<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-11063
Winthrop Residential Associates II, A Limited
--------------------------------------------------
Partnership (Exact name of small business issuer as
specified in its charter)
Maryland 04-2742158
- ------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, Massachusetts 02110
-------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
1 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands, Except Unit Data) 1996 1995
--------------------- ---------------------
Assets
<S> <C> <C>
Cash and cash equivalents $ 3,693 $ 2,078
Restricted cash 351 -
Other assets 31 8
--------------------- ---------------------
Total assets $ 4,075 $ 2,086
===================== =====================
Liabilities and Partners' Capital
Liabilities:
Accrued expenses $ 63 $ -
Other liability 382 $ -
Distribution payable $ 605 $ 105
--------------------- ---------------------
Total liabilities 1,050 105
--------------------- ---------------------
Partners Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized, issued
and outstanding - 25,005 Units 3,937 2,970
General Partners (Deficit) (912) (989)
--------------------- ---------------------
Total Partners' Capital 3,025 1,981
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 4,075 $ 2,086
===================== =====================
</TABLE>
See notes to financial statements.
2 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Statements of Operations (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
----------------- ----------------- ---------------- ----------------
1996 1995 1996 1995
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Income:
Local limited partnership cash distributions $ 1,801 $ 191 $ 1,939 $ 521
Interest income 36 27 82 73
----------------- ----------------- ---------------- ----------------
Total income 1,837 218 2,021 594
----------------- ----------------- ---------------- ----------------
Expenses:
General and administrative 19 5 62 46
Management fees 26 19 99 59
----------------- ----------------- ---------------- ----------------
Total expenses 45 24 161 105
----------------- ----------------- ---------------- ----------------
Net income $ 1,792 $ 194 $ 1,860 $ 489
================= ================= ================ ================
Net income allocated to General Partners $ 90 $ 10 $ 93 $ 25
================= ================= ================ ================
Net income allocated to Limited Partners $ 1,702 $ 184 $ 1,767 $ 464
================= ================= ================ ================
Net income per Unit of Limited Partnership
Interest $ 68.05 $ 7.36 $ 70.65 $ 18.55
================= ================= ================ ================
Distributions per Unit of Limited Partnership Interest $ 24.00 $ 3.00 $ 32.00 $ 8.00
================= ================= ================ ================
</TABLE>
See Notes to Financial Statements
3 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Statement of Changes in Partners' Capital (Unaudited)
<TABLE>
<CAPTION>
Units of
(In Thousands, Except Unit Data) Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
----------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Balance - January 1, 1996 25,010 $ (989) $ 2,970 $ 1,981
Distributions (16) (800) (816)
Net income 93 1,767 1,860
----------------- ------------------ ------------------- -------------------
Balance - September 30, 1996 25,010 $ (912) $ 3,937 $ 3,025
================= ================== =================== ===================
</TABLE>
See notes to financial statements.
4 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1996 1995
--------------------- ---------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,860 $ 489
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from Local Limited Partnership
cash distributions (1,939) (521)
Changes in assets and liabilities:
Decrease in other assets 8 66
Increase in accrued expenses 63 11
--------------------- ---------------------
Net cash (used in) provided by operating activitie (8) 45
--------------------- ---------------------
Cash Flows From Investing Activities:
Cash distributions from Local Limited Partnerships 1,939 521
--------------------- ---------------------
Repayment of loan from Local Limited Partnership 382 -
Loans to Local Limited Partnership (31) -
Increase in restricted cash (351) -
--------------------- ---------------------
Cash provided by investing activities 1,939 521
--------------------- ---------------------
Cash Flows From Financing Activities:
Cash distributions (316) (184)
--------------------- ---------------------
Cash used in financing activities (316) (184)
--------------------- ---------------------
Net increase in cash and cash equivalents 1,615 382
Cash and cash equivalents, beginning of period 2,078 1,566
--------------------- ---------------------
Cash and cash equivalents, end of period $ 3,693 $ 1,948
===================== =====================
</TABLE>
See notes to financial statements.
5 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Partnership's annual report on Form 10-K for
the year ended December 31, 1995.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. Certain amounts have been reclassified to conform to the
September 30, 1996 presentation. The balance sheet at December 31, 1995 was
derived from audited financial statements at such date.
The results of operations for the three and nine months ended September 30,
1996 and 1995 are not necessarily indicative of the results to be expected
for the full year.
2. Related Party Transactions
An affiliate of the Managing General Partner, is entitled to a fee for
services rendered in managing the Partnership's investments in the Local
Limited Partnerships equal to the greater of $100,000 or 10% of the
Partnership's share of cash distributions from the Local Limited
Partnerships, not to exceed 1/2 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. Management fees aggregated $99,000 during the
nine months ended September 30, 1996.
3. Reorganization
In August 1996, the Local Limited Partnership owning Southwest Parkway
Apartments ("Southwest Parkway"), in an effort to avoid a foreclosure of
the property, filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. The carrying value on
the books of the Partnership of this investment is zero.
Prior to the Chapter 11 filing, Southwest Parkway remitted $382,000 to the
Partnership in partial repayment of a loan. In addition, between July and
August 1996 the Partnership made loans to Southwest Parkway and paid
expenses on its behalf aggregating $31,000. The disposition of the above
transactions is uncertain pending the outcome of the Chapter 11
proceedings. Consequently, the Partnership has reflected the $351,000 of
net cash resulting from the above transactions as restricted cash and the
$382,000 of loan proceeds as an other liability on the accompanying
financial statements.
6 of 12
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation
This Item should be read in conjunction with the financial statements
and other items contained elsewhere in the report.
Liquidity and Capital Resources
As of September 30, 1996, the Partnership retained an equity interest in
nine Local Limited Partnerships owning 11 apartment properties. 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 or to make capital
contributions or loans 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. In August 1996, the Local
Limited Partnership which owns Southwest Parkway Apartments, in an
effort to avoid foreclosure and retain control of the property, filed
for protection under Chapter 11 of the United States Bankruptcy Code
(see Item 1, Note 3). If Southwest Parkway Apartments is lost through
foreclosure, the Partnership expects that $5.5 million (approximately
$210 per limited partnership unit) will be recaptured as income for
income tax purposes.
Southwest Parkway, however, anticipates reaching agreement for a
settlement with the Lender, which agreement is subject to approval of
the Bankruptcy Court. The agreement will allow Southwest Parkway to
purchase the debt for $4,100,000 and retain ownership of the property.
In order to complete the purchase of the debt, the Partnership expects
to lend approximately $2,000,000 to Southwest Parkway. It is anticipated
that the remaining $2,100,000 will be funded by a new first mortgage.
If the deal is consummated the Partnership will retain the $382,000
discussed in Item 1, Note 3.
To date, all cash requirements have been satisfied by interest income
earned on short-term investments and cash distributed to the Partnership
by the Local Limited Partnerships. If the Partnership funds any
operating deficits, it will use monies from its operating reserves. As
of September 30, 1996, the Partnership held operating reserves of
$3,693,000 as compared to $2,078,000 at December 31, 1995. The Managing
General Partner's current policy is to maintain a reserve balance
sufficient to provide the Partnership the flexibility to preserve its
economic interest in the Local Limited Partnerships. Therefore, a lack
of cash distributed by the Local Limited Partnerships to the Partnership
in the future should not deplete the reserves, though it may restrict
the Partnership from making distributions.
The level of liquidity based on cash and cash equivalents experienced a
$1,615,000 increase at September 30, 1996, as compared to December 31,
1995. The Partnership's $1,939,000 of cash distributions and $382,000
loan repayment (see Item 1, Note 3) from Local Limited Partnerships was
partially offset by $31,000 of loans to Southwest Parkway Apartments,
$351,000 of restricted cash (see Item 1, Note 3), $8,000 of cash used in
operating activities and $316,000 of cash distributions to partners.
Distributions received from Local Limited Partnerships include
$1,391,000 of refinancing proceeds distributed to the Partnership in the
third quarter of 1996 from the Local Limited Partnership which owns
Crofton Village Apartments, of which $500,000 is being distributed to
limited partners on November 15, 1996.
7 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
The Partnership is not obligated to provide any additional funds to the
Local Limited Partnerships to fund operating deficits and does not
anticipate doing so in 1996. Beyond 1996, the Partnership will determine
on a case by case basis whether to fund any 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 may
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.
The Partnership is contemplating investing an additional $100,000 to be
used for capital improvements in the Local Limited Partnership owning
Brookside Apartments ("Brookside"). The Partnership is currently
negotiating with the general partner of the Local Limited Partnership
which holds title to Brookside pursuant to which an affiliate of the
general partner of the Partnership would be appointed as general partner
of the Brookside Local Limited Partnership and assume responsibility for
managing Brookside. Such transfer is subject to the approval of the U.S.
Department of Housing and Urban Development.
During the nine months ended September 30, 1996, the Partnership
distributions aggregated $800,000 ($32.00 per unit), which includes
$500,000 of refinancing proceeds received from the Local Limited
Partnership owning Crofton Village Apartments, to its limited partners
and $16,000 to the general partners. The ability of the Partnership to
continue to make distributions to its partners is dependent upon the
financial performance of the Local Limited Partnerships.
Results of Operations
Net income increased by $1,371,000 and $1,598,000 for the nine and three
months ended September 30, 1996, respectively, as compared to 1995,
primarily due to a distribution of $1,391,000 from Crofton Village
Apartments. Expenses increased by $56,000 and $21,000 for the nine and
three months ended September 30, 1996, respectively, as compared to
1995, primarily due to an increase in management fees and an increase in
general and administrative expenses. General and administrative expenses
increased due to an increase in professional fees and related costs.
Management fees increased primarily due to the timing of the accrual for
the 1995 period.
8 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
PART - II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to Section 9.4 of the
Partnership Agreement.
(b) Reports on Form 8-K:
On September 19, 1996 a current report on Form 8-K was filed with respect
to the Registrant's change of Independent Auditors.
9 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY:/S/ Michael L. Ashner
--------------------------
Michael L. Ashner
Chief Executive Officer
BY:/S/ Edward V. Williams
--------------------------
Edward V. Williams
Chief Financial Officer
Dated: November 7, 1996
10 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
SEPTEMBER 30, 1996
Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 12
11 of 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
SEPTEMBER 30, 1996
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three months
ended September 30, 1996:
Net Income $ 1,792,000
Less: Cash to reserves (1,186,000)
-------------
Cash Available for Distribution $ 606,000
=============
Distributions allocated to General Partners $ 6,000
=============
Distributions allocated to Limited Partners $ 600,000
=============
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended
September 30, 1996:
Entity Receiving Form of
Compensation Compensation Amount
------------------ ------------------------------------------- --------
W.P. Management
Co., Inc. Property Management Fees $ 26,000
General Partners Interest in Cash Available for Distribution $ 6,000
WFC Realty Co., Inc.
(Initial Limited
Partner) Interest in Cash Available for Distribution $ 120
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates II, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,693,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,075,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,025,000
<TOTAL-LIABILITY-AND-EQUITY> 4,075,000
<SALES> 0
<TOTAL-REVENUES> 1,939,000
<CGS> 0
<TOTAL-COSTS> 99,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,860
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,860
<EPS-PRIMARY> 70.65
<EPS-DILUTED> 70.65
</TABLE>
