<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Commission File
For the year ended December 31, 1997 Number 0-10272
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Maryland 04-2720493
(State of Organization) (I.R.S. Employer I.D. No.)
5 Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (617) 234-3000
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 $593,000.
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.
Development
Winthrop Residential Associates I ("WRA I") was originally organized
under the Uniform Limited Partnership Act of the State of Maryland on January
30, 1981, for the purpose of investing, as a limited partner, in other
limited partnerships which would develop, manage, own, operate and otherwise
deal with apartment complexes assisted by Federal, state or local government
agencies ("Local Limited Partnerships") pursuant to programs which do not
significantly restrict distributions to owners or the rates of return on
investments in such complexes. On June 23, 1983, WRA I elected to comply with
and be governed by the Maryland Revised Uniform Limited Partnership Act (the
"Act") and filed its Agreement and Certificate of Limited Partnership (the
"Partnership Agreement") with the Maryland State Department of Assessments
and Taxation. In accordance with and upon filing its certificate of limited
partnership pursuant to the Act, WRA I changed its name to Winthrop
Residential Associates I, A Limited Partnership (the "Partnership").
The General Partners of the Partnership are One Winthrop Properties,
Inc., a Massachusetts corporation ("One Winthrop" or the "Managing General
Partner"), and Linnaeus-Hampshire Realty Limited Partnership (formerly known
as Linnaeus-Hampshire Realty Company), a Massachusetts limited partnership
("Linnaeus-Hampshire"). One Winthrop is a wholly-owned subsidiary of First
Winthrop Corporation ("First Winthrop"), a Delaware corporation, which in
turn is wholly-owned by Winthrop Financial Associates, A Limited Partnership
("WFA"), a Maryland public limited partnership. See "Change in Control".
In 1981, the Partnership sold, pursuant to Registration Statement on
Form S-11 filed with the Securities and Exchange Commission, 25,666 Units of
limited partnership interest ("Unit") at a purchase price of $1,000 per Unit
(an aggregate of $25,666,000). Capital contributions net of selling
commissions and sales registration costs were utilized to purchase interests
in 16 Local Limited Partnerships and the remainder in temporary short-term
investments.
The only business of the Partnership is investing as a limited
partner in other limited partnerships that own apartment complexes originally
subsidized by the U.S. Department of Housing and Urban Development ("HUD").
The Partnership initially acquired equity interests in the form of limited
partnership interests in 16 Local Limited Partnerships owning and operating
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apartment complexes. The Partnership completed its acquisitions in May 1982.
The Partnership has sold its interests in six properties: Greentree
Apartments (November 1986), Marsh Cove Apartments (December 1986), Orchard
Hill (October 1988), Racquet Club (May 1989), Columbine (May 1989) and
Heritage Hills Townhouses (1997). See "Item 2. Description of Properties." A
seventh property, Copperfield Apartments, was sold in 1985 by its Local
Limited Partnership which provided seller financing with a second mortgage.
The buyer subsequently defaulted on the second mortgage in 1988, and the
Local Limited Partnership completed the reacquisition of the property in
August 1991. The Partnership lost its ownership interests in The Park
Apartments and Candlewood Apartments when HUD foreclosed on the Local Limited
Partnerships owning those properties in August 1993 and January 1995,
respectively. The mortgage encumbering Stonewood Apartments was foreclosed in
March 1996 and Shadowbrook Apartments was effectively deeded in lieu of
foreclosure to the lender in August 1996. See "Defaults" below.
The Partnership has entered into a letter of intent pursuant to which
it will sell 37.5% of its 80% residual interest in the Local Limited
Partnership which owns Copperfield Apartments to the general partner of such
Local Limited Partnership. If this sale, which is subject to many conditions,
is consummated, it is expected that the Partnership will receive
approximately $260,000 in net proceeds.
Defaults
As noted above, the Partnership holds limited partnership interests
in Local Limited Partnerships which own apartment properties, all of which
were originally financed with HUD-insured first mortgages. If a Local Limited
Partnership defaults on a HUD-insured mortgage, the mortgagee can assign the
defaulted mortgage to HUD and recover the principal owed on its first
mortgage from HUD. HUD, in its discretion, may then either (i) negotiate a
workout agreement with the Local Limited Partnership, (ii) sell the mortgage
to another lender, or (iii) pursue its right to transfer the ownership of the
property from the Local Limited Partnership to HUD through a foreclosure
action. The objective of a workout agreement between an owner and HUD is to
secure HUD's sanction of a plan which, over time, will cure any mortgage
delinquencies. While a workout agreement is effective and its terms are being
met, HUD agrees not to pursue any remedies available to it as a result of the
default. If the owner does default under the terms of the workout agreement
or if HUD concludes that a property in default lacks the ability to generate
sufficient revenue to cure its default, it may pursue its right to assume
ownership of the property through foreclosure. HUD may also sell the mortgage
to another lender.
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Some workout agreements terminate upon the sale of the mortgage to
another lender.
The Local Limited Partnership owning Shadowbrook defaulted on its
mortgage in November 1987, and the mortgage was subsequently assigned by the
lender to HUD. In August 1996, unable to reach a resolution to cure the
default, this property was effectively deeded in lieu of foreclosure to the
lender. See Item 7, Financial Statements-Note 8.
The Local Limited Partnership owning The Villas defaulted on its
mortgage obligation in November 1991. The lender assigned the mortgage to HUD
in August 1992. On September 1, 1996, a provisional workout agreement was
entered into with HUD. This agreement expired on August 31, 1997. The
provisional workout agreement was extended through December 30, 1998. The
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 Partnership and HUD are unable to agree on a resolution, the
Property could be lost through foreclosure.
The Local Limited Partnership owning Stonegate defaulted on its
mortgage obligation in July 1991. The lender assigned the mortgage to HUD in
August 1992. In late 1994, the Local Limited Partnership negotiated its third
one-year Provisional Workout Arrangement (the "Current Agreement"), effective
from February 1, 1995 to January 31, 1996. On December 1, 1995, the Local
Limited Partnership signed a corrected Modification of Mortgage Note and
Mortgage. This modification increased the principal amount by the $442,579.41
of accrued interest, has an interest rate of 7.5% and reamortized the debt
over the remaining term through December 1, 2022.
The Local Limited Partnership owning Stonewood defaulted on its
mortgage in February 1988, and the mortgage was assigned to HUD in September
1988. The Local Limited Partnership was unable to negotiate a workout
proposal which HUD will approve. In May 1995, HUD sold the mortgage to Condor
One, Inc. The Local Limited Partnership signed a pre-negotiation agreement
with the new lender and submitted various proposals to the new lender all of
which were rejected. The new owner of the mortgage foreclosed on its mortgage
on March 14, 1996.
All of the Local Limited Partnerships face the possibility that HUD
or a new lender if HUD sells its mortgage, (collectively the "Lender") could
foreclose on the properties as long as (i) the Lender and the Local Limited
Partnerships have not entered into a workout agreement; and (ii) there is
unpaid interest and principal owed the Lender, and the Lender determines that
it is
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unlikely that the property can generate sufficient revenue to cure the
mortgage delinquency. To date, however, the Lender has allowed the Local
Limited Partnership which owns the Villas to maintain ownership of its
property, while the Local Limited Partnership and the Lender attempt to
negotiate a plan which will allow the Local Limited Partnership to work
toward reducing the unpaid amounts. The lender has taken foreclosure or
similar actions with rest to the Park, Candlewood, Stonewood and Shadowbrook
properties.
Employees
The Partnership does not have any employees. Services were performed
for the Partnership until December 16, 1997 by the Managing General Partner,
and Winthrop Management LLC, an affiliate of the Managing General Partner.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services 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 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 right to receive fees from the
Partnership as provided in the Partnership Agreement. See "Item 12. Certain
Relations and Related Transactions."
Change in Control
On July 18, 1995 Londonderry Acquisition II Limited Partnership
("Londonderry II"), a Delaware limited partnership, and affiliate of Apollo
Real Estate Advisors, L.P. ("Apollo"), acquired, among other things, a
general partner interest in W.L. Realty, L.P. ("W.L. Realty") and a sixty
four percent (64%) limited partnership interest in W.L. Realty. WFA also
acquired the sole general partner interest of Linnaeus-Hampshire. As a
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result of the foregoing acquisitions, Londonderry II is the sole general
partner of W.L. Realty which is the sole general partner of Linnaeus, and
which in turn is the sole general partner of WFA. As a result of the
foregoing, effective July 18, 1995, Londonderry II, an affiliate of Apollo,
became the controlling entity of the General Partners. In connection with the
transfer of control, the officers and directors of One Winthrop resigned and
Londonderry II appointed new officers and directors. See Item 9, "Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section
16(a) of the Exchange Act.
Item 2. Description of Properties.
The following table sets forth certain information regarding the
properties owned by the six Local Limited Partnerships in which the
Partnership has retained an interest and which continue to own apartment
properties as of March 15, 1998:
Date of Number of
Property Name Location Acquisition(1) Units
- ------------- -------- -------------- -----
The Villas Apartments Amarillo, TX 6/05/81 136
Lynnwood Park Apartments Raleigh, NC 9/28/81 152
Stonegate Apartments Holland, MI 8/04/81 156
Albany Landing Apartments Decatur, AL 4/02/82 120
College Green Apartments Wilmington, NC 11/30/81 138
Copperfield Apartments Columbia, SC 8/22/91 120
- ----------------------------
(1) Represents the date on which the Partnership made its initial investment
in the Local Limited Partnership
The following table sets forth information relating to the first
mortgage encumbering each of the Local Limited Partnership's properties:
Principal Principal
Balance at Balance
December 31, Interest Period Maturity Due at
Property 1997 Rate Amortized Date Maturity
- -------- ---- ------ ----------- ---- --------
The Villas $3,574,000 7.5% 40 years 8/1/2022 (1)
Lynndale $4,180,000 7.5% 40 years 3/1/2023 (1)
Stonegate $4,826,000 7.5% 40 years 3/1/2022 (1)
Albany Landing $2,807,000 7.5% 40 years 9/1/2023 (1)
College Green $2,794,000 7.5% 40 years 3/1/2023 (1)
Copperfield $ 745,000 7.5% 30 years 6/1/2012 (1)
(1) Self-amortizing loan.
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The following table sets forth the Partnership's limited partnership
ownership interest in each of the Local Limited Partnerships:
Local Limited Partnership Ownership Interest
The Villas, Ltd. 99%
Lynndale Apartments, Ltd. 50%
Stonegate Apartments
Limited Partnership 93%
Cedar Lake, Ltd. 98.93%
College Green 95%
First Investment
Limited Partnership I 80%
In July 1997, the Local Limited Partnership owning Heritage Hills
Townhouses sold the property. Net proceeds distributed to the Partnership as
a result of the sale totaled $506,000. See "Item 7. Financial Statements -
Note 7" for information relating to the tax effect of this sale.
As of March 15, 1998, none of the Local Limited Partnerships had
plans for substantial renovation, improvement or development of the
properties owned by the Local Limited Partnerships. All of the properties
owned by the Local Limited Partnerships are adequately covered by insurance.
The following chart provides comparative data for each property owned
by the Local Limited Partnerships regarding occupancy rates and average
market rental rates per apartment unit, for the last two years, where that
data is available to the Partnership:
Average Monthly
Average Monthly Rental
Occupancy Rate Rate per Unit
Property 1997 1996 1997 1996
- -------- ---- ---- ---- ----
The Villas 98% 98% $431 $431
Lynnwood Park 98% 99% $536 $526
Stonegate 95% 95% $526 $523
Albany Landing 82% 93% $403 $395
College Green 94% 96% $525 $479
Copperfield 89% 90% $482 $469
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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, 1997 (in thousands):
Gross Federal
Carrying Accumulated Tax
Property Value Depreciation Rate Method Basis
- -------- ----- ------------ ---- ------ -----
The Villas $4,565 $2,722 5-25 yrs. S/L $ 400
Lynnwood Park $4,427 $2,795 10-25 yrs. S/L $ 183
Stonegate $4,784 $3,030 5-25 yrs. S/L $1,754
Albany Landing $3,347 $1,918 10-25 yrs. S/L $ 165
College Green $3,529 $2,194 10-25 yrs. S/L $ 154
Copperfield $3,029 $ 733 5-27.5 yrs. S/L $1,841
Item 3. Legal Proceedings.
The Partnership is not a party, nor are any of the Local Limited
Partnerships subject, to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the
period covered by this report.
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PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters.
The Partnership is a partnership and thus has no common stock. There
is no active market for the Units. Trading in the Units is sporadic and
occurs solely through private transactions.
As of March 1, 1998, there were 2,870 holders of Units holding 25,585
units.
The Partnership Agreement requires that any Cash Available for
Distribution (as defined in said agreement) be distributed monthly or
quarterly to the Partners in specified proportions and priorities. There are
no outside restrictions on the Partnership's present or future ability to
make distributions of Cash Available for Distribution. There was no Cash
Available for Distribution in 1997 or 1996.
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Item 6. Management's Discussion and Analysis or Plan of Operation
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 business 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 business and results of operation. 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
As of December 31, 1997, 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
a $29,000 decrease for the year ended December 31, 1997, as compared to
December 31, 1996. The Partnership's $11,000 used in operating activities,
$377,000 of repayment of loans payable to an affiliate and $147,000 decrease
in accrued interest payable to an affiliate (financing activities), more than
offset the $506,000 of sale proceeds received from the sale of the Heritage
Hills Townhouses (investing activities). During July 1997, the Local Limited
Partnership owning the Heritage Hills Townhouses sold the property and
distributed $506,000 of sale proceeds to the Partnership. The Partnership
repaid a portion of the principal balance of the loans payable to an
affiliate and accrued interest with the sales proceeds. The Partnership
recognized a $506,000 gain on sale as a result of the Partnership's
investment account having a zero balance at the date of sale. For tax
purposes, a gain of approximately $188 per unit will be allocated to the
limited partners, primarily due to the recapture of benefits taken in prior
years with respect to this Local Limited Partnership.
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
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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 from an affiliate of the Managing
General Partner.
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 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 the 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 $301,000 at December 31, 1997. Prior to
the transfer, the Partnership repaid $377,000 of the loans payable to an
affiliate and $195,000 of interest (of which $154,000 was accrued in prior
years), primarily from sales proceeds received from the sale of the Heritage
Hills Townhouses. The Partnership will be unable to fully repay this
indebtedness and continue to fund its general and administrative expenses
until such time as (i) the operating results of any or all of the Local
Limited Partnerships improve sufficiently to provide cash distributions to
the Partnership; or, (ii) any or all of the properties owned by the Local
Limited Partnerships can be sold at a price to provide sufficient net sales
proceeds to the Partnership. In addition, any future contributions by the
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Partnership to the Local Limited Partnerships would have to be funded by
additional affiliate loans. Neither the Managing General Partner or its
affiliates has an obligation to fund any loan amounts required. The
Partnership did not make cash distributions to its partners during 1997 or
1996.
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 owning 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
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 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 has entered into a letter of intent pursuant to which
it will sell 37.5% of its 80% interest in the Local Limited Partnership, which
owns Copperfield Apartments, to the general partner of such Local Limited
Partnership. If this sale, which is subject to many conditions, is consummated,
it is expected that the Partnership will receive approximately $260,000 in net
proceeds. As a result of this negotiated sales price, the
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Partnership has recorded a $762,000 write-down of its investment in the Local
Limited 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
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
The Partnership's net loss for the year ended December 31, 1997 was
approximately $322,000 as compared to net income of approximately $359,000
for the year ended December 31, 1996.
The decrease in net income of $681,000 is attributable to the
$762,000 write-down of the Partnership's investment in a Local Limited
Partnership and a $519,000 decrease in income from Local Limited Partnership
cash distributions, which was partially offset by the $506,000 gain on sale
of the Heritage Hills Townhouses property.
During the year ended December 31, 1997, approximately $81,000 was
received from the Local Limited Partnership owning the Lynwood property and
$24,000 was received from the Local Limited Partnership owning the Heritage
Hills Townhouses. The Partnership also received residual cash distributions
of $22,000, and $2,000 from the Shadowbrook and Candlewood properties,
respectively. In 1996, $648,000 was received from three Local Limited
Partnerships (Shadowbrook $502,000, Lynwood $101,000, and Stonewood $45,000).
The Shadowbrook and Stonewood Apartment properties were lost through
foreclosure during 1996 and accordingly, no additional distributions will be
received from these Local Limited Partnerships.
General and administrative costs declined due to costs associated
with the Shadowbrook foreclosure during 1996.
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Item 7. Financial Statements
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
INDEX
Page
----
Independent Auditors' Report .............................................F - 2
Financial Statements:
Balance Sheets as of December 31, 1997 and 1996...........................F - 3
Statements of Operations for the Years Ended
December 31, 1997 and 1996............................................F - 4
Statements of Partners' Capital for the Years Ended
December 31, 1997 and 1996............................................F - 5
Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996............................................F - 6
Notes to Financial Statements.............................................F - 7
F-1
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Independent Auditors' Report
To the Partners
Winthrop Residential Associates I, A Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of Winthrop Residential
Associates I, A Limited Partnership (a Maryland limited partnership) as of
December 31, 1997 and 1996, and the related statements of operations,
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 did not audit the financial statements of certain Local
Limited Partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting and
were written down to zero (see Note 1). Those statements were audited by
other auditors whose reports have been furnished to us, and our opinion,
insofar as it relates to the amounts included for those Local Limited
Partnerships, is based solely on the reports of other auditors.
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 and the reports
of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Winthrop Residential Associates I, A
Limited Partnership as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Imowitz Koenig & Co., LLP
New York, New York
March 9, 1998
F-2
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
BALANCE SHEETS
(In Thousands, Except Unit Data)
DECEMBER 31,
--------------------
1997 1996
-------- --------
ASSETS
Cash and cash equivalents $ 251 $ 280
Investment in Local Limited Partnership 700 1,524
-------- --------
Total Assets $ 951 $ 1,804
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued interest and expenses $ 22 $ 17
Accrued interest payable to affiliate - 159
Loan payable 289 -
Loans payable to affiliate - 666
-------- --------
Total Liabilities 311 842
-------- --------
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 1,728 2,014
General Partners' (deficit) (1,088) (1,052)
-------- --------
Total Partners' Capital 640 962
-------- --------
Total Liabilities and Partners' Capital $ 951 $ 1,804
======== ========
See notes to financial statements.
F-3
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Income:
Income from Local Limited Partnership
cash distributions $ 129 $ 648
Gain on sale of property from Local Limited Partnership 506 -
Equity in net loss of Local Limited Partnership (55) (74)
Interest 13 11
----------------- -----------------
Total Income 593 585
----------------- -----------------
Expenses:
Amortization 7 7
Interest 48 62
General and administrative 88 147
Management fees 10 10
Write-down of investment in a
Local Limited Partnership 762 -
----------------- -----------------
Total Expenses 915 226
----------------- -----------------
Net (loss) income $ (322) $ 359
================= =================
Net (loss) income allocated to General Partners $ (36) $ 18
================= =================
Net (loss) income allocated to Limited Partners $ (286) $ 341
================= =================
Net (loss) Income per Unit of Limited Partnership Interest $ (11.17) $ 13.32
================= =================
</TABLE>
See notes to financial statements.
F-4
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WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1997 AND 1996
(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, 1996 25,595 $ (1,070) $ 1,673 $ 603
Net Income 18 341 359
-------------- -------------- -------------- --------------
Balance - December 31, 1996 25,595 (1,052) 2,014 962
Net Loss - (36) (286) (322)
-------------- -------------- -------------- --------------
Balance - December 31, 1997 25,595 $ (1,088) $ 1,728 $ 640
============== ============== ============== ==============
</TABLE>
See notes to financial statements.
F-5
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (322) $ 359
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Gain on sale of property from Local Limited Partnership (506) -
Amortization 7 7
Equity in loss of Local Limited Partnerships 55 74
Write-down of investment in a Local Limited Partnership 762
Changes in assets and liabilities:
(Decrease) increase in accrued expenses (7) 17
----------------- -----------------
Net cash (used in) provided by operating activities (11) 457
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Local Limited Partnership sale of property 506 -
----------------- -----------------
Cash provided by investing activities 506 -
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in accrued interest payable (147) (288)
Repayment of loans payable to affiliate (377) -
----------------- -----------------
Cash used in financing activities (524) (288)
----------------- -----------------
Net (decrease) increase in cash and cash equivalents (29) 169
Cash and cash equivalents, Beginning of Year 280 111
----------------- -----------------
Cash and cash equivalents, End of Year $ 251 $ 280
================= =================
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 195 $ 350
================= =================
</TABLE>
See notes to financial statements.
F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Winthrop Residential Associates I, A Limited Partnership (the
"Partnership"), was organized on January 30, 1981 under the Uniform Limited
Partnership Act of the State of Maryland to invest in limited partnerships
(the "Local Limited Partnerships") that develop, manage, operate and
otherwise deal in government-assisted apartment complexes. At December 31,
1997, the Partnership has investments in six Local Limited Partnerships, each
owning one apartment complex. The properties are located throughout the
United States. One property owned by a Local Limited Partnership, was sold
during 1997 (see Note 7).
The Partnership was capitalized with approximately $25,667,000 of
contributions representing 25,666 investor limited partnership units. The
offering closed in September 1981. The general partners and the initial
limited partner (10 units) contributed $12,000. At December 31, 1997 and
1996, there were 25,595 limited partnership units issued and outstanding.
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.
Uses 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 in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Investments in Local Limited Partnerships
The Partnership accounts for its investment in each Local Limited
Partnership using the equity method. Under the equity method of accounting,
the investment cost is subsequently adjusted by the Partnership's share of
the Local Limited Partnership's results of operations and by distributions
received. Costs relating to the acquisition and selection of the investment
in the Local Limited Partnerships are capitalized to
F-7
<PAGE>
the investment account and amortized over the life of the investment or until
the investment balance has been written down to zero. Costs in excess of the
Partnership's initial basis in the net assets of the Local Limited
Partnership are amortized over the estimated useful lives of the underlying
assets. Equity in the loss of Local Limited Partnerships is not recognized to
the extent that the investment balance would become negative since the
Partnership is not obligated to advance funds to the Local Limited
Partnerships.
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 25,595 units outstanding.
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.
Reclassification
Certain amounts from 1996, were reclassified to conform to the 1997
presentation.
2. ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS
In accordance with the partnership agreement, profits and losses not
arising from a sale and cash available for distribution from operations shall
be allocated 5% to the general partners and 95% to the limited partners.
Gains and distributions of proceeds arising from a sale or refinancing are
allocated first to the limited partners to the extent of their Adjusted
Capital Contribution (as defined) and then in accordance with the partnership
agreement, however, the general partner is allocated at least 1% of the gain.
If there are no sale proceeds, gains from a sale are allocated 5% to the
general partners and 95% to the limited partners.
3. TRANSACTIONS WITH RELATED PARTIES
One Winthrop Properties, Inc. ("One Winthrop" or the "Managing
General Partner"), and WP Management Co., Inc. ("WP Management"), the manager
of the Partnership's investments in the Local Limited Partnerships are wholly
owned subsidiaries of First Winthrop Corporation ("First Winthrop"), which in
turn is
F-8
<PAGE>
controlled by Winthrop Financial Associates, A Limited Partnership ("WFA").
WP Management is entitled to a fee for services rendered in managing
the Partnership's investments in the Local Limited Partnerships equal to 10%
of the Partnership's share of cash distributions from the Local Limited
Partnerships, not to exceed one half of 1% of the sum of (a) the amount of
the Partnership's aggregate total investment in all Local Limited
Partnerships, plus (b) the Partnership's allocable share of all liens and
mortgages secured by the projects of all Local Limited Partnerships. The fee
is noncumulative and commences at the closing of each Local Limited
Partnership's permanent loan. WP Management earned $10,000 of such fees in
1997 and 1996.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services 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. 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 right to receive fees from the Partnership, as provided in the
Partnership Agreement.
The Partnership has depleted its available reserves and, as a result,
borrows amounts from First Winthrop to pay operating expenses and fund
operating deficits at properties owned by the Local Limited Partnerships. The
borrowings from First Winthrop bear interest at the prime rate (8.50% and
8.25% at December 31, 1997 and 1996, respectively) plus 1%. The loan was
transferred by First Winthrop to an unaffiliated third party on October 27,
1997. The accrued interest payable to First Winthrop was $159,000 at December
31, 1996. The Partnership paid $195,000 of accrued interest to First Winthrop
in 1997, before the transfer. The Partnership will repay the loans from cash
flow generated by the Local Limited Partnerships and the proceeds of any
sales of real estate owned by the Local Limited Partnerships.
F-9
<PAGE>
An affiliate of the Managing General Partner received approximately
$32,000 and $83,000 in management fees from Local Limited Partnerships during
1997 and 1996, respectively.
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of December 31, 1997, the Partnership has Limited Partnership
equity interests in six Local Limited Partnerships each owning one apartment
complex. Such interests are summarized as follows:
Local Limited Partnership Percentage Ownership
- ------------------------- --------------------
The Villas Ltd. (The Villas Apartments) 99
Lynndale Apartments, Ltd. (Lynwood Park Apartments) 50
Stonegate Apartments Limited Partnership (Stonegate Apartments) 93
Cedar Lake, Ltd. (Albany Landing Apartments) 99
College Green Limited Partnership (College Green Apartments) 95
First Investment Limited Partnership (Copperfield Apartments) 80
The Partnership's equity interest in Washington Square Limited Partnership
(89%) was sold in July 1997.
The above Local Limited Partnerships have outstanding mortgages totaling
$18,946,000, which are secured by the Local Limited Partnerships' real
property, security interests, liens and endorsements common to first mortgage
loans.
The combined balance sheets of the Local Limited Partnerships are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------- -------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 929 $ 1,543
Buildings, net of accumulated
depreciation of $13,391 and $16,499 in
1997 and 1996, respectively 9,372 12,740
Cash and cash equivalents 505 1,162
Other assets, net of accumulated
amortization of $722 and $896 in 1997
and 1996, respectively 1,172 1,744
--------------- -------------
Total Assets $ 11,978 $ 17,189
================ =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Notes payable $ 774 $ 804
Loans payable 578 578
Mortgage notes payable 18,946 25,810
Accounts payable and accrued expenses 1,115 1,604
---------------- -------------
</TABLE>
F-10
<PAGE>
<TABLE>
<S> <C> <C>
Total Liabilities 21,413 28,796
---------------- -------------
Partners' Capital:
Winthrop Residential Associates I (7,814) (8,921)
Other partners (1,621) (2,686)
--------------- -------------
(9,435) (11,607)
--------------- -------------
Total Liabilities and Partners' Capital $ 11,978 $ 17,189
================ =============
</TABLE>
The combined statements of operations of the Local Limited Partnerships are
as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------- -------------------
1997 1996
---- ----
<S> <C> <C>
Income:
Rental Income $ 5,020 $ 6,822
Other Income 387 578
-------------- ------------
Total Income 5,407 7,400
-------------- ------------
Expenses:
Interest 1,750 2,476
Depreciation and amortization 1,263 1,495
Taxes and insurance 517 830
Other operating expenses 2,814 3,534
-------------- -----------
Total expenses 6,344 8,335
-------------- -----------
Loss from operations (937) (935)
Gain on sale of properties 3,298 8,181
-------------- -----------
Net income $ 2,361 $ 7,246
============== =============
Net income allocated to Winthrop
Residential Associates I $ 1,212 $ 6,881
============= =============
Net income allocated to other partners $ 1,149 $ 365
============= =============
</TABLE>
During 1997, the Partnership made no additional investments in the
Local Limited Partnerships. As of December 31, 1997, the net cumulative
operating deficit advanced to the Local Limited Partnerships was $3,249,000,
which the Partnership has recorded as capital contributions. However, the
Local Limited Partnerships have accounted for $2,213,000 of these investments
as operating deficit advances and $898,000 as capital contributions. The
remaining $138,000 represents a purchase of interests in a Local Limited
F-11
<PAGE>
Partnership, which is not accounted for by the Local Limited Partnership.
5. INTENT TO SELL AND WRITE-DOWN OF INVESTMENT IN LOCAL LIMITED PARTNERSHIP
The Partnership has entered into a letter of intent pursuant to which
it will sell 37.5% of its 80% interest in a Local Limited Partnership, First
Investment Limited Partnership 1 ("FILP"), to the general partner of the Local
Limited Partnership. If this sale, which is subject to many conditions, is
consummated, it is expected that the Partnership will receive approximately
$260,000 in net proceeds. As a result of this negotiated sales price, the
Partnership recorded a $762,000 write-down of its investment in FILP to its net
realizable value.
6. 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. Due to the
nature of the loans payable it is not practicable to estimate their fair
value because it cannot be determined whether financing with similar terms
and conditions would be available to the Partnership.
7. GAIN ON SALE OF PROPERTY FROM LOCAL LIMTED PARTNERSHIP
During July 1997, the Washington Square Local Limited Partnership
owning the Heritage Hills Townhouses sold the property. The Partnership
received $506,000 in distributions from the sale. The Partnership recognized
a $506,000 gain on sale, as a result of the Partnership's investment account
having a zero balance at the date of sale. The Local Limited Partnership was
terminated during the fourth quarter of 1997.
8. FORECLOSURE OF REAL ESTATE
The mortgage encumbering the Local Limited Partnership owning the
Stonewood property ("Stonewood") was foreclosed upon in March 1996 and the
mortgage encumbering Louisiana Housing Partners ("Shadowbrook") was
effectively deeded in lieu of foreclosure to the lender in August 1996. The
carrying value on the books of the Partnership of these investments was zero
at the time of foreclosure. Distributions from such partnerships aggregated
$539,000 for the year ended December 31, 1996 and are included in income. For
tax purposes, the Partnership recognized a gain of approximately $10,500,000
in 1996 as a result of the foreclosure.
F-12
<PAGE>
9. TAXABLE INCOME
The Partnership's taxable income differs from the net income (loss)
for financial reporting purposes, as follows (in thousands):
1997 1996
---- ----
Net income (loss) for financial reporting purposes $ (322) $ 359
Plus: Amortization of capitalized costs and
costs in excess of the Partnership's
initial basis in the net assets of the 7 7
Local Limited Partnerships
Tax gains in excess of gains for
financial reporting purposes (due
primarily to termination) 4,386 10,558
Writedown of investment 762 -
Equity in Local Limited Partnerships
GAAP loss in excess of tax loss 503 184
Less: Equity in Local Limited Partnership's
losses for financial reporting purposes
not recognizable under the equity method
of accounting (853) (834)
Income from Local Limited Partnerships
Cash distributions (129) (648)
------ ------
$4,354 $9,626
====== ======
10. CONTINGENCIES
On Septebmber 1, 1996, the Local Limited Partnership owning The Villas
Apartments signed a provisional workout agreement, which expired 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
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 Partnerhsip 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 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 Partnerhsip's
investment in this Local Limited Partnership had previously been written-down to
zero.
F-13
<PAGE>
Item 8. Changes in and Disagreements on Accounting and
Financial Disclosure.
There were no disagreements with Imowitz Koenig & Co., LLP regarding
the 1997 or 1996 audits of the Partnership's financial statements.
27
<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. One Winthrop
Properties, Inc., the managing general partner of the Partnership (the
"Managing General Partner"), manages and controls substantially all of the
Partnership's affairs and has general responsibility and ultimate authority
in all matters affecting its business. As of March 1, 1998, 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 and Age Managing General Partner Officer Since
- ------------ ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Edward Williams Chief Financial Officer 4-96
Vice President and
Treasurer
Peter Braverman Senior Vice President 1-96
Carolyn Tiffany Vice President and Clerk 10-95
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") 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.
Edward V. Williams, age 57, has been the Chief Financial Officer of
WFA since April 1996. From June 1991 through March 1996, Mr. Williams was
Controller of NPI and NPI Management. Prior to 1991, Mr. Williams held other
real estate related positions including Treasurer of Johnstown American
Companies and Senior Manager at Price Waterhouse.
28
<PAGE>
Peter Braverman, age 46, has been a Senior Vice President of WFA
since January 1996. From June 1995 until January 1996, Mr. Braverman was a
Vice President of 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 31, 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. From October
1995 to present Ms. Tiffany has been a Vice President in the asset management
and investor relations departments 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 79 Limited Partnership; Winthrop Partners 80 Limited Partnership;
Winthrop Partners 81 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 I Limited Partnership; Winthrop Interim Partners I, A
Limited Partnership; Southeastern Income Properties Limited Partnership;
Southeastern Income Properties II Limited Partnership; and Winthrop Miami
Associates 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
29
<PAGE>
its most recent fiscal year, the Partnership is not aware of any director,
officer or beneficial owner of more than ten percent of 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.
Effective December 16, 1997, the Managing General Partner and certain
of its affiliates entered into an agreement with Coordinated Services of
Valdosta, LLC ("Coordinated Services") to provide for the daily asset and
property management services and investor services for the Partnership. See
"Item 11, Security Ownership of Certain Beneficial Owners and Management."
Coordinated Services of Valdosta LLC is a Georgia limited liability
corporation with headquarters in Valdosta, Georgia. Founded in 1997, its
managing member is Investor Service Group, Inc., a Georgia Corporation. The
principals of Investor Service Group are Mary T. Johnson and James L. Dewar,
Jr.
Mary T. Johnson is the Manager of Coordinated Services. Ms. Johnson
is also Executive Vice President of Dewar Realty, Inc. and Dewar Properties,
Inc. Ms. Johnson is a graduate of Valdosta State University and is a licensed
Georgia Real Estate Broker. Ms. Johnson has 21 years of experience in
property management, asset management, investor services, and development of
apartment and assisted living properties. Ms. Johnson is currently
responsible for the asset management of over 150 investor partnerships and
property management of over 50 apartment communities.
James L. Dewar, Jr. is the founder of Dewar Realty, Inc. and Dewar
Properties, Inc. Mr. Dewar is a graduate of the University of Georgia and is
a licensed Georgia Real Estate Broker. Mr. Dewar has 32 years experience in
real estate construction, property management and development of apartment
and assisted living properties. Mr. Dewar has produced over $100 million in
conventional and government funded family and elderly apartment communities.
Item 10. Executive Compensation.
The Partnership 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.")
30
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners.
The General Partners own the entire general partnership interest. No
person or group is known by the Partnership to be the beneficial owner of
more than 5% of the outstanding Units at March 15, 1998. Under the
Partnership Agreement, 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 approval of the
other General Partner, Linnaeus, is required as to all investments in Local
Limited Partnerships and in connection with any votes or consents arising out
of the ownership of a Local Limited Partnership interest.
(b) Security ownership of management.
None of the officers, directors or general partners of the General
Partner or their respective officers, directors or general partners owned any
Units at March 15, 1998 in individual capacities; however, a wholly-owned
subsidiary of First Winthrop owns 100 Units and Winthrop Financial
Associates, A Limited Partnership owns 5 Units (.60% in the aggregate).
(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. On December 16, 1997, the Managing General Partner and certain
of its affiliates entered into a Services Agreement with 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 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
31
<PAGE>
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 right to receive fees from the Partnership as provided in the
Partnership Agreement.
Item 12. Certain Relationships and Related Transactions.
The Partnership began borrowing from First Winthrop in 1986, and
through December 31, 1997, has borrowed a total of $1,164,672 from First
Winthrop to fund operating deficits incurred by some Local Limited
Partnerships and to pay the Partnership's general and administrative
expenses. Through December 31, 1997, the Partnership has repaid $875,661 to
First Winthrop leaving an outstanding loan balance of $289,011 on December
31, 1997. This amount was transferred by First Winthrop to an unaffiliated
third party on October 27, 1997.
The loans from First Winthrop were made pursuant to and in compliance
with Section 5.3A (iv) of the Partnership Agreement. The loans between the
Partnership and First Winthrop are demand loans which bear interest at Bank
of Boston prime rate plus 1%. No specific repayment terms were negotiated.
The Partnership intends to repay the loans when the Partnership receives cash
from either cash flow or sales proceeds from a Local Limited Partnership.
Under the Partnership Agreement, the General Partners and their
affiliates are entitled to receive various fees, commissions, cash
distributions, allocations of taxable income or loss and expense
reimbursements from the Partnership. There were no fees, commissions or cash
distributions which the Partnership paid to or accrued for the account of the
General Partners and their affiliates for the year ended December 31, 1996.
For the years ended December 31, 1996 and 1997, respectively, Winthrop
Management LLC received management fees of $31,701 and $82,673 from the Local
Limited Partnerships owning Villas, Stonewood and Shadowbrook. In addition,
the Partnership paid $10,000 to Winthrop Management for services rendered in
each of 1996 and 1997.
32
<PAGE>
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
33
<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 as this 28th day
of March 1998.
WINTHROP RESIDENTIAL ASSOCIATES I,
A 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 L. Ashner Chief Executive March 28, 1998
- --------------------- Officer and Director
Michael L. Ashner
/s/ Edward V. Williams Chief Financial Officer March 28, 1998
- ---------------------
Edward V. Williams
34
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
- ------- ----
3. Agreement and Certificate of Limited Partnership of Winthrop
Residential Associates I, A Limited Partnership, dated as of
June 23, 1983 (incorporated herein by reference to the
Partnership's Annual Report on Form 10-K filed March 30,
1984, File No. 0-10272).
4. Agreement and Certificate of Limited Partnership of Winthrop
Residential Associates I, A Limited Partnership, dated as of
June 23, 1983 (incorporated herein by reference to Exhibit 3
hereto).
10.1 Agreement between Winthrop Residential Associates I, A
Limited Partnership and The Artery Organization, Inc.
(incorporated herein by reference to the Registrant's
Registration Statement on Form S-11, File No. 2-70828)
10.2 Services Agreement, dated December 16, 1997, by and 37
between First Winthrop Corporation, Winthrop Financial Co.,
Inc., WFC Realty Co., Inc., WFC Realty Saugus, Inc.,
Winthrop Properties, Inc., Winthrop Metro Equities
Corporation, Winthrop Lisbon Realty, Inc. and Northwood
Realty Co., Inc. and Coordinated Services of Valdosta, LLC.
16. Letter from Arthur Andersen LLP dated September 19, 1996
(incorporated herein by reference to Registrant's Current
Report on Form 8-K dated September 19, 1996).
27. Financial Data Schedule.
99. Supplementary Information Required Pursuant to Section 9.4 of the
Partnership Agreement
35
<PAGE>
DRAFT 3/27/98
SERVICES AGREEMENT
This Agreement (the "Services Agreement") is entered into as of this
_____ day of December, 1997 by and between First Winthrop Corporation, a
Delaware corporation ("FWC"), Winthrop Financial Co., Inc., a Massachusetts
corporation, WFC Realty Co., Inc., a Massachusetts corporation, WFC Realty
Saugus, Inc., a Massachusetts corporation, One Winthrop Properties, Inc., a
Massachusetts corporation, Two Winthrop Properties, Inc., a Massachuset
corporation, Three Winthrop Properties, Inc., a Massachusetts corporation,
Winthrop Metro Equities Corporation, a Delaware corporation, Winthrop Libson
Realty, Inc., a Massachusetts corporation, and Northwood Realty Co., Inc., a
Massachusetts corporation (FWC and the foregoing entities are sometimes
collectively referred to herein as "Winthrop"), and Coordinated Services of
Valdosta, LLC, a Georgia limited liability company ("Agent").
R E C I T A L S:
A. Winthrop provides asset management and investor services to the
partnerships listed on Schedule 1 attached hereto (the "Partnerships");
B. Winthrop also serves as a general partner of certain, but not all,
of the Partnerships;
C. Winthrop is entitled to: (i) certain fees from the Partnerships
for the provision of asset management and investor services as listed in
Column "A" on Schedule 1 (the "Asset Management Fees"), including the payment
of certain accrued fees from the Partnerships as listed in Column "B" on
Schedule 1 (the "Accrued Asset Management Fees"), and in certain instances,
reimbursement of its expenses incurred in the performance of such services to
the Partnerships as set forth in Column "F" on Schedule 1 (the
"Reimbursements"); and (ii) certain (x) cash distributions from operations
("Operating Distributions"), (y) cash distributions from the refinancing
("Refinancing Distributions") of properties owned by the Partnerships, and
(z) cash distributions from the sale ("Sale Distributions") of the properties
owned by the Partnerships, all in its capacity as a partner of the
Partnerships;
D. Winthrop has made certain loans to the Partnerships as listed in
Column "C" on Schedule 1 (the "Existing Loans") which loans have been
assigned by Winthrop to a third party pursuant to a separate agreement;
E. Winthrop maintains numerous bank accounts on behalf of the
Partnerships, including, without limitation, those accounts listed in Column
"I" on Schedule 1 (the "Operating Accounts"), which accounts contain the
operating reserves of the Partnerships which are available to pay third party
costs, including, when appropriate, the Asset Management Fees, Reimbursements
and loans made to the Partnerships; and
F. Winthrop, in its capacity as asset manager and investor services
agent of the Partnerships, desires to assign and appoint Agent to perform
such services, and Agent hereby accepts such assignment and appointment, all
subject to the terms and conditions set forth in this Services Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
ARTICLE 1 - Recitals
1.1 Recitals. The foregoing recitals are hereby affirmed by the
parties as true and correct and are incorporated herein by this reference.
ARTICLE 2 - Services
2.1 Assignment and Acceptance. Winthrop hereby assigns to Agent all
of its rights to perform the asset management and investor services duties
currently being performed by Winthrop on behalf of the Partnerships, and
Agent hereby accepts such appointment and agrees to perform all asset
management and investor services on behalf of the Partnerships, including,
without limitation, the following services:
2.1.1 Asset Management Services. Asset management services
shall include those duties and services which are necessary or appropriate in
connection with the business or operation of the Partnerships, and which are
customarily performed by an asset manager, including, without limitation, the
following:
(i) review and respond to proposals received from
operating partnerships or local general partners pertaining to the
refinancing, sale or restructuring of partnership properties;
(ii) coordinate the prosecution or defense of any
litigation with respect to any of the Partnerships in which Winthrop is the
controlling general partner (excluding any litigation instituted by or on
behalf of any limited partners of the Partnerships against any Partnership or
Winthrop);
(iii) preparation and review of partnership reports;
(iv) supervision and review of partnership bookkeeping,
accounting and audits for Winthrop Residential Associates I, A Limited
Partnership, Winthrop Residential Associates II, A Limited Partnership,
Winthrop Residential Associates III, A Limited Partnership, and Presidential
Associates I Limited Partnership;
(v) maintenance and updating of partnership records, as
appropriate;
(vi) supervision and review of partnership state and
federal tax returns for the Partnerships in which Winthrop serves as tax
matters partners;
(vii)supervision of professionals employed by a
Partnership in connection with any of the foregoing, including attorneys,
accountants and appraisers; and
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(viii) review of each investor Partnership's cash
reserves and approval of distributions to the partners of such Partnerships;
2.1.2 Investor Services. Investor services shall include those
duties and services which are necessary and appropriate in connection with
reporting and communicating with the limited partners of the Partnerships,
including, without limitation:
(i) maintenance and updating the Partnerships'
investors database, including the facilitation of partnership interest
transfers;
(ii) maintenance and updating of all limited partner
records, including, without limitation, limited partner correspondence;
(iii) communications with the limited partners of the
Partnerships in response to their telephone and/or written inquiries
regarding partnership operations and/or the availability of the Partnerships'
tax information;
(iv) preparation of any required limited partner
consent solicitation to any sale or refinancing of a partnership property, or
other major event requiring limited partner consent, and the subsequent
solicitation of any such consent;
(v) an annual mailing (or more frequent communication
as may be required) to the limited partners of the Partnerships with respect
to partnership operations, including annual financial statements of the
Partnerships;
(vi) the mailing to each limited partner of the
Partnerships' limited partner tax information (Schedule K-1);
(vii) analyze the federal income tax consequences of
the sale of any partnership property;
(viii) periodic mailings to limited partners of the
Partnership of partnership distribution checks, if any; and
(ix) upon termination of any Partnership, deliver to
Winthrop such Partnership's records;
2.1.3. Management of Partnership Accounts. Within ten (10)
business days after the full execution of this Services Agreement by all
parties (the "Effective Date"), Winthrop shall transfer the Operating
Accounts to Agent. Agent agrees to provide cash management services to the
Partnerships, subject to the following terms and conditions:
(i) all partnership cash shall be maintained in
segregated cash accounts;
(ii) each cash account shall be clearly identified as
belonging to a Partnership (e.g. XYZ Partnership Account);
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(iii) each account shall be an interest bearing account
for the benefit of the respective Partnership, and shall be maintained at a
federally insured depository institution;
(iv) each account shall be in an amount less than
$100,000 or otherwise invested in an account that is backed by government
securities; and
(v) a fidelity bond in the amount of $150,000 shall be
obtained covering all persons authorized to draw on such accounts, such bond
to be reasonably acceptable to Winthrop with respect to the issuing carrier,
and shall name Winthrop as an additional insured; and
2.1.4 Other Services. Agent or any affiliate thereof shall be
permitted to perform other services to the Partnerships as may be agreed to
between Agent and the Partnerships, provided that such services are not
duplicating the services to be performed hereunder (a property management fee
or a fee for services rendered in procuring a refinancing or sale shall not
be deemed duplicative) and such amounts are similar to those that would be
charged by an independent third party rendering comparable services.
2.2 Obligation to Loan Funds. Agent agrees to lend funds to the
Partnerships (the "Agent Loans") in an amount necessary to pay the costs
associated with the preparation of the tax returns for those Partnerships in
which Winthrop serves as tax matters partner and the distribution thereof to
the limited partners of the Partnerships, through June 30, 2002. The Agent
Loans will be repaid in accordance with Section 3.3 herein.
2.3 Winthrop Consent; Actions Regarding Approval. Winthrop, as
general partner of those Partnerships in which its serves as a general
partner, hereby consents to the services to be performed by Agent hereunder
on its behalf, and hereby agrees, subject to its fiduciary duties when acting
as a general partner of a Partnership, that Agent shall have the power and
authority to perform the necessary asset management and investor services
required to be performed hereunder for the Partnerships in which Winthrop
serves as a general partner (or limited partner to the extent Winthrop
possesses any special approval rights separate and apart from the other
limited partners of a Partnership), without any approval from Winthrop;
provided, however, Agent shall have no authority to perform the following
functions without the prior written approval of Winthrop:
(i) the sale, transfer, assignment or other disposition
of all or any portion of the properties owned by a Partnership;
(ii) filing for protection under the bankruptcy laws by
a Partnership;
(iii) surrender of a property of a Partnership to a
lender;
(iv) the filing of any reports required under the
Securities Exchange Act of 1934 (e.g. Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and any Current Reports required to be filed on Form
8-K);
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(v) the subordination of the Existing Loans to any
loans in excess of the outstanding principal balance of all indebtedness of
the respective Partnership as of the date of this Services Agreement;
(vi) transfer of partnership assets to a master limited
partnership or any other form of so-called partnership roll-up;
(vii) the tender or offer to purchase of any limited
partnership interests;
(viii) amending any partnership agreement as it affects
the rights or obligations of a general partner; and
(ix) the making of any future distributions to partners
of the Partnerships after Winthrop has given written notice to Agent that, in
the reasonable judgment of Winthrop, such future distributions will result in
an unacceptable amount of cash reserves available for future operations;
provided, however, that in any event a payment to Agent of the annual fee
shown on Schedule I shall not be affected.
In addition to the matters listed above, Winthrop shall
have the right, upon at least ten (10) days prior written notice to Agent, to
designate any additional action as an action that should require its prior
approval if, in its reasonable judgment, such designation is reasonably
necessary in order to permit Winthrop to carry out its fiduciary duty as a
general partner of a Partnership; provided Agent shall not be obligated to
increase its scope of services or liability under this Services Agreement,
nor decrease its compensation as a result thereof.
2.4 Standard of Performance. In performing the services required to
be performed by it pursuant to this Services Agreement, Agent shall perform
such services in accordance with all applicable laws, rules and regulations,
and in a manner that is consistent with all applicable provisions of the
partnership agreements of the Partnerships (and Agent shall take no action
with respect to any Partnership which cannot otherwise be taken by the
general partner or limited partner of any Partnership (the "Partner")), and,
subject to the provisions of and limitations set forth in Section 2.3, with
such care and in accordance with such standards of performance as would be
applied to a such Partner pursuant to the terms of any partnership agreement
if such Partner had performed such services directly.
2.5 Servicer not a Partner. No provision of this Services Agreement
shall be construed as stating or implying that Agent is acting or
substituting for Winthrop as a Partner of any of the Partnerships, or that
Agent has assumed any fiduciary duty or fiduciary responsibility that
Winthrop, as a Partner of a Partnership, may have as to the Partnership.
2.6 Power of Attorney. Upon the reasonable request of Agent and so
long as a power of attorney is necessary to consummate the action requested,
and, if required hereunder Winthrop has consented to such action, Winthrop
shall within ten (10) business days after written receipt of Agent's request,
deliver a power of attorney to enable Agent to act on behalf of Winthrop,
provided such action is consistent with the terms of this Services Agreement.
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ARTICLE 3 - Consideration
3.1 Winthrop Compensation. For and in consideration of the rights
transferred to Agent hereunder, Agent hereby agrees to pay Winthrop Six
Hundred Thousand Dollars ($600,000) in immediately available funds upon the
Effective Date of this Services Agreement. The parties hereto acknowledge
that the foregoing consideration is allocable as follows:
(i) $100,000 consulting fee with respect to the
transfer of the Partnerships' records;
(ii) $200,000 consulting fee with respect to the
potential sale of Irvington and New Brunswick; and
(iii) $300,000 in consideration for the fee income and
distributions assigned pursuant to Section 3.2 below.
As additional consideration, Agent shall pay to Winthrop one hundred
twenty-five thousand dollars ($125,000) within five (5) days after the
closing of the WMC Mortgage transaction, when and if such closing occurs.
3.2 Agent Compensation. For and in consideration of the assumption of
the rights, duties and obligations by Agent hereunder, Winthrop hereby
assigns to Agent all of its right, title and interest in and to the Asset
Management Fees, the Accrued Asset Management Fees, the Reimbursements, the
Operating Distributions and the Refinancing Distributions. Agent acknowledges
that Sale Distributions are not being assigned pursuant to the terms of this
Services Agreement, and that any Sale Distributions shall be paid to the
partners of the Partnerships, including Winthrop, as provided by the
appropriate Partnership's partnership agreement, with the exception of any
Sale Distributions attributable to Irvington and New Brunswick which shall be
paid to Agent.
3.3 Agent Loans. Agent Loans shall be repaid pursuant to the terms of
the respective partnership agreement as third party loans of the Partnerships
to which a loan was made. Notwithstanding Section 2.3(v) of this Services
Agreement, Agent Loans shall be repaid prior to the Existing Loans.
3.4 Fees Nonrecourse. Agent acknowledges that the services to be
provided hereunder are for the benefit of the Partnerships and not Winthrop,
and therefore, Agent agrees to look solely to the net assets of each
Partnership for the payment of the Asset Management Fees, the Accrued Asset
Management Fees, the Reimbursements, the Operating Distributions, the
Refinancing Distributions, and the repayment of any Agent Loans, and not to
the assets of any other Partnership or Winthrop (except to the extent any
sums received by Winthrop which should otherwise be paid to Agent pursuant to
the terms of this Services Agreement are not paid to Agent), and further
agrees that any deficit capital account of a partner in a Partnership shall
not be deemed an asset of the Partnership. The provisions of this Section 3.4
shall not apply to the obligations of Winthrop under Section 6.3 below.
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ARTICLE 4 - Partnership Information
4.1 Partnership Information. Winthrop, within five (5) business days
after the Effective Date, shall deliver the following information to Agent:
(i) all Partnership files, consisting of the
syndication and acquisition files of the Partnerships to the extent in
Winthrop's possession;
(ii) all Partnership records, consisting of the
Partnership Agreements and any amendments thereto;
(iii) all investors records, consisting of limited
partner lists and correspondence, including access to the existing Resource
Phoenix investor database;
(iv) federal tax returns for the Partnerships for the
years 1994, 1995 and 1996, to the extent in Winthrop's possession; and
(v) federal tax returns for years prior to 1994 on an
as requested basis with payment of a fee to Winthrop for retrieving such
information from its off-site storage facility, such fee to be determined in
writing by Winthrop prior to such retrieval.
Further, all information and payments relating to Partnerships
received by Winthrop after the Effective Date shall be promptly forwarded to
Agent.
4.2 Future Information. Agent agrees to deliver to Winthrop the
following reports after the Effective Date of this Services Agreement:
(i) all correspondence and other reports sent to the
limited partners of the Partnerships;
(ii) copies of all status reports for the Partnerships;
(iii) copies of all complaints, cease and desist orders
from federal or state regulatory authorities, notices threatening litigation
or regulatory proceedings, any other similar notices which relate to any of
the Partnerships;
(iv) annual financial reports and tax returns; and
(v) copies of such other documents and reports relating
to this Services Agreement as Winthrop may reasonably require.
ARTICLE 5 - Representations
5.1 Representations by Winthrop. Winthrop hereby represents and
warrants to Agent as follows:
(i) Each Winthrop entity (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation , and (b) has full
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corporate power to enter into this Services Agreement and to perform all of
the terms, conditions and provisions set forth herein to be performed by it;
(ii) the acceptance and performance of the terms and
provisions of this Services Agreement have been duly authorized and approved
by all necessary governmental authorities and this Services Agreement is
binding upon and enforceable against Winthrop in accordance with its terms;
(iii) none of the transactions hereby contemplated to
be performed by Winthrop, nor the fulfillment of the terms, provisions and
conditions hereof, will conflict with, or result in a breach of any of the
material terms, conditions, or provisions of, or constitute a default under,
any material agreement or instrument to which Winthrop is a party or by which
it is bound; and
(iv) Schedule 1 attached hereto is true, correct and
complete in all material respects;
5.2 Representations by Agent. Agent hereby represents and warrants to
FWC as follows:
(i) Agent (a) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Georgia, and (b) has full power to enter into this Services Agreement and
to perform all of the terms, conditions and provisions set forth herein to be
performed by Agent;
(ii) the acceptance and performance of the terms and
provisions of this Services Agreement have been duly authorized and approved
by all necessary governmental authorities and this Services Agreement is
binding upon and enforceable against Agent in accordance with its terms; and
(iii) none of the transactions hereby contemplated to
be performed by Agent, nor the fulfillment of the terms, provisions and
conditions hereof, will conflict with, or result in a breach of any of the
material terms, conditions, or provisions of, or constitute a default under,
any material agreement or instrument to which Agent is a party or by which it
is bound.
5.3 Survival. All representations and warranties contained in this
Services Agreement or made pursuant hereto or in connection herewith shall
remain in effect for a period of five (5) years after the Effective Date,
after which they shall expire and cease to be of any force and effect,
provided that any representation or warranty which is not true when made and
which is made fraudulently and with intent to defraud or mislead shall
survive such 5-year period.
ARTICLE 6 - Term, Transfer and Termination
6.1 Term. This Services Agreement shall commence on the Effective
Date and shall continue with respect to each Partnership until the
liquidation of such Partnership and the distribution of all of its assets;
provided, however, that this Services Agreement shall terminate in any event
no later than June 30, 2014. Notwithstanding the foregoing, at any time after
June
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30, 2008, Winthrop may elect to request Agent (or affiliate(s) of
Agents, as Agent shall direct) to acquire (including by way of a transfer of
control of a Winthrop entity) its general partnership in all of the
Partnerships in which Winthrop acts as the general partner for the purchase
price of one thousand dollars ($1,000) (the "Purchase Price"). Such request
shall be made by Winthrop by delivering notice to Agent indicating Winthrop's
request under this Section 6.1. Within sixty (60) days following receipt of
such request, if Agent elects to agree to Winthrop's request,: (a) Agent
shall cause the Purchase Price to be paid by check to Winthrop; and (b)
Winthrop shall (i) provide appropriate documentation evidencing the transfer
of the general partnership to Agent or its designee, and (ii) deliver to
Agent an absolute and unconditional assignment of its rights to provide the
services contemplated by this Services Agreement, together with the fees
associated therewith, without representation or warranty. Upon closing of the
aforementioned transaction, this Services Agreement shall terminate, and
neither party shall have any further rights or obligations hereunder, except
those that expressly survive the termination of this Services Agreement. Upon
receipt of Winthrop's request, Agent may decline the same by written notice
to Winthrop within thirty (30) days. In such event, this Services Agreement
shall terminate fifteen (15) days after Agent's notice, and neither party
shall have any further rights or obligations hereunder, except those that
expressly survive the termination of this Services Agreement. In the event
that no offer is then outstanding under Section 6.2 below, Winthrop shall be
obligated to make an offer to Agent in accordance with the terms of this
Section 6.1 by May 1, 2014.
6.2 Transfer/Right of First Offer. Agent shall have no right to
transfer (including by way of a transfer of control of Agent) or assign this
Services Agreement without the consent of Winthrop, which may be given or
withheld in its sole discretion. Winthrop shall have the right to transfer
its general partner interest in any or all of the Partnerships in which it
acts as a general partner; provided, however, that if Winthrop elects to sell
its general partnership interest in a Partnership during the term of this
Services Agreement, Agent shall have the right of first offer set forth in
subsection (i) to purchase such interest:
(i) Winthrop shall give written notice to Agent of the
price and terms on which Winthrop desires to sell the general partnership
interest. Such notice shall constitute an offer by Winthrop to sell the
general partnership interest to Agent on an "as is" basis, without any
representations and warranties other than those as to ownership of such
interest. The price offered to Agent shall be the value of the interest
encumbered by this Services Agreement. Agent shall have thirty (30) days from
receipt of such notice to accept the offer by giving to Winthrop within such
period written notice of acceptance. If the offer is so accepted, the
purchase and sale of the interest shall be consummated within sixty (60) days
after such acceptance (or such longer period, not to exceed six (6) months,
as may be required solely to obtain the approval of any governmental
authority whose consent is required to transfer a general partnership
interest in any Partnership). If the purchase transaction is not consummated
within the foregoing 60-day period, Agent's rights pursuant to this Section
shall terminate.
(ii) In the event Agent rejects the offer or fails
timely to accept the offer made pursuant to subsection (i) above, Winthrop
may, during the six (6) month period next following the expiration of the
30-day offer period, enter into an agreement with any third person for the
sale of the interest at a price not less than the price contained in the
notice
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submitted to Agent and on terms not more favorable to the purchaser than the
terms contained in the notice submitted to Agent. Conditions to the
purchaser's obligation to buy and warranties concerning the interest shall
not be deemed terms more favorable to the purchaser. If no agreement is
entered into within such 6-month period, or if an agreement is entered into
within such 6-month period, but the purchase transaction has not been
consummated with sixty (60) days after expiration of such 6-month period (or
such longer period, not to exceed six (6) months, as may be required solely
to obtain the approval of any governmental authority whose consent is
required to transfer a general partnership interest in any Partnership), the
interest shall not thereafter be sold without first being reoffered to Agent
in accordance with the terms of this Section.
6.3 Termination by Winthrop. If, during the term of this Services
Agreement, Winthrop receives notice of the occurrence of any of the events
listed in this Section 6.3, Winthrop may terminate this Services Agreement
(either in total for the reasons set forth in clauses (i)or (ii) below, or as
to one or more of the Partnerships for the reasons set forth in clause (iii)
or clause (iv) below to the extent that such reasons are applicable to such
Partnership(s)), upon thirty (30) days written notice to Agent (or such
shorter period if required in the reasonable judgment of Winthrop to prevent
a disruption of continuous services to the Partnerships):
(i) a continuing material default by Agent to provide
the services to the Partnerships required herein and in the manner provided
herein, which default shall not be cured within thirty (30) days after
receipt of written notice thereof from Winthrop or within such longer period
(but in any event not to exceed one hundred and twenty (120) days), if any,
as may be reasonably required to effect such proceeding to effect such cure;
(ii) the discontinuance or cessation of business by
Agent, including by reason of the bankruptcy of Agent;
(iii) with respect to any one or more of the
Partnerships, a decision made in the good faith judgment of Winthrop that
termination is required to permit Winthrop to satisfy their fiduciary
obligations to such Partnership(s); or
(iv) at any time after the Effective Date, the adoption
or enactment of any applicable law or governmental rule, requirement,
guideline, order or regulation, or any change therein or change in the
interpretation or administration thereof, by any judicial or governmental
authority which shall make it illegal or impossible for Winthrop or the
Partnerships to engage Agent to provide the services described in this
Services Agreement; provided, however, that (a) Winthrop shall use its
reasonable efforts to eliminate such illegality or impossibility to the
extent reasonably possible, and shall have the right to terminate only those
portions of this Services Agreement which it has become illegal or impossible
for Winthrop or the Partnerships to engage Agent to perform, and (b) Winthrop
shall provide to Agent an opinion of Winthrop's counsel (which counsel shall
be reasonably satisfactory to Agent) confirming such illegality or
impossibility.
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In the event Winthrop elects to terminate this Services Agreement (in
whole or part) for the reasons set forth in clause (iii) above, Winthrop
shall pay Agent the following termination fee (the "Termination Fee"):
Years Termination Fee
1 - 5 Three (3) times the actual
collected Asset Management Fees and
Operating Distributions received
from the Partnerships for which
this Services Agreement is canceled
for the calendar year preceding
such termination
6 - 10 Two (2) times the actual collected
Asset Management Fees and Operating
Distributions received from the
Partnerships for which this
Services Agreement is canceled for
the calendar year preceding such
termination
11 - 15 One (1) times the actual collected
Asset Management Fees and Operating
Distributions received from the
Partnerships for which this
Services Agreement is canceled for
the calendar year preceding such
termination
In the event Winthrop elects to terminate this Services Agreement (in
whole or part) for the reasons set forth in clause (iv) above at any time
prior to June 30, 2002, Winthrop shall refund the consideration paid by Agent
under Section 3.1 (i), (ii), and (iii) less the amount of Asset Management
Fees, Accrued Asset Management Fees, Operation Distributions, Refinancing
Distributions, and Sale Distributions Agent has collected after deducting
Agent's reasonable direct costs and unreimbursed expenses which it has
incurred in the performance of its services hereunder.
Said Termination Fees, if any, will be paid within five (5) business
days after receipt from Agent of all Partnership information required to be
returned to Winthrop pursuant to the terms of this Services Agreement, and
the transfer of the Operating Accounts, if any, held by Agent pursuant to
Section 2.1.3 herein.
6.4 Termination by Agent. If, during the term of this Services
Agreement, Agent receives notice of the occurrence of any of the events
listed below, Agent may terminate this Services Agreement:
(i) at any time after the Effective Date, the adoption
or enactment of any applicable law or governmental rule, requirement,
guideline, order or regulation, or any change therein or change in the
interpretation or administration thereof, by any judicial or governmental
authority which shall make it illegal or impossible for Agent to provide the
services described herein; provided, however, that (a) Agent shall use its
reasonable efforts to
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eliminate such illegality or impossibility to the extent reasonably possible,
and shall have the right to terminate only those portions of this Services
Agreement which it has become illegal or impossible for Agent to perform, and
(b) Agent shall provide to Winthrop an opinion of Agent's counsel (which
counsel shall be reasonably satisfactory to Winthrop) confirming such
illegality or impossibility;
(ii) the material breach by Winthrop of any one or more
of the representations made in Section 5.1, but only where such material
breach has a material adverse effect on the business, condition (financial or
otherwise) or results of operations of Agent; or
(iii) with respect to any one or more of the
Partnerships, the amendment of the partnership agreement of a Partnership
upon the request or direction of Winthrop which has a material adverse effect
on Agent's rights, compensation or obligations under this Services Agreement
as to such Partnership.
In any event, Agent shall have the right to terminate this Services
Agreement on June 30, 2002, and each anniversary thereafter, upon six (6)
months prior written notice to Winthrop.
In the event this Services Agreement is terminated by Agent pursuant
to Section 6.4 (i) or (iii) above (in whole or part) at any time prior to
June 30, 2002, Winthrop shall refund the consideration paid by Agent under
Section 3.1 (i), (ii), and (iii) less the amount of Asset Management Fees,
Accrued Asset Management Fees, Operation Distributions, Refinancing
Distributions, and Sale Distributions Agent has collected after deducting
Agent's reasonable direct costs and unreimbursed expenses which it has
incurred in the performance of its services hereunder; said refund will be
paid within five (5) business days after receipt from Agent of all
Partnership information required to be returned to Winthrop pursuant to the
terms of this Services Agreement, and the transfer of Operating Accounts, if
any, held by Agent pursuant to Section 2.1.3 herein.
6.5 Effect of Termination. In the event of the termination of this
Services Agreement with respect to any one or more particular Partnership,
then the entitlement of Agent with respect to any compensation referred to in
Section 3.2 with respect to such Partnership shall terminate concurrently
therewith. Notwithstanding the foregoing, no termination of this Services
Agreement, either in total or with respect to any Partnership, shall impair
the rights of Agent to ultimately receive all amounts earned by Agent under
this Services Agreement prior to the effective date of any such termination.
6.6 Post-Termination Matters.
6.6.1 Servicer Cooperation. In the event of a termination of
this Services Agreement, in its entirety or as to one or more Partnerships,
Agent shall:
(i) turn over to Winthrop within five (5) business
days, without charge, all Partnership books and records, whether in writing
or stored in electro-magnetic form, all bank accounts maintained on behalf of
the Partnerships, all management summaries relating
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to the administration of Partnership business, and all management systems
utilized to provide services to the Partnerships, and all other materials
generally relating to the Partnerships;
(ii) consent, without the payment of any consideration,
to the employment by Winthrop, or any other person that Winthrop may retain
to provide services to the Partnerships, of any of Agent's employees
following termination of this Services Agreement which Agent shall not
require (in Agent's sole discretion) in order to continue its other business
activities; and
(iii) for such period as is reasonably required
therefor, generally cooperate in good faith with Winthrop in winding down its
activities under this Services Agreement and causing an orderly transition of
responsibility for the services to occur.
In the event this Services Agreement is terminated by Winthrop under
Section 6.3 (iv) or (v) or by Agent under Section 6.4 (i), (ii) or (iii),
Winthrop shall reimburse Agent for the cost of compliance with Section
6.6.1(i), provided, however, Agent shall not charge any fee in connection
with such matters.
6.6.2 Survival. The provisions of this Section of this
Services Agreement shall survive any termination hereof for a period of one
(1) year.
ARTICLE 7 - Miscellaneous
7.1 Access to Books and Records. Agent shall permit Winthrop and its
agents and representatives to have access, during normal business hours, to
all books and records of Agent and the Partnerships (as they relate to the
Partnerships) and to those management-level persons employed or retained by
Agent who provide services to any of the Partnerships, for the purpose of
permitting Winthrop to verify the performance by Agent of its obligations
under this Services Agreement. Agent shall also, from time to time, supply to
Winthrop such other information as Winthrop may reasonably request for such
purpose. All information and documents received hereunder by Winthrop shall,
unless the same have previously been made available to the public by Agent or
otherwise are generally known in the trade, be kept confidential by Winthrop
and its agents and representatives and shall not be disclosed or released to
any other person or entity without the express written consent of Agent or
the Partnerships. Winthrop shall provide similar access to Agent for any
records in its possession which relate to the Partnerships.
7.2 Successors and Assiqns. Without limiting the restrictions on
transfer set forth in Section 6.2, this Services Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns.
7.3 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Services
Agreement shall be governed by and construed and enforced in accordance with
the laws of the Commonwealth of Massachusetts applicable to contracts
intended to be performed entirely within such Commonwealth (without regard to
any choice of law provisions thereof). The parties each hereby irrevocably
consent and submit to the jurisdiction of the courts in the Commonwealth of
Massachusetts, for the purposes of all legal proceedings arising out of or
13
<PAGE>
relating to this Services Agreement, and agree that venue for any legal
action arising out of this Services Agreement shall be in Suffolk County,
Massachusetts.
7.4 Entire Agreement. This Services Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any prior oral or written agreement between the parties respecting
the subject matter hereof.
7.5 Waivers. Neither this Services Agreement nor any of the terms
hereof may be terminated, amended or waived orally by the parties, but only
by an instrument in writing signed by the party against which enforcement of
the termination, amendment or waiver is sought. Notwithstanding the foregoing
provisions of this Section 7.5, the rights and obligations of the parties
hereunder shall be automatically modified from time to time hereunder to the
extent and in the manner necessary to make this Services Agreement and the
rights and obligations of the parties hereunder comply with any and all
applicable federal and state securities and real estate syndication laws,
rules and regulations.
7.6 Counterparts. This Services Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Services Agreement to produce or
account for more than one such counterpart.
7.7 Independent Contractor Relationship. This Services Agreement is
not intended to and shall not create any relationship of principal and agent,
partnership, joint venture, employer and employee or any other relationship,
association or affiliation whatsoever between the parties, except for that of
independent contractor.
7.8 Further Assurances. Each party covenants on behalf of itself, its
successors and assigns, to execute, with acknowledgment or affidavit if
required, any and all documents and writings which may be necessary or
desirable to carry out the purposes of this Services Agreement.
7.9 Severability. In the event that any provision of this Services
Agreement, or the application of such provision to any person, entity or set
of circumstances, shall be deemed invalid, unlawful or unenforceable to any
extent, the remainder of this Services Agreement, and the application of all
such provisions to persons, entities or circumstances other than those
determined invalid, unlawful or unenforceable shall not be affected and shall
continue to be enforceable to the fullest extent permitted by law.
7.10 Notices.
7.10.1 All notices, demands or requests provided for or
permitted to be given pursuant to this Services Agreement must be in writing.
All notices, demands and requests to be sent to Winthrop pursuant hereto
shall be deemed to have been properly given or served by personal delivery,
by depositing the same in the United States mail, postpaid and registered or
certified with return receipt requested or by depositing the same with any
reputable overnight mail courier at the following address:
14
<PAGE>
First Winthrop Corporation
5 Cambridge Center, 9th Floor
Cambridge, Massachusetts 02142
Attention: Carolyn Tiffany
and
First Winthrop Corporation
100 Jericho Quadrangle, Suite 214
Jericho, New York 11753
Attention: Peter Braverman
with a copy to: Post & Heymann, LLP
100 Jericho Quadrangle, Suite 214
Jericho, New York 11753
Attention: William W. Post, Esquire
7.10.2 All notices, demands or requests to be sent to Agent
pursuant hereto shall be deemed to have been properly given or served by
personal delivery, by depositing the same in the United States mail, postpaid
and registered or certified with return receipt requested or by depositing
the same with any reputable overnight mail courier at the following address:
2409 Bemiss Road
Valdosta, Georgia 31601
Attention: Mary T. Johnson
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Katharine E. Bachman, Esquire
7.10.3 Unless another requirement is specifically set forth in
any Section hereof, each notice, demand and request shall be effective upon
personal delivery or three (3) business days after the date on which the same
is deposited in the United States mail or the next business day after the
date on which the same is deposited with any reputable overnight mail courier
in accordance with the foregoing requirements. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no
notice was given shall not adversely impact the effectiveness of any such
notice, demand or request.
7.10.4 By giving to the other parties at least fifteen (15)
days written notice thereof, the parties hereto, and their respective
successors and assigns, shall have the right from time to time and at any
time during the term of this Services Agreement to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
15
<PAGE>
7.11 Titles and Captions. Paragraph titles or captions contained in
this Services Agreement are inserted only as a matter of convenience and for
reference. Such titles and captions in no way define, limit, extend or
describe the scope of this Services Agreement nor the intent of any
provisions hereof.
7.12 No Third Party Beneficiaries. Under no circumstances shall any
provision of this Services Agreement be deemed to be for the benefit of or
enforceable by any person or entity other than Winthrop, each of the
Partnerships (unless and until this Services Agreement is terminated with
respect to such Partnership) and Agent.
7.13 Attorneys' Fees. If any party hereto brings an action to enforce
the terms hereof or to obtain a declaration of the rights of such party
hereunder, the prevailing party in any such action, on trial or appeal, shall
be entitled to such party's reasonable attorneys' fees to be paid by the
losing party.
[SIGNATURE LINES ON SET FORTH ON NEXT PAGE]
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Services Agreement
as of the Effective Date.
COORDINATED SERVICES OF VALDOSTA, LLC
By:
--------------------------
Name:
Title:
FIRST WINTHROP CORPORATION
By:
--------------------------
Name:
Title:
WINTHROP FINANCIAL CO., INC.
By:
--------------------------
Name:
Title:
WFC REALTY CO., INC.
By:
--------------------------
Name:
Title:
WFC REALTY SAUGUS, INC.
By:
--------------------------
Name:
Title:
ONE WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
17
<PAGE>
TWO WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
THREE WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
WINTHROP METRO EQUITIES CORPORATION
By:
--------------------------
Name:
Title:
WINTHROP LIBSON REALTY, INC.
By:
--------------------------
Name:
Title:
NORTHWOOD REALTY CO., INC.
By:
--------------------------
Name:
Title:
18
<TABLE> <S> <C>
<PAGE>
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 251,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 951,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 640,000
<TOTAL-LIABILITY-AND-EQUITY> 951,000
<SALES> 0
<TOTAL-REVENUES> 580,000 <F1>
<CGS> 0
<TOTAL-COSTS> 17,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 762,000
<INTEREST-EXPENSE> 48,000
<INCOME-PRETAX> (322,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (322,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322,000)
<EPS-PRIMARY> (11.17)
<EPS-DILUTED> (11.17)
<FN>
(1) Includes gain on sale of property from Local Limited Partnership of
$506,000.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
WINTHROP RESIDENTIAL ASSOCIATES I, A LIMITED PARTNERSHIP
DECEMBER 31, 1997
SUPPLEMENTARY INFORMATION REQUIRED PURSUANT TO SECTION 9.4 OF THE
PARTNERSHIP AGREEMENT (UNAUDITED)
1. Statement of Cash Available for Distribution for the three months
ended December 31, 1997:
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1997 December 31, 1997
------------------- ---------------------
<S> <C> <C>
Net (loss) $ (322,000) $ (780,000)
Add: Amortization 7,000 2,000
Write-down of investment in Local
Limited Partnership 762,000 762,000
Cash from reserves 180,000 37,000
Less: Equity in net loss of Local Limited
Partnership (55,000) (21,000)
Repayment of loan payable affiliate (377,000) -
Repayment of interest payable to affiliate (195,000) -
------------------- ---------------------
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 December 31, 1997:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
------------ ----------------- --------------
<S> <C> <C>
First Winthrop Corporation Interest on Loans $ 7,000
</TABLE>
