE
----------------------
The mortgage notes payable by the Partnership are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
On May 29, 1998, the Partnership renewed the mortgage note encumbering
the Batavia, NY property, which had matured, at a lower interest rate of
8.32%. The note requires monthly installments 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. $ 398,000 $ 426,000
10.115% mortgage note, due in monthly installments of $2,730 for
principal and interest, maturing on December 1, 2004. 146,000 163,000
12% mortgage note, due in monthly installments of $12,618 for
principal and interest, maturing on July 1, 2000 207,000 326,000
12% mortgage note, due in monthly installments of $11,892 for
principal and interest, maturing on July 1, 2000 195,000 307,000
10.25% mortgage note, due in monthly installments of $7,622 for
principal and interest, maturing on July 1, 2010 613,000 640,000
------------------ ---------------
$ 1,559,000 $ 1,862,000
================== ===============
</TABLE>
As of December 31, 1998 principal payments are required as follows:
1999........................................... 707,000
2000........................................... 196,000
2001........................................... 60,000
2002........................................... 67,000
2003........................................... 74,000
Thereafter..................................... 455,000
------------------
Total..........................................$ 1,559,000
===================
7. 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) were distributed to the limited
partners during the fourth quarter of 1998.
F-12
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amount of cash and cash equivalents approximates its fair
value due to the short term nature of such instruments. The carrying amount
of the Partnership's mortgage notes based on the borrowing rates available
to the Partnership for mortgage notes with similar terms, was approximately
$1,665,000 and $2,100,000 at December 31, 1998 and 1997, respectively.
9. TAXABLE INCOME
--------------
The Partnership's taxable income for 1998 and 1997 differs from net income
for financial reporting purposes as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
<S> <C> <C>
Net income for financial reporting purposes $ 897,000 $ 747,000
Plus: Minimum lease payments received, net of interest
income earned, on leases accounted for under the
financing method 314,000 306,000
Gain on sale of property 325,000 -
Minus: Depreciation on leases accounted for under the
financing method and tax depreciation adjustment (151,000) (173,000)
---------------- -----------------
Taxable income $ 1,385,000 $ 880,000
================ =================
Taxable income per Unit of Limited Partnership Interest $ 127.34 $ 80.92
================ =================
</TABLE>
10. 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 January 1, 1997 was restated to
reflect an increase of $527,000, consisting of the reversal of the $500,000
loss due to impairment of value (which should not have been recorded) and
$27,000 of depreciation expensed during the period January 1, 1992 through
December 31, 1996. Net income for the year ended December 31, 1997 was not
restated since the adjustment to depreciation expense resulted in a
difference of approximately $1,000.
F-13
<PAGE>
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
(Continued)
-----------
11. SUBSEQUENT EVENT - SALES CONTRACT
---------------------------------
On February 19, 1999, the Partnership entered into an agreement to sell the
University City, Missouri property to an unaffiliated third party for
approximately $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.
F-14
<PAGE>
Item 8. Changes in and Disagreements on Accounting and
----------------------------------------------
Financial Disclosure.
--------------------
There were no disagreements with Imowitz Koenig & Co., LLP regarding the
1998 or 1997 audits of the Partnership's financial statements.
15
<PAGE>
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------ -------------------------------------------------------------
Compliance With Section 16(a) of the Exchange Act.
-------------------------------------------------
The Partnership has no officers or directors. The Managing General
Partner manages and controls substantially all of Registrant's affairs and has
general responsibility and ultimate authority in all matters affecting its
business. As of February 1, 1999, the names of the directors and executive
officers of the Managing General Partner and the position held by each of them
are as follows:
Has Served as
Position Held with the a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President 1-96
and Director
Carolyn Tiffany Chief Operating Officer 10-95
and Clerk
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property Investors,
Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director
and executive officer of NPI Property Management Corporation ("NPI Management")
from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been
President of Exeter Capital Corporation, a firm which has organized and
administered real estate limited partnerships.
Thomas C. Staples, age 43, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 47, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of
16
<PAGE>
NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was a Vice President and Assistant Secretary of Fischbach Corporation,
a publicly traded, international real estate and construction firm.
Carolyn Tiffany, age 32, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 80
Limited Partnership; Winthrop Partners 81 Limited Partnership; Winthrop
Residential Associates I, A Limited Partnership; Winthrop Residential Associates
II, A Limited Partnership; Winthrop Residential Associates III, A Limited
Partnership; 1626 New York Associates Limited Partnership; 1999 Broadway
Associates Limited Partnership; Nantucket Island Associates Limited Partnership;
One Financial Place Limited Partnership; Presidential Associates I Limited
Partnership; Riverside Park Associates Limited Partnership; Springhill Lake
Investors Limited Partnership; Twelve AMH Associates Limited Partnership;
Winthrop California Investors Limited Partnership; Winthrop Growth Investors 1
Limited Partnership; Winthrop Interim Partners I, A Limited Partnership;
Southeastern Income Properties Limited Partnership; and Southeastern Income
Properties II Limited Partnership.
Except as indicated above, neither the Partnership nor the Managing
General Partner has any significant employees within the meaning of Item 401(b)
of Regulation S-B. There are no family relationships among the officers and
directors of the Managing General Partner.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of
17
<PAGE>
the units of limited partnership interest in the Partnership that failed to file
on a timely basis, as disclosed in the above Forms, reports required by section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
Item 10. Executive Compensation.
- ------- ----------------------
Registrant is not required to and did not pay any compensation to the
officers or directors of the Managing General Partner. The Managing General
Partner does not presently pay any compensation to any of its officers or
directors. (See Item 12, "Certain Relationships and Related Transactions.")
Item 11. Security Ownership of Certain Beneficial Owners and
- ------- ---------------------------------------------------
Management.
----------
(a) Security Ownership of Certain Beneficial Owners.
-----------------------------------------------
No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at February 1, 1999. Under the
Partnership Agreement (incorporated herein by reference), the voting rights of
the Limited Partners are limited and, in some circumstances, are subject to the
prior receipt of certain opinions of counsel or judicial decisions.
Under the Partnership Agreement, the right to manage the business of
the Partnership is vested in the General Partners and is generally to be
exercised only by the Managing General Partner, although the consent of the
Associate General Partner is required for all purchases, financings,
refinancings and sales or other dispositions of the Partnership's real
properties and with respect to certain other matters.
(b) Security Ownership of Management.
--------------------------------
At February 1, 1999, the partners of WFA and the officers, directors
and the general partner of the General Partners owned as a group 5 Units
representing less than 1% of the total number of Units outstanding.
(c) Changes in Control.
------------------
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 12. Certain Relationship and Related Transactions.
- ------- ---------------------------------------------
Under the Partnership Agreement, the General Partners and their
affiliates are entitled to receive various fees,
18
<PAGE>
commissions, cash distributions, allocations of taxable income or loss and
expense reimbursements from the Partnership. Pursuant to Section 4.1 of the
Partnership Agreement, 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, 1998 and 1997, the Partnership did not pay or accrue any
distributions to the General Partners from Cash Available for Distributions, as
defined in the Partnership Agreement.
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.
WFC Realty Co., Inc. owns five limited partnership units and receives
its proportionate share of Cash Available for Distribution, pursuant to Section
4.1 of the Partnership Agreement.
Pursuant to Section 5.3A (iii) of the Partnership Agreement, Winthrop
Management receives a Property Management fee equal to 1.5% of cash receipts in
excess of cash expenditures other than expenditures for the management fee, debt
service payments and capital improvements. For the years ended December 31, 1998
and 1997, Winthrop Management earned approximately $21,000 and $22,000,
respectively, for managing the real properties of the Partnership.
Item 13. Exhibits and Reports on Form 8-K.
- ------- --------------------------------
(a) Exhibits:
The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report and incorporated in this
Annual Report as set forth in said Index.
(b) Reports on Form 8-K - None
19
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 26th day of March
1999.
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
By: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
By: /s/ Michael L. Ashner
--------------------------
Michael Ashner
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
/s/ Michael Ashner Chief Executive March 26, 1999
- ------------------ Officer and Director
Michael Ashner
/s/ Thomas Staples Chief Financial Officer March 26, 1999
- ------------------
Thomas Staples
20
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
- ------- ----
3 Amended and Restated Agreement of Limited Partnership (a)
of Winthrop Partners 79 Limited Partnership dated as of
April 4, 1979
4(a) See Exhibit 3
4(b) Documents which define the rights of holders of
long-term debt of the Partnership are included in
Exhibits 10(b), 10(h), 10(i), 10(j), 10(k) and 10(l)
10(a) Property Management Agreement between Winthrop Partners (b)
79 Limited Partnership and WP Management Co., Inc.
dated March 13, 1979
10(b) Property Management Subcontract between WP Management (b)
Co., Inc. dated August 1, 1979
10(c) Turnkey Agreement between McWethy Development (b)
Corporation and Winthrop Financial Co., Inc. dated
December 7, 1978 and related Conforming Documents dated
December 7, 1978, letter from Winthrop Financial Co.,
Inc. dated December 7, 1978, and letter from Messrs.
Dibble Koff Lane Stern & Stern dated January 12, 1979
10(d) Contract of Sale between Hayden Cutler and Winthrop (b)
Financial Co., Inc. dated March 22, 1979
10(e) Property Management Subcontract between WP Management (b)
Co., Inc. and Winthrop/Dolben Management Co., Inc.
dated as of August 1, 1979
10(f) Amendment dated as of August 1, 1979 to Property (b)
Management Agreement between Winthrop Partners 79
Limited Partnership and WP Management Co., Inc.
10(g) Documents relating to the J.C. Penney Company, Inc. (c)
property in Batavia, New York
10(h) Documents relating to the Toys "R" Us, Inc. ("Toys") (d)
property in San Antonio, Texas
21
<PAGE>
10(i) Documents relating to the Toys property in Fort Worth, (d)
Texas
10(j) Documents relating to the Frank's Nursery Sales, Inc. (d)
property in Hillside, Illinois
10(k) Documents relating to the Handy Dan Hardware, Inc. (b)
property in Hurst, Texas
10(l) Lease by and between the Partnership and Creative Paint (e)
and Wallpaper, Inc. dated January 31, 1991
10(m) Lease by and between the Partnership and B & G, Inc., (e)
d/b/a Splash Pools and Spas, dated January 17, 1991
10(n) Agreement of Purchase and Sale between Lucky Stores, (b)
Inc. and Winthrop Financial Co., Inc. dated November
16, 1979
10(o) Documents relating to the Wal-Mart Stores, Inc. (g)
property in Mexia, Texas
10(p) Documents relating to the Walgreen Co. property in (h)
University City, Missouri
16. Letter from Arthur Andersen LLP dated September 19, (i)
1996.
27. Financial Data Schedule 38
99. Supplementary Information required pursuant to Section 40
9.4 of the Partnership Agreement
(a) Filed as an Exhibit to the Partnership's Annual Report on Form 10-K for the
year ended December 31 1994 and incorporated herein by reference.
(b) Filed as an exhibit to the Partnership's Registration Statement on Form
S-11, File No. 2-63216, and incorporated herein by reference.
(c) Filed as exhibits to the Partnership's Current Report on Form 8-K dated
September 12, 1979, and incorporated herein by reference.
22
<PAGE>
(d) Filed as exhibits to the Partnership's Current Report on Form 8-K dated
January 25, 1980, and incorporated herein by reference.
(e) Filed as an exhibit to the Partnership's Annual Report on Form 10-K dated
March 31,1992 and incorporated herein by reference.
(f) Filed as exhibits to the Partnership's Current Report on Form 8-K dated May
30, 1980, and incorporated herein by reference.
(g) Filed as exhibits to the Partnership's Current Report on Form 8-K dated
November 14, 1980, and incorporated herein by reference.
(h) Filed as exhibits to the Partnership's Current Report on Form 8-K dated
September 12, 1979, and incorporated herein by reference.
(i) Incorporated by reference to the Partnership's Current Report on Form 8-K
dated September 23, 1996.
23
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,713,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,401,000
<DEPRECIATION> (2,431,000)
<TOTAL-ASSETS> 7,777,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,559,000
<COMMON> 0
0
0
<OTHER-SE> 6,028,000
<TOTAL-LIABILITY-AND-EQUITY> 7,777,000
<SALES> 0
<TOTAL-REVENUES> 1,252,000<F1>
<CGS> 0
<TOTAL-COSTS> 178,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,000
<INCOME-PRETAX> 897,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 897,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 897,000
<EPS-PRIMARY> 82.46
<EPS-DILUTED> 82.46
<FN>
<F1>
Includes gain on sale of property of $138,000.
</FN>
</TABLE>
<PAGE>
Exhibit 99
----------
WINTHROP PARTNERS 79 LIMITED PARTNERSHIP
----------------------------------------
DECEMBER 31, 1998
-----------------
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement (Unaudited)
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1998 December 31, 1998
----------------- -----------------
<S> <C> <C>
1. Statement of Cash Available for Distribution:
Net Income $ 897,000 $ 141,000
Add: Depreciation and amortization charged to income
not affecting cash available for distribution 108,000 32,000
Minimum lease payments received, net of interest
income earned, on leases accounted for under the
financing method 314,000 72,000
Net proceeds from sale of property 964,000 -
Less: Mortgage principal payments (303,000) (78,000)
Gain on sale of property (138,000) -
Cash to Reserves (712,000) -
---------------- ----------------
Cash Available for Distribution $ 1,130,000 $ 167,000
================= ================
Distributions allocated to Limited Partners $ 1,130,000 $ 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 December 31, 1998:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
---------------- -------------------------------------------- --------
<S> <C> <C>
Winthrop
Management LLC Property Management Fees $ 4,000
General Partners Interest in Cash Available for Distribution $ -
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 83
</TABLE>
