<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-10272
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Winthrop Residential Associates I, A Limited Partnership
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(Exact name of small business issuer as specified in its charter)
Maryland 04-2720493
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(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 RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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PART 1 - FINANCIAL INFORMATION
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Item 1. Financial Statements.
Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------------- ---------------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 467 $ 251
Note receivable 105 --
Investment in Local Limited Partnership 333 700
-------------------- ---------------------
Total Assets $ 905 $ 951
==================== =====================
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Accrued interest and expenses $ 41 $ 22
Loan payable 289 289
-------------------- ---------------------
Total Liabilities 330 311
-------------------- ---------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,676
units authorized; 25,595 units issued
and outstanding 1,665 1,728
General Partners deficit (1,090) (1,088)
-------------------- ---------------------
Total Partners' Capital 575 640
-------------------- ---------------------
Total Liabilities and Partners' Capital $ 905 $ 951
==================== =====================
</TABLE>
See notes to financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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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,
1998 1997 1998 1997
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Income:
Income from Local Limited Partnership
cash distributions $ -- $ 24 $ 74 $ 104
Equity in net loss of Local Limited
Partnership (21) (34) (21) (34)
Interest 8 3 12 10
Gain on sale of property from Local
Limited Partnership -- 500 -- 500
Loss on sale of investment in
Local Limited Partnership (23) -- (23) --
---------------- ----------------- ---------------- -----------------
Total (loss) income (36) 493 42 580
---------------- ----------------- ---------------- -----------------
Expenses:
Amortization -- 1 -- 5
Interest 8 10 21 41
General and administrative 27 24 81 64
Management fees -- 2 5 10
---------------- ----------------- ---------------- -----------------
Total expenses 35 37 107 120
---------------- ----------------- ---------------- -----------------
Net (loss) income $ (71) $ 456 $ (65) $ 460
================ ================= ================ =================
Net (loss) income allocated to General Partners $ (2) $ 3 $ (2) $ 3
================ ================= ================ =================
Net (loss) income allocated to Limited Partners $ (69) $ 453 $ (63) $ 457
================ ================= ================ =================
Net (loss) income per Unit of Limited
Partnership Interest $ (2.70) $ 17.70 $ (2.46) $ 17.86
================ ================= ================ =================
</TABLE>
See notes to financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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Statements of Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance - January 1, 1998 25,595 $ (1,088) $ 1,728 $ 640
Net loss (2) (63) (65)
----------------- ----------------- ---------------- ----------------
Balance - September 30, 1998 25,595 $ (1,090) $ 1,665 $ 575
================= ================= ================ ================
</TABLE>
See notes to financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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Statements of Cash Flows (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30, September 30,
1998 1997
-------------------- ---------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ (65) $ 460
Adjustments to reconcile net (loss) income to net cash provided
by (used in) operating activities:
Amortization -- 5
Equity in net loss of Local Limited Partnership 21 34
Loss on sale of investment in Local Limited Partnership 23 --
Gain on sale of property from Local Limited Partnership -- (500)
Changes in assets and liabilities:
Decrease in accounts payable and
accrued expenses (2) (9)
-------------------- ---------------------
Net cash used in operating activities (23) (10)
-------------------- ---------------------
Cash Flows From Investing Activities:
Expenses relating to sale of investment in Local
Limited Partnership (2) --
Collections of note receivable 70 --
Distributions received from Local Limited Partnership 150 --
Proceeds from Local Limited Partnership sale of property -- 500
-------------------- ---------------------
Net cash provided by investing activities 218 500
-------------------- ---------------------
Cash Flows From Financing Activities:
Repayment of loans payable to affiliate -- (377)
Increase (decrease) in accrued interest payable 21 (154)
-------------------- ---------------------
Net cash provided by (used in) financing activities 21 (531)
-------------------- ---------------------
Net increase (decrease) in cash 216 (41)
Cash and cash equivalents, beginning of period 251 280
-------------------- ---------------------
Cash and cash equivalents, end of period $ 467 $ 239
==================== =====================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ -- $ 195
==================== =====================
Sale of Investment in Local Limited Partnership - See Note 3
</TABLE>
See notes to financial statements.
5 of 12
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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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, 1997.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature, except as discussed in Note 3. The balance sheet at
December 31, 1997, was derived from audited financial statements at such
date.
The results of operations for the nine months ended September 30, 1998
and 1997 are not necessarily indicative of the results to be expected for
the full year.
2. Related Party Transactions
Management fees earned by an affiliate of the Managing General Partner
totaled $10,000 for the nine months ended September 30, 1997. Commencing
December 16, 1997, an unaffiliated third party began providing management
services to the Partnership.
3. Sale of Investment in Local Limited Partnership
The Partnership sold a portion of its interest in a Local Limited
Partnership, First Investment Limited Partnership 1 ("Copperfield
Apartments"), to the general partner of the Local Limited Partnership.
The Partnership now owns a 50% interest in Copperfield Apartments. The
sales price was $175,000, payable with a promissory note, maturing on
December 31, 2008, and secured by the interest in the Partnership. The
promissory note accrues interest at 8% per annum. As specified in the
promissory note, one half of the general partner's future distributions
from Copperfield Apartments will be required to repay the note. During
September 1998, the general partner of Copperfield Apartments repaid
$70,000 of the principal balance and $5,000 of accrued interest. During
1997, the Partnership recorded a $762,000 write-down of its investment in
Copperfield Apartments to its net realizable value.
4. Mortgage Refinancing
On August 31, 1998, Copperfield Apartments refinanced its mortgage. The new
mortgage in the amount of $1,200,000 replaced indebtedness of approximately
$725,000. The mortgage bears interest at 6.40%, requires monthly payments
of $8,000 and matures on September 1, 2008, with a balloon payment of
approximately $1,039,000. A premium is to be calculated under the terms of
the mortgage if the loan is prepaid. During September 1998, Copperfield
Apartments distributed $150,000 of refinancing proceeds to the Partnership.
6 of 12
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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Item 2. Management's Discussion and Analysis or Plan of Operation
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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
-------------------------------
As of September 30, 1998, the Partnership retained an equity
interest in six Local Limited Partnerships. During July 1997,
Washington Square Limited Partnership sold the Heritage Hills
Townhouses property. This Local Limited Partnership was
terminated in the fourth quarter of 1997.
The level of liquidity based on cash and cash equivalents
experienced an $216,000 increase for the nine months ended
September 30, 1998, as compared to December 31, 1997. The
Partnership's $218,000 of cash provided by investing activities
and an increase in accrued interest payable of $21,000 (financing
activities), were only partially offset by $23,000 of cash used
in operating activities. Investing activities consisted of
$150,000 of refinancing proceeds distributed by First Investment
Limited Partnership I ("Copperfield Apartments"), one of the
Local Limited Partnerships which the Partnership has an equity
interest, and $70,000 of collections of a note receivable (see
Item 1 Note 3), which were only partially offset by $2,000 of
expenses relating to the sale of the investment in Copperfield
Apartments. At September 30, 1998, the Partnership had $467,000
in cash and cash equivalents, which has been invested primarily
in short-term-certificates of deposit and money market accounts.
The Partnership's primary source of income is distributions from
the Local Limited Partnerships. The Partnership requires cash to
pay management fees, general and administrative expenses and to
make capital contributions to any of the Local Limited
Partnerships which the Managing General Partner deems to be in
the Partnership's best interest to preserve its ownership
interest. To date, all cash requirements have been satisfied by
interest income, cash distributed by the Local Limited
Partnerships to the Partnership or by loans.
On December 16, 1997, the Managing General Partner and certain of
its affiliates entered into a Service Agreement with Coordinated
Services of Valdosta, LLC ("Coordinated Services"), pursuant to
which Coordinated Services was retained to provide asset
management and investor services to the Partnership and certain
affiliated partnerships. As a result of this agreement,
Coordinated Services has the right to direct the day to day
affairs of the Partnership, including without limitation,
reviewing and analyzing potential sale, refinancing or
restructuring proposals by Local Limited Partnerships,
preparation of all Partnership reports, maintaining Partnership
records and maintaining
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
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Item 2. Management's Discussion and Analysis or Plan of Operation
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(Continued)
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Liquidity and Capital Resources (Continued)
-------------------------------------------
bank accounts of the Partnership. Coordinated Services is not
permitted, however, without the consent of the Managing General
Partner, or as otherwise required under the terms of the
Partnership's Agreement of Limited Partnership (the "Partnership
Agreement") to, among other things, cause the Partnership to
consent to a sale of an asset or cause the Partnership to file
for bankruptcy. As compensation for providing these services, the
Managing General Partner and its affiliates assigned to
Coordinated Services all of their rights to receive fees from the
Partnership, as provided in the Partnership Agreement.
The loan payable to an affiliate of the Managing General Partner
was assigned to an unaffiliated third party on October 27, 1997.
The loan, which bears interest at prime plus 1%, is repayable
from cash flows generated by the Local Limited Partnerships and
the proceeds of any sales of real estate owned by the Local
Limited Partnerships. The outstanding principal balance and
accrued interest on the loan was approximately $321,000 at
September 30, 1998. The Partnership did not make cash
distributions to its partners during 1998 or 1997.
The Partnership does not intend to make advances to fund future
operating deficits incurred by any Local Limited Partnership, but
retains its prerogative to exercise business judgment to reverse
this position if circumstances change. Moreover, the Partnership
is not obligated to provide any additional funds to the Local
Limited Partnerships to fund operating deficits. If a Local
Limited Partnership sustains continuing operating deficits and
has no other sources of funding, it is likely that it will
eventually default on its mortgage obligations and risk a
foreclosure on its property by the lender. If a foreclosure were
to occur, the Local Limited Partnership would lose its investment
in the property and would incur a tax liability due to the
recapture of tax benefits taken in prior years. The Partnership,
as an owner of the Local Limited Partnership, would share these
consequences in proportion to its ownership interest in the Local
Limited Partnership.
On September 1, 1996, the Local Limited Partnership which owns
The Villas Apartments signed a provisional workout agreement,
expiring August 31, 1997, with the U.S. Department of Housing and
Urban Development ("HUD"). The provisional workout agreement has
been extended until December 30, 1998. The general partner of the
Local Limited Partnership is currently negotiating with HUD to
reach a resolution. There can be no assurance that a resolution
of this default will be reached with HUD. If the general partner
of the Local Limited Partnership and HUD are unable to agree on a
resolution, the Property could be lost through foreclosure. The
Partnership's investment in this Local Limited Partnership had
previously been written-down to zero.
The Cedar Lake Ltd. Local Limited Partnership, which owns Albany
Landings Apartments, has incurred significant operating losses
and cash flow deficits. If operations at the property do not
improve, this property may be lost through foreclosure. The
Partnership's investment in this Local Limited Partnership had
previously been written-down to zero.
The Partnership sold a portion of its interest in a Local Limited
Partnership, First Investment Limited Partnership 1 ("Copperfield
Apartments"), to the general partner of the Local Limited
Partnership. The Partnership now owns a 50% interest in
Copperfield Apartments. The sales price was $175,000, payable
with a promissory note, maturing on December 31, 2008, and
secured by
8 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
------------------------------
Item 2. Management's Discussion and Analysis or Plan of Operation
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(Continued)
-----------
Liquidity and Capital Resources (Continued)
-------------------------------------------
the interest in the Partnership. The promissory note accrues
interest at 8% per annum. As specified in the promissory note,
one half of the general partner's future distributions from
Copperfield Apartments will be required to repay the note. During
September 1998, the general partner of Copperfield Apartments
repaid $70,000 of the principal balance and $5,000 of accrued
interest.
On August 31, 1998, Copperfield Apartments refinanced its
mortgage. The new mortgage in the amount of $1,200,000 replaced
indebtedness of approximately $725,000. The mortgage bears
interest at 6.40%, requires monthly payments of $8,000 and
matures on September 1, 2008, with a balloon payment of
approximately $1,039,000. A premium is to be calculated under the
terms of the mortgage if the loan is prepaid. During September
1998, Copperfield Apartments distributed $150,000 of refinancing
proceeds to the Partnership.
The Partnership is dependent upon Coordinated Services and the
management agents of the Local Limited Partnerships for
management and administrative services. Coordinated Services has
completed an assessment and believes that their computer systems
will function properly with respect to dates in the Year 2000 and
thereafter (the "Year 2000 Issue"). The management agents of the
Local Limited Partnerships are at various stages of completing an
assessment of their computer systems. These Year 2000 costs, if
any, are the responsibility of the individual management agents.
The Partnership does not expect that it will incur any material
costs associated with, or be materially affected by, the Year
2000 Issue.
Results of Operations
---------------------
Net income declined by $525,000 for the nine months ended
September 30, 1998, as compared to 1997, due to a decrease in
income of $538,000, which was only partially offset by a decrease
in expenses of $13,000.
Income declined primarily due to the $500,000 gain on sale of
property from the Local Partnership owning the Heritage Hills
Townhouses in 1997 as compared to the $23,000 loss on the sale of
a portion of the Partnership's interest in Copperfield Apartments
during 1998. During the nine months ended September 30, 1998, the
Partnership received $51,000 from the Local Limited Partnership
which owns the Lynwood property and $23,000 from the Shadowbrook
property. The Shadowbrook property was lost through foreclosure
during 1996, and accordingly no additional distributions are
expected to be received. At September 30, 1997, $80,000 was
received from the Local Limited Partnership which owns the
Lynwood property and $24,000 from the Local Limited Partnerships
owning the Heritage Hills Townhouses.
Expenses declined primarily due to decreases in interest expense
of $20,000 and management fees of $5,000, which were only
partially offset by an increase in general and administrative
expenses of $17,000. Interest expense declined due to a
significant portion of the loan being repaid during the third
quarter of 1997. General and administrative expenses increased
due to the timing of certain expenses.
9 of 12
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
------------------------------
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit 27
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 three months
ended September 30, 1998.
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
------------------------------
SIGNATURES
----------
Pursuant to the requirements 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.
WINTHROP RESIDENTIAL ASSOCIATES I,
----------------------------------
A LIMITED PARTNERSHIP
---------------------
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
-----------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
-----------------------
Edward V. Williams
Chief Financial Officer
Dated: November 12, 1998
11 of 12
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
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FORM 10-QSB SEPTEMBER 30, 1998
------------------------------
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three months
ended September 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Net loss $ (71,000)
Add: Loss on sale of investment in Local Limited Partnership 23,000
Collections from note receivable 70,000
Distribution received from Local Limited Partnership 150,000
Less: Equity in net loss of Local Limited Partnership (21,000)
Cash to reserves (151,000)
------------------
Cash Available for Distribution $ --
==================
</TABLE>
2. Fees and other compensation paid or accrued by the Partnership to
the General Partners, or their affiliates, during the three
months ended September 30, 1998:
Entity Receiving Form of
Compensation Compensation Amount
---------------- ------------ ------
None
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates I, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 467,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 905,000
<CURRENT-LIABILITIES> 0
<BONDS> 289,000
<COMMON> 0
0
0
<OTHER-SE> 575,000
<TOTAL-LIABILITY-AND-EQUITY> 905,000
<SALES> 0
<TOTAL-REVENUES> 30,000 <F1>
<CGS> 0
<TOTAL-COSTS> 5,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> (65,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (65,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,000)
<EPS-PRIMARY> (2.46)
<EPS-DILUTED> (2.46)
<FN>
<F1>Includes a $23,000 loss on sale of investment in a Local Limited
Partnership.
</FN>
</TABLE>
