<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 June 30, 1997
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, MA 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_____
---
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1997
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
(In Thousands, Except Unit Data) 1997 1996
------------- ------------
Assets
Cash and cash equivalents $ 1,328 $ 2,732
Escrow deposits 101 370
Other 115 5
Real Estate (net of accumulated depreciation
of $3,096 in 1997) 2,541 -
------------- ------------
Total Assets $ 4,085 $ 3,107
============= ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 241 $ 70
Distribution payable 53 53
Due to affiliate 501 -
Mortgage payable 2,195 -
------------- ------------
Total Liabilities 2,990 123
------------- ------------
Partners Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized, issued
and outstanding - 25,010 Units. 2,103 3,898
General Partners (Deficit) (1,008) (914)
------------- ------------
Total Partners' Capital 1,095 2,984
------------- ------------
Total Liabilities and Partners' Capital $ 4,085 $ 3,107
============= ============
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1997
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Income:
Rental income $ 214 $ - $ 426 $ -
Local limited partnership cash
distributions 168 41 190 138
Interest income 15 24 35 46
Other 5 - 11 -
------------- ------------- ------------- ------------
Total income 402 65 662 184
------------- ------------- ------------- ------------
Expenses:
General and administriative 41 26 65 43
Operating 116 - 221 -
Depreciation 51 - 102 -
Amortization 4 - 4 -
Interest 46 - 84 -
Management fees 36 40 69 73
------------- ------------- ------------- ------------
Total expenses 294 66 545 116
------------- ------------- ------------- ------------
Net income (loss) before
extraordinary item 108 (1) 117 68
Extraordinary gain on extinguishment
of debt - - 2,522 -
------------- ------------- ------------- ------------
Net income (loss) $ 108 $ (1) $ 2,639 $ 68
============= ============= ============= ============
Net income (loss) allocated to General
Partners $ 5 $ - $ 132 $ 3
============= ============= ============= ============
Net income (loss) allocated to Limited
Partners $ 103 $ (1) $ 2,507 $ 65
============= ============= ============= ============
Net income (loss) per Unit of Limited
Partnership interest:
Income (loss) before extraordinary
item $ 4.12 $ (.04) $ 4.44 $ 2.60
Extraordinary gain - - 95.80 -
------------- ------------- ------------- ------------
Net income (loss) $ 4.12 $ (.04) $ 100.24 $ 2.60
============= ============= ============= ============
Distributions per Unit of Limited
Partnership $ 2.00 $ 4.00 $ 4.00 $ 8.00
============= ============= ============= ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1997
Consolidated 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, 1997 25,010 $ (914) $ 3,898 $ 2,984
Adjustment due to consolidation (221) (4,202) (4,423)
Net income 132 2,507 2,639
Distributions (5) (100) (105)
----------- ------------ ----------- ------------
Balance - June 30, 1997 25,010 $ (1,008) $ 2,103 $ 1,095
=========== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1997
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30, June 30,
(In Thousands) 1997 1996
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 2,639 $ 68
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 102 -
Amortization 4 -
Extraordinary gain on extinguishment of debt (2,522) -
Changes in assets and liabilities:
Decrease in escrow deposits 623 -
(Increase) decrease in other assets (10) 8
(Decrease) increase in accounts payable and
accrued expenses (46) 36
------------- -------------
Net cash provided by operating activities 790 112
------------- -------------
Cash Flows From Investing Activities:
Deposits to replacement reserve (23) -
Property improvements (36) -
------------- -------------
Cash used in investing activities (59) -
------------- -------------
Cash Flows From Financing Activities:
Loan proceeds 2,200 -
Satisfaction of mortgage payable (4,148) -
Mortgage principal payments (5) -
Cash distributions (105) (210)
Deferred loan costs (77) -
------------- -------------
Net cash used in financing activities (2,135) (210)
------------- -------------
Net decrease in cash and cash equivalents (1,404) (98)
Cash and cash equivalents, beginning of period 2,732 2,078
------------- -------------
Cash and cash equivalents, end of period $ 1,328 $ 1,980
============= =============
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash $ 84 $ -
============= =============
Supplemental Disclosure of Non-Cash Financing
Activities:
Accrued Distributions to Partners $ 53 $ 105
============= =============
</TABLE>
See notes to consolidated financial statements.
5 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
NOTES TO CONSOLIDATED 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-KSB for the year ended December 31, 1996.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of
such financial information have been included. All adjustments are of a
normal recurring nature, except for the accounting of the additional
investment in one of the Local Limited Partnerships as described in
Note 2. The balance sheet at December 31, 1996 was derived from audited
financial statements at such date.
The results of operations for the six months ended June 30, 1997 and
1996 are not necessarily indicative of the results to be expected for
the full year.
2. Basis of Presentation
The Partnership owns a 99% limited partnership interest in Southwest
Parkway Ltd. ("Southwest Parkway"), a Local Limited Partnership. An
affiliate of the general partners of the Partnership is the general
partner of Southwest Parkway. This limited partnership interest prior
to January 1, 1997 had been accounted for under the equity method. As a
result of the significant new capital contribution made by the
Partnership in January 1997, as described below, the Partnership has
attained substantive control of Southwest Parkway. Accordingly,
effective January 1, 1997, the financial statements include the
accounts of Southwest Parkway on a consolidated basis. All significant
intercompany transactions and balances have been eliminated.
Southwest Parkway, in an effort to avoid foreclosure and retain control
of its property, filed for protection under Chapter 11 of the United
States Bankruptcy Code in August 1996. Southwest Parkway negotiated an
agreement for a settlement with its lender that was approved by the
Bankruptcy Court as part of the confirmation of the plan of
reorganization in January 1997. The agreement, which was implemented in
January 1997, allowed Southwest Parkway to purchase its debt for
$4,100,000 and retain ownership of the property. In conjunction with
the purchase of the debt, the Partnership invested approximately
$1,770,000 in Southwest Parkway as a capital contribution. Southwest
Parkway obtained a new first mortgage in the amount of $2,200,000 and
recognized an extraordinary gain of $2,522,000 on the extinguishment of
debt.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Proforma Financial Information
The proforma condensed, consolidated balance sheet of the Partnership
and Southwest Parkway at December 31, 1996 and proforma condensed,
consolidated statements of operations for the six and three month
periods ended June 30, 1996 are summarized as follows (in thousands):
December 31,
1996
----------
Cash $ 2,732
Other assets, primarily
real estate 3,520
----------
Total assets $ 6,252
==========
Liabilities, primarily a
mortgage payable 7,715
Deficit (1,463)
----------
Total liabilities and equity $ 6,252
==========
Six months Three months
ended June 30, ended June 30,
1996 1996
---------- -----------
Total revenue $ 628 $ 289
---------- -----------
Operating and other expenses 381 201
Depreciation 106 53
Mortgage interest 245 126
---------- -----------
Total expenses 732 380
---------- -----------
Net loss $ (104) $ (91)
=========== ===========
4. Related Party Transactions
An affiliate of the Managing General Partner earned a fee for services
rendered in managing the Partnership's investments in the Local Limited
Partnerships of $50,000 and $73,000 during the six months ended June
30, 1997 and 1996, respectively.
Southwest Parkway is managed by an affiliate of its general partner,
which receives an annual fee of 5% of the gross receipts of the
property. Management fees aggregated $19,000 during the six months
ended June 30, 1997.
As of June 30, 1997, Southwest Parkway is obligated to its general
partner for an operating deficit loan payable of $501,000. The loan is
non-interest bearing.
7 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Mortgage Payable
In January 1997, Southwest Parkway obtained a new first mortgage in the
amount of $2,200,000. The loan bears interest at 8.75%, requires
monthly payments of approximately $18,000 and is being amortized over
27 1/2 years. The loan matures on February 1, 2007 with a balloon
payment of approximately $1,898,000. As specified in the loan
agreement, Southwest Parkway is required to make monthly payments of
approximately $4,000 to a replacement reserve account for future
capital improvements. Total capitalized loan costs were approximately
$77,000.
8 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
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 June 30, 1997, the Partnership retained an equity interest
in eight Local Limited Partnerships owning ten apartment
properties. The Partnership also owns a 99% Limited Partnership
interest in Southwest Parkway Ltd. ("Southwest Parkway"). An
affiliate of the general partners of the Partnership is the
general partner of Southwest Parkway. In conjunction with the
substantial investment made by the Partnership, in January 1997,
in Southwest Parkway (which had been accounted for as another
Local Limited Partnership under the equity method), the financial
statements of the Partnership and Southwest Parkway have been
consolidated effective January 1, 1997. The Partnership's primary
sources of income are distributions from the Local Limited
Partnerships and rental income from Southwest Parkway. The
Partnership requires cash to pay the operating expenses of
Southwest Parkway, 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, as well as to pay its management
fees, general and administrative expenses.
Southwest Parkway in an effort to avoid foreclosure and retain
control of the property, filed for protection under Chapter 11 of
the United States Bankruptcy Code in August 1996. Southwest
Parkway negotiated an agreement for a settlement with its lender
that was approved by the Bankruptcy Court as part of the
confirmation of the plan of reorganization in January 1997. The
agreement, which was closed in January 1997, allowed Southwest
Parkway to purchase its debt for $4,100,000 and retain ownership
of the property. Southwest Parkway recognized an extraordinary
gain of $2,522,000 on the extinguishment of debt. In conjunction
with the purchase of the debt, the Partnership invested
approximately $1,770,000 in Southwest Parkway in January 1997, as
a capital contribution. Southwest Parkway obtained a new first
mortgage in the amount of $2,200,000. The loan bears interest at
8.75%, requires monthly payments of approximately $18,000 and is
being amortized over 27 1/2 years. The loan matures on February
1, 2007 with a balloon payment of approximately $1,898,000. As
specified in the loan agreement, Southwest Parkway is required to
make monthly payments of approximately $4,000 to a replacement
reserve account for future capital improvements. As a result of
this transaction, the Partnership preserved its equity in the
property.
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. 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.
9 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
The level of liquidity based on cash and cash equivalents
experienced a $1,404,000 decline at June 30, 1997, as compared to
December 31, 1996. The reduction resulted primarily from the
satisfaction of the Southwest Parkway mortgage as described
above. The Partnership's $790,000 of cash provided by operating
activities was more than offset by $36,000 of property
improvements, $23,000 of deposits to replacement reserve
(investing activities) and $2,135,000 of cash used in financing
activities. Financing activities consisted of mortgage payable
satisfaction of $4,148,000, mortgage principal payments of
$5,000, cash distributed to partners of $105,000 and deferred
loan costs of $77,000, which were only partially offset by loan
proceeds of $2,200,000.
The Partnership is not obligated to provide any additional funds
to the Local Limited Partnerships to fund operating deficits. 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 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.
The general partner of the Local Limited Partnership owning the
Westbury Springs property has agreed to purchase the property or
the Partnership's limited partnership interest in the Local
Limited Partnership. The current agreement provides for a closing
by December 31, 1997. If the sale is consummated, it is
anticipated the Partnership will receive net proceeds of no less
than $1,400,000.
As of June 30, 1997, Partnership distributions (paid or accrued)
aggregated $100,000 ($4.00 per unit) to its limited partners and
$5,000 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 for the six months ended June 30, 1997 by
$2,571,000, as compared to the six months ended June 30, 1996.
The increase includes net income of $2,503,000 recognized due to
the consolidation of Southwest Parkway ($2,522,000 of
extraordinary gain). Excluding Southwest Parkway, net income
increased by $68,000 primarily due to an increase in Local
Limited Partnership cash distributions of $52,000 and a decrease
in management fees of $23,000. In 1997, Local Limited
Partnerships owning Honeywood and Crofton Village Apartments made
cash distributions to the Partnership of $146,000 and $44,000,
respectively.
10 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Results of Operations (Continued)
Net income increased for the three months ended June 30, 1997 by
$109,000, as compared to the three months ended June 30, 1996.
Excluding Southwest Parkway, net income increased by $125,000,
due to an increase in Local Limited Partnership cash
distributions of $127,000.
11 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
PART - II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to Section
9.4 of the Partnership Agreement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months
ended June 30, 1997.
12 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
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: August 8, 1997
13 of 15
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
Exhibit Index
Exhibit Page No.
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 15
14 of 15
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1997
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three
months ended June 30, 1997:
<TABLE>
<S> <C>
Net Income $ 108,000
Add: Depreciation 51,000
Amortization 4,000
Less: Cash to reserves (111,000)
---------------
Cash Available for Distribution $ 52,000
===============
Distributions allocated to General Partners $ 2,000
===============
Distributions allocated to Limited Partners $ 50,000
===============
</TABLE>
2. Fees and other compensation paid or accrued by the
Partnership to the general partners, or their affiliates,
during the three months ended June 30, 1997:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
---------------- ------------ ------
<S> <C> <C>
W.P. Management
Co., Inc. Property Management Fees $ 25,000
General Partners Interest in Cash Available for Distribution $ 2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 10
</TABLE>
15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Winthrop Residentail Associates II, A Limited Partnership and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,328,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,637,000
<DEPRECIATION> 3,096,000
<TOTAL-ASSETS> 4,085,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,195,000
<COMMON> 0
0
0
<OTHER-SE> 1,095,000
<TOTAL-LIABILITY-AND-EQUITY> 4,085,000
<SALES> 0
<TOTAL-REVENUES> 627,000
<CGS> 0
<TOTAL-COSTS> 396,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,000
<INCOME-PRETAX> 117,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 117,000
<DISCONTINUED> 0
<EXTRAORDINARY> 2,522,000
<CHANGES> 0
<NET-INCOME> 2,639,000
<EPS-PRIMARY> 100.24
<EPS-DILUTED> 100.24
</TABLE>
