<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
For the year ended December 31, 1996 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 of organization) (I.R.S. Employer I.D. No.)
One International Place, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 330-8600
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. [ ]
Cover Page continued on Next Page
<PAGE>
Cover Page 2 of 2
Registrant's revenues for its most recent fiscal year were $2,092,797.
No market for the Limited Partnership Units exists and therefore, a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part of the
Form 10-KSB
I The Prospectus of the Registrant dated January 29,
1982, as supplemented on March 5, 1982, June 21, 1982
and August 27, 1982
Transitional Small Business Disclosure Format: Yes ___ No X
2
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PART I
Item 1. Description of Business.
Development.
Winthrop Residential Associates II ("WRA II"), was originally organized
under the Uniform Limited Partnership Act of the State of Maryland on October
21, 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, the financing of which are 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 properties. On June 23, 1983, WRA II 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 II changed its name to Winthrop Residential
Associates II, A Limited Partnership (the "Partnership").
The general partners of the Partnership are One Winthrop Properties,
Inc., a Massachusetts corporation ("One Winthrop"), and Linnaeus-Hawthorne
Associates Limited Partnership ("Linnaeus-Hawthorne"). One Winthrop is a
wholly-owned subsidiary of First Winthrop Corporation ("First Winthrop"), which
in turn is wholly-owned by Winthrop Financial Associates, A Limited Partnership
("WFA"), a Maryland public limited partnership. One Winthrop is the
Partnership's managing general partner. See "Change in Control."
In late 1981, the Partnership filed a Registration Statement on Form
S-11 with the Securities and Exchange Commission with respect to a public
offering of 25,000 Units of limited partnership interest ("Units") at a purchase
price of $1,000 per Unit (an aggregate of $25,000,000). The Registration
Statement was declared effective on January 29, 1982. The offering terminated on
November 17, 1982, at which time 25,000 Units, representing capital
contributions from Investor Limited Partners of $25,000,000, had been subscribed
for. Capital contributions, net of selling commissions, sales and registration
costs, were
3
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utilized to purchase interests in 10 Local Limited Partnerships and temporary
short term investments.
The only business of the Partnership is investing as a limited partner
in Local Limited Partnerships that own, operate and otherwise deal with
apartment complexes with original financing insured by the U.S. Department of
Housing and Urban Development ("HUD"). The Partnership's investment objectives
and policies are described at pages 23-29 of its Prospectus dated January 29,
1982 (the "Prospectus") under the caption "Investment Objectives and Policies,"
which description is attached hereto as an exhibit and incorporated herein by
this reference. The Prospectus was previously filed with the Commission pursuant
to Rule 424(b).
Initially, the Partnership acquired equity interests ranging from 52.8%
to 99% in ten Local Limited Partnerships, owning 12 properties, for an aggregate
investment, including capitalizable and noncapitalizable fees and expenses, of
approximately $21,669,334. One of the Partnership's properties was sold in 1986.
See "Item 2, Description of Properties" for information relating to these
properties.
The Partnership is currently negotiating with the general partner of
the Local Limited Partnership which owns Brookside Apartments to replace the
general partner with an affiliate of the Partnership. In addition, an affiliate
of the Partnership would also assume responsibility for managing Brookside
Apartments. Any such transfer would be subject to HUD approval.
Defaults
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, 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
4
<PAGE>
is effective and its terms are being met, HUD agrees not to pursue any remedies
available to it as a result of the default.
In March 1987, the Local Limited Partnership owning Southwest Parkway
defaulted on its mortgage. Since that time, the Local Limited Partnership has
submitted various proposals to HUD to cure the mortgage default, all of which
have been rejected. The Partnership was notified that this mortgage would be
included in an auction. 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. In November 1996, Southwest
Parkway filed its Bankruptcy Plan which was confirmed by the Bankruptcy Court in
January 1997. The plan included the payment to the lender of $4,100,000 as full
satisfaction of the outstanding indebtedness. In connection with this
transaction, the Partnership expects to recognize forgiveness of indebtedness
income in 1997. See "Item 2, Description of Properties" for information with
respect to the origination of funds used to satisfy the outstanding
indebtedness.
In April 1995, the Local Limited Partnership owning Sanford Landing
negotiated a workout agreement with HUD pursuant to which the interest rate on
the debt was reduced so that the debt service payments are at a serviceable
level based on the property's current cash flow. In addition, a portion of the
mortgage was reassigned to the original mortgagee. The remaining balance
continues to be held by HUD.
Change in Control
On December 22, 1994, pursuant to an Investment Agreement entered into
among Nomura Asset Capital Corporation ("NACC"), Arthur J. Halleran, Jr., the
sole general partner of Linnaeus Associates Limited Partnership ("Linnaeus"),
the sole general partner of WFA, Mr. Halleran and certain other individuals who
comprised the senior management of WFA, transferred the general partnership
interest in Linnaeus to W.L. Realty, L.P. ("W.L. Realty"). W.L. Realty is a
Delaware limited partnership, the general partner of which was, until July 18,
1995, A.I. Realty Company, LLC ("Realtyco"), an entity owned by certain
employees of NACC. 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"),
5
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acquired, among other things, Realtyco's general partner interest in W.L. Realty
and a sixty four percent (64%) limited partnership interest in W.L. Realty, and
the general partnership interest in Linneaus-Hampshire.
As a result of the foregoing acquisitions, Londonderry II is the sole
general partner of W.L. Realty which is the sole general partner of Linnaeus,
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.
Employees
The Partnership does not have any employees. Services are performed for
the Partnership by the Managing General Partner, and agents retained by it,
including an affiliate of the Managing General Partner, WP Management Co., Inc.
Item 2. Description of Properties.
The Partnership has invested in Local Limited Partnerships which own
properties located in diverse markets with respect to both the amount and nature
of competition affecting the properties. Some of the rental markets first became
overbuilt during the mid-1980's. Supply of apartments available for rent began
to exceed demand and consumers became very price sensitive. In order to attract
tenants, certain properties were required to maintain rental rates rather than
increase them to meet increasing costs. As a result, these properties were
forced to defer maintenance and replacements which were necessary to attract
tenants, thus exacerbating the competitive forces at work in these markets.
6
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The following table sets forth certain information regarding the
properties owned by the Local Limited Partnerships in which the Partnership has
retained an interest and which continue to own apartment properties as of March
15, 1997:
Date of Number of
Property Name Location Acquisition(1) Units
- ------------- -------- -------------- ---------
Whisper Lake Orlando, FL 2/24/82 400
Apartments
Sanford Landing Sanford, FL 4/06/82 264
Apartments
Honeywood Apartments Roanoke, VA 1/05/83 300
Brookside Apartments Sylacauga, AL 4/20/82 80
Westbury Springs Gwinnett Co, GA 5/27/82 150
Apartments
Southwest Parkway Wichita Falls, TX 6/22/82 200
Apartments
Wedgewood Creek Gurnee, IL 6/24/82 198
Apartments
Mountain Vista I Albuquerque, NM 10/28/82 124
Mountain Vista II Albuquerque, NM 10/28/82 96
Cibola Village Albuquerque, NM 10/28/82 128
Apartments
Crofton Village Crofton, MD 10/04/82 258
Apartments
- --------------------
(1) Represents the date on which the Partnership made its initial investment
in the Local Limited Partnership
7
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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 1996 Rate Amortized Date Maturity
- -------- ------------ -------- --------- -------- ---------
Whisper Lake $12,025,180 7.675% 40 years 4/1/2024 (1)
Sanford Landing 5,433,364 8.75% 40 years 6/1/2024 (1)
Honeywood 5,812,789 7.5% 40 years 12/1/2019 (1)
Brookside 1,438,503 7.5% 40 years 2/1/2023 (1)
Westbury Springs 4,360,428 7.5% 40 years 7/1/2023 (1)
Southwest Parkway (2) 8.75% 40 years 2/1/2007 $2,000,000
Wedgewood Creek 9,003,004 7.5% 40 years 8/1/2024 (1)
Mountain Vista I 1,910,850 7.5% 38 years 10/1/2018 (1)
Mountain Vista II 2,016,189 7.5% 38 years 5/1/2020 (1)
Cibola Village 1,914,243 7.5% 37 years 2/1/2019 (1)
Crofton Village 9,575,007 8.2% 38 years 9/1/2006 (1)
(1) Loan at maturity is fully amortized.
(2) Loan was refinanced on January 27, 1997.
Descriptions of the properties and the terms upon which the equity
interests were acquired by the Partnership are set forth under the captions
"Investment in Local Limited Partnerships" at pages 1-11 of the Supplement to
the Prospectus dated March 5, 1982; at pages 1-22 of the Supplement to the
Prospectus dated June 21, 1982; and at pages 1-48 of the Supplement to the
Prospectus dated August 27, 1982, all of which descriptions are attached hereto
as an exhibit and incorporated herein by this reference. The three Supplements
to the Prospectus were filed with the Commission pursuant to Rule 424(c) and as
Post-Effective Amendments Nos. 1, 2, and 3, respectively, to the Partnership's
Registration Statement on Form S-11 (Registration No. 2-74784).
In connection with the Bankruptcy of the Local Limited Partnership
which owns Southwest Parkway Apartments, on January 27, 1997 the Local Limited
Partnership obtained a new first mortgage loan in the principal amount of
$2,200,000. The loan bears interest at a rate of 8.75%, is amortized over a 30
year period and matures on February 1, 2007. The Local Limited Partnership paid
approximately $100,000 in transactional costs.
In order to obtain the remaining $2,000,000 needed by the Local Limited
Partnership to satisfy the then existing debt on the property
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pursuant to the Bankruptcy Plan, the Partnership made a capital contribution of
approximately $1,770,000 and the balance was funded from the Local Limited
Partnership's cash reserves.
On March 21, 1997, the Partnership was informed that an affiliate of
the general partner of the Local Limited Partnership that owns Westbury Springs
offered to purchase the property for $1,555,641, of which $1,447,434 is
allocable to the Partnership. The sale is subject to many conditions and is
expected to be consummated, if at all, during 1997.
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 1996 1995 1996 1995
- -------- ---- ---- ---- ----
Whisper Lake 92% 92% $548 $524
Sanford Landing 93% 89% $497 $478
Honeywood 89% 92% $508 $508
Brookside 88% 91% $334 $341
Westbury Springs 96% 97% $595 $559
Southwest Parkway 99% 99% $364 $363
Wedgewood Creek 92% 92% $718 $720
Mountain Vista I 86% 93% $584 $571
Mountain Vista II 89% 96% $593 $576
Cibola Village 93% 94% $511 $503
Crofton Village 94% 97% $680 $680
9
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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, 1996:
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
- -------- -------- ------------ ---- ------ ---------
Whisper Lake 14,250,490 7,379,694 10-25 yrs. S/L 1,843,500
Sanford Landing 9,043,423 4,784,366 7-25 yrs. S/L 833,011
Honeywood 8,606,288 7,607,751 5-25 yrs. ACRS 998,537
Brookside 1,812,110 1,079,869 10-25 yrs. S/L 70,918
Westbury Springs 5,291,512 2,811,065 10-25 yrs. S/L 567,464
Southwest Parkway 5,601,588 2,993,632 10-25 yrs. S/L 849,554
Wedgewood Creek 11,001,943 5,652,414 10-25 yrs. S/L 5,349,529
Mountain Vista I 3,219,163 1,616,375 5-27.5 yrs. S/L 4,626,045(1)
Mountain Vista II 2,941,634 1,497,708 5-27.5 yrs. S/L 4,626,045(1)
Cibola Village 3,079,736 1,500,404 5-27.5 yrs. S/L 4,626,045(1)
Crofton Village 10,125,255 5,419,502 10-25 yrs. S/L 1,485,337
(1) Represents the Partnership's Federal Tax Basis in the Local Limited
Partnership which owns Mountain Vista I, Mountain Vista II and Cibola Village.
Except for an additional $100,000 investment for capital improvements
in the Local Limited Partnership owning Brookside Apartments which the
Partnership is currently contemplating, the Partnership has no present
intentions of investing any additional funds in the Local Limited Partnerships.
Item 3. Legal Proceedings.
The Partnership is not a party nor are any of its properties subject to
any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period
covered by this report.
10
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, 1997, there were 2,615 holders of 25,000 outstanding
Units.
The Partnership Agreement requires that if the Partnership has Cash
Available for Distribution, it be distributed quarterly to the Partners in
specified proportions. The Partnership Agreement defines Cash Available for
Distribution as Cash Flow less cash designated by the Managing General Partner
to be held for restoration or creation of reserves. Cash Flow, in turn, is
defined as cash derived from the Local Limited Partnerships (but excluding sale
or refinancing proceeds) and all cash derived from Partnership operations, less
cash used to pay operating expenses of the Partnership. For the years ended
December 31, 1996 and 1995, cash distributions paid or accrued to the Investor
Limited Partners as a group totaled $850,000 and $300,000, respectively.
11
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Liquidity and Capital Resources
As of December 31, 1996, the Partnership retained an equity interest in nine
Local Limited Partnerships owning eleven 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.
The Local Limited Partnership which owns Southwest Parkway Apartments
("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 (see Item 7, "Financial Statements" - Note
4). 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. In conjunction with the purchase of the debt and in order to
avoid a significant tax liability to the Partnership and, accordingly,
its partners, 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
new mortgage bears interest of 8.75% per annum and matures on February
1, 2007.
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. At December 31, 1996, the Partnership
held operating reserves of $2,732,000 (of which $1,400,000 was invested in
Southwest Parkway in January 1997) 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
$654,000 increase at December 31, 1996, as compared to December 31, 1995. The
Partnership's $1,969,000 of cash distributions from Local Limited Partnerships
was partially offset by a $370,000 escrow payment with respect to the
Southwest Parkway Apartments debt settlement and $920,000 of cash
distributions to partners. Distributions received from Local Limited
Partnerships include $1,391,000 of refinancing proceeds distributed to the
Partnership from the Local Limited Partnership owning Crofton Village
Apartments, of which $500,000 was distributed to the limited partners in
November, 1996.
The Partnership is not obligated to provide any additional funds to the Local
Limited Partnerships to fund operating deficits. 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 Partnership would share these consequences
in proportion to its ownership interest in the Local Limited Partnership.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Liquidity and Capital Resources (Continued)
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 is negotiating to purchase the property or the Partnership's
limited partnership interest in the Local Limited Partnership. An agreement
has not yet been reached.
For the year ended December 31, 1996, Partnership distributions aggregated
$850,000 ($33.99 per unit), which includes $500,000 of refinancing proceeds
received from the Local Limited Partnership owning Crofton Village Apartments,
to its limited partners and $18,000 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 $1,158,000 for the year ended December 31, 1996, as
compared to 1995, primarily due to the receipt of a $1,391,000 distribution
from the refinancing proceeds from Crofton Village Apartments. Expenses
increased by $95,000 for the year ended December 31, 1996 compared to 1995,
primarily due to an increase in management fees and general and administrative
expenses. General and administrative expenses increased due to an increase in
professional fees and related costs. Management fees increased due to the
timing of the accrual for the 1995 period.
<PAGE>
Item 7. Financial Statements
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
INDEX
Page
Independent Auditors' Reports.................................. F-2
Financial Statements:
Balance Sheets as of December 31, 1996 and 1995................ F-4
Statements of Income for the Years Ended
December 31, 1996 and 1995................................ F-5
Statements of Partners' Capital for the Years Ended
December 31, 1996 and 1995................................ F-6
Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995................................ F-7
Notes to Financial Statements.................................. F-8
F-1
<PAGE>
Independent Auditors' Report
To the Partners
Winthrop Residential Associates II, a Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheet of Winthrop Residential
Associates II, a Limited Partnership (a Maryland limited partnership) as of
December 31, 1996 and the related statements of income, partners' capital and
cash flows for the year 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 audit. We did
not audit the financial statements of the 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 audit 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 audit and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit 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 II, a
Limited Partnership as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Imowitz Koenig & Co., LLP
New York, New York
March 24, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of WINTHROP RESIDENTIAL
ASSOCIATES II, A Limited Partnership (a Maryland limited partnership) as of
December 31, 1995 and the related statements of operations, changes in
partners' capital and cash flows for the year 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. 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 the 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 II, A
LIMITED PARTNERSHIP as of December 31, 1995 and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 20, 1996
F-3
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
BALANCE SHEETS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1996 1995
------------------ -------------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 2,732 $ 2,078
Escrow Deposit 370 -
Other 5 8
----------------- -----------------
Total Assets $ 3,107 $ 2,086
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses $ 70 $ -
Distribution payable 53 105
----------------- -----------------
Total Liabilities 123 105
----------------- -----------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership
Interest, $1,000 stated value
per unit; 25,010 units authorized,
issued and outstanding 3,898 2,970
General Partners (deficit) (914) (989)
----------------- -----------------
Total Partners' Capital 2,984 1,981
----------------- -----------------
Total Liabilities and Partners'
Capital $ 3,107 $ 2,086
================= =================
</TABLE>
See notes to financial statements.
F-4
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995
---------------- ------------------
<S> <C> <C>
Income:
Income from Local Limited Partnership
cash distributions $ 1,969 $ 701
Interest 124 100
Other - 39
----------------- -----------------
Total Income 2,093 840
----------------- -----------------
Expenses:
General and Administrative 99 50
Management fees 123 77
----------------- -----------------
Total Expenses 222 127
----------------- -----------------
Net income $ 1,871 $ 713
================= =================
Net income allocated to General
Partners $ 93 $ 36
================= =================
Net income allocated to Limited
Partners $ 1,778 $ 677
================= =================
Net Income per Unit of Limited
Partnership Interest $ 71.09 $ 27.07
================= =================
Distributions per Unit of Limited
Partnership Interest $ 33.99 $ 12.00
================= =================
</TABLE>
See notes to financial statements.
F-5
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1996 AND 1995
(In Thousands, Except Unit Data)
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
---------- ---------- ---------- ----------
Balance - January 1, 1995 25,010 $ (1,009) $ 2,593 $ 1,584
Net Income 36 677 713
Distributions (16) (300) (316)
---------- ---------- ---------- ----------
Balance - December 31, 1995 25,010 (989) 2,970 1,981
Net Income 93 1,778 1,871
Distributions (18) (850) (868)
---------- ---------- ---------- ----------
Balance - December 31, 1996 25,010 $ (914) $ 3,898 $ 2,984
========== ========== ========== ==========
See notes to financial statements.
F-6
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,871 $ 713
Changes in assets and liabilities:
Increase (decrease) in accrued expenses 70 (3)
Decrease in other assets 3 66
------------ ----------------
Net cash provided by operating activities 1,944 776
------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Escrow deposit (370) -
------------ ----------------
Cash used in investing activities (370) -
------------ ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (920) (263)
------------ ----------------
Cash used in financing activities (920) (263)
------------ ----------------
Net increase in cash 654 513
Cash and Cash Equivalents, Beginning of Year 2,078 1,565
------------ ----------------
Cash and Cash Equivalents, End of Year $ 2,732 $ 2,078
============ ================
Supplemental Disclosure of Non-Cash
Financing Information - Accrued
Distributions to Partners $ 53 $ 105
---------------------------------
============ ================
</TABLE>
See notes to financial statements.
F-7
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Winthrop Residential Associates II, A Limited Partnership (the
"Partnership") was organized on October 21, 1981 under the Uniform
Limited Partnership Act of the State of Maryland to invest in limited
partnerships (the "Local Limited Partnerships") which develop, manage,
operate and otherwise deal in government assisted apartment complexes and
which do not significantly restrict distributions to owners or the rate
of return on investments in such properties. The Partnership has
investments in nine Local Limited Partnerships owning eleven apartment
complexes located in various locations throughout the United States.
The Partnership was capitalized with $25,000,000 of contributions
representing 25,000 investor limited partnership units. The offering
closed on November 17, 1982. The general partners and the initial limited
partner (10 units) contributed $12,000.
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. The carrying amount of cash and cash equivalents
approximates its fair value due to its short term nature.
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 the investment account and amortized over
the life of the investment. 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 and amortization of investment costs
and costs in excess of initial basis 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.
F-8
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Income Per Limited Partnership Unit
The net income per limited partnership unit is computed by dividing net
income allocated to the limited partners by the 25,010 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.
Concentration of Credit Risk
Principally all of the Partnership's cash and cash equivalents consist of
a mutual fund that invests in U.S. treasury bills and repurchase
agreements with original maturity dates of three months or less.
2. ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS
In accordance with the partnership agreement, profits and losses not
arising from a sale or refinancing and cash available for distribution
shall be allocated 5% to the general partners and 95% to the limited
partners. 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.
3. TRANSACTIONS WITH RELATED PARTIES
One Winthrop Properties, Inc. ("One Winthrop"), 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, which in turn
is wholly owned 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 operations of 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. The minimum fee is
$100,000 per annum. For the years ended December 31, 1996 and 1995, WP
Management earned $123,000 and $77,000, respectively,
F-9
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
3. TRANSACTIONS WITH RELATED PARTIES (Continued)
for managing the Partnership's investments in the Local Limited
Partnerships. The 1996 fee includes a $23,000 adjustment for 1995.
An affiliate of WFA has a general partnership interest in one of the
Local Limited Partnerships which it acquired in 1986.
During the liquidation stage of the Partnership, the General Partners and
their affiliates are entitled to receive certain distributions,
subordinated to specified minimum returns to the Limited Partners as
described in the partnership agreement.
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of December 31, 1996 and 1995 the Partnership's equity interests in
nine Local Limited Partnerships is summarized as follows:
Local Limited Partnership Percentage Ownership
Whisper Lake, Ltd. 99
Sanford Landing Apartments, Ltd. 99
Honeywood Associates 95
Brookside, Ltd. 99
Westbury Springs, Ltd. 99
Southwest Parkway, Ltd. 99
Wedgewood Creek Limited Partnership 99
First Investment Limited Partnership IX 90
Crofton Village Limited Partnership 53
The Local Limited Partnership which owns Southwest Parkway Apartments
("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. 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. In conjunction with the purchase of the debt,
the Partnership invested
F-10
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The investment balance in Local Limited Partnerships is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31,
1995 Activity 1996
------------------- -------------------- -------------------
<S> <C> <C> <C>
Equity payments $ 20,727 $ $ 20,727
Additional investments made to and recognized
as operating deficit advances by the Local
Limited Partnerships 943 943
Capitalized costs 356 356
Cash distributions from Local Limited Partnerships (10,434) (1,969) (12,403)
Amortization of the capitalized costs and the costs
in excess of the Partnership's initial basis in the
net assets of the Local Limited Partnerships (1,099) (1,099)
Equity in loss of Local Limited Partnerships (12,406) (12,406)
Income from Local Limited Partnership cash
distribution 1,913 1,969 3,882
------------------- -------------------- -------------------
Investments per balance sheet 0 0 0
Difference in basis (including equity payments
paid to partners of two Local Limited
Partnerships totaling $2,188,000) (3,572) (3,572)
Additional investments paid to and recognized as
operating deficit advances by Local Limited
Partnerships (943) (943)
Capitalized costs (356) (356)
Amortization of the capitalized costs and the costs
in excess of the Partnership's initial basis in the
net assets of the Local Limited Partnerships 1,099 1,099
Equity in loss of Local Limited Partnerships not
recognizable under the equity method of
accounting (Note 2) (19,817) (1,331) (21,148)
Income from Local Limited Partnership cash
distribution (1,913) (1,969) (3,882)
------------------- -------------------- -------------------
Deficit per Local Limited Partnerships' combined
financial statements $ (25,502) $ (3,300) $ (28,802)
=================== ==================== ===================
</TABLE>
F-11
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The combined balance sheets of the Local Limited Partnerships are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------- -----------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 4,616 $ 4,616
Buildings, net of accumulated
depreciation of $38,137,000
and $35,426,000 in 1996
and 1995, respectively 29,768 32,003
Cash and cash equivalents 1,042 1,115
Other assets, net of accumulated
amortization of $1,652,000 and
$1,581,000 in 1996 and
1995, respectively 4,466 3,876
------------- ----------
Total Assets $ 39,892 $ 41,610
============= ==========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Liabilities subject to compromise $ 8,003 $ -
Notes payable 2,488 2,950
Loans payable 473 973
Mortgage notes payable 57,442 59,893
Accounts payable and accrued expenses 2,650 4,339
------------- ----------
Total Liabilities 71,056 68,155
------------- ----------
Partners' Deficit:
Winthrop Residential Associates II (28,802) (25,502)
Other partners (2,362) (1,043)
------------- ----------
Total Deficit: (31,164) (26,545)
------------- ----------
Total Liabilities and Partners' Deficit $ 39,892 $ 41,610
============= ==========
</TABLE>
F-12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The combined statements of operations of the Local Limited
Partnerships are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1995
----------------- --------------
<S> <C> <C>
Income:
Rental income $ 13,323 $ 13,125
Other income 573 497
----------------- --------------
Total Income 13,896 13,622
----------------- --------------
Expenses:
Interest 4,659 4,990
Depreciation and amortization 2,782 2,749
Taxes and insurance 1,610 1,481
Management and administration fees 743 733
Repairs and maintenance 2,412 2,133
General and administrative 2,956 2,874
----------------- --------------
Total Expenses 15,162 14,960
----------------- --------------
Loss before extraordinary item (1,266) (1,338)
Extraordinary item:
Gain from extinguishment of debt - 863
----------------- --------------
Net loss $ (1,266) $ (475)
================= ==============
Net loss allocated to
Winthrop Residential Associates II $ (1,331) $ (643)
================= ==============
Net income allocated to
other partners $ 65 $ 168
================= ==============
</TABLE>
F-13
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
approximately $1,770,000 in Southwest Parkway, in January 1997 as a
capital contribution. As of December 31, 1996, $370,000 was reflected as
an escrow deposit in contemplation of the above settlement. Southwest
Parkway obtained a new first mortgage in the amount of $2,200,000. The
new mortgage bears interest of 8.75% per annum and matures on February 1,
2007.
As of December 31, 1996, the Partnership has Limited Partnership equity
interests in nine Local Limited Partnerships that own eleven apartment
complexes. These Local Limited Partnerships have outstanding mortgages
totaling $64,288,000 (including $6,846,000 outstanding on Southwest
Parkway which is classified as liabilities subject to compromise), which
are secured by the Local Limited Partnerships' real property, security
interests, liens and endorsements common to first mortgage loans.
5. TAXABLE INCOME
The Partnership's taxable loss differs from the net income for financial
reporting purposes as follows (in thousands):
1996 1995
------------ ------------
Net income for financial reporting
purposes................................. $ 1,871 $ 713
Less: Equity in Local Limited Partnerships'
tax loss in excess of financial
statement loss (due primarily to the
depreciation differences caused
by ACRS and amount capitalized for
construction) ..................... (388) (620)
Equity in Local Limited Partnerships'
losses not recognizable under the
equity method of accounting for
financial reporting purposes....... (1,331) (643)
Income from Local Limited Partnership
cash distributions ................ (1,969) (701)
------------ ------------
Taxable loss ............................ $ (1,817) $ (1,251)
============ ============
F-14
<PAGE>
Item 8. Changes in and Disagreements on Accounting and Financial Disclosure.
Effective September 19, 1996, the Partnership dismissed its prior
Independent Auditors, Arthur Andersen LLP ("Arthur Andersen") and retained as
its new Independent Auditors, Imowitz Koenig & Co., LLP ("Imowitz Koenig").
Arthur Andersen's Independent Auditors' Report on the Partnership's financial
statements for calendar year ended December 31, 1995, did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
Independent Auditors was approved by the Partnership's managing general
partner's directors. During calendar year ended 1995 and through September 19,
1996, there were no disagreements between the Partnership and Arthur Andersen on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure which disagreements if not resolved
to the satisfaction of Arthur Andersen, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports.
Effective September 19, 1996, the Partnership engaged Imowitz Koenig as
its Independent Auditors. The Partnership did not consult Imowitz Koenig
regarding any of the matters or events set forth in Item 304(a)(2) of Regulation
S-B prior to September 19, 1996.
14
<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 effective
its business. As of March 1, 1997, the names of the directors and executive
officers of the Managing General Partner and the position held by each of them,
are as follows:
Has Served as
Position Held with the a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Richard J. McCready President and
Chief Operating Officer 7-95
Jeffrey Furber Executive Vice President 7-95
and Clerk
Edward Williams Chief Financial Officer 4-96
Vice President and
Treasurer
Peter Braverman Senior Vice President 1-96
Michael L. Ashner, age 45, 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.
Richard J. McCready, age 38, is the President and Chief Operating
Officer of WFA and its subsidiaries. Mr. McCready previously served as a
Managing Director, Vice President and Clerk of WFA and a
15
<PAGE>
Director, Vice President and Clerk of the Managing General Partner and all other
subsidiaries of WFA. Mr. McCready joined the Winthrop organization in 1990.
Jeffrey Furber, age 37, has been the Executive Vice President of WFA
and the President of Winthrop Management since January 1996. Mr. Furber served
as a Managing Director of WFA from January 1991 to December 1995 and as a Vice
President from June 1984 until December 1990.
Edward V. Williams, age 56, 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.
Peter Braverman, age 45, 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.
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 I, A Limited
Partnership; Winthrop Residential Associates III, A Limited Partnership; 1626
New York Associates Limited Partnership; 1999 Broadway Associates Limited
Partnership; Indian River Citrus Investors 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
16
<PAGE>
Partnership; Winthrop Miami Associates Limited Partnership; and Winthrop
Apartment Investors Limited Partnership.
Except as indicated above, neither the Partnership nor the Managing
General Partner has any significant employees within the meaning of Item 401(b)
of Regulation S-B. There are no family relationships among the officers and
directors of the Managing General Partner.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer, 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.
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.")
17
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners.
The General Partners own all the outstanding general partnership
interests. No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at December 31, 1997. 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 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
Partners or their respective officers, directors or general partners owned any
Units at December 31, 1996 in individual capacities; however, WFC Realty Co.,
Inc., a wholly owned subsidiary of First Winthrop, (of which certain officers
and directors of the Managing General Partner are officers or directors) owns 95
units (.38%).
(c) Changes in control.
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 12. Certain Relationships and Related Transactions.
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. WP Management Co., Inc.
("WP Management"), an affiliate of the Managing General Partner, is entitled to
a fee for services rendered in managing the Partnership's investments equal to
10% of the Partnership's share of cash distributions from the Local Limited
18
<PAGE>
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. For
the years ended December 31, 1996 and 1995, WP Management earned approximately
$123,000 and $77,000, respectively.
The Partnership's general partners are entitled to 5% of cash available
for distribution. The general partners received $18,428 and $15,796 of cash
distributions in 1996 and 1995, respectively.
For the year ended December 31, 1996, the Partnership allocated $34,040
of tax losses to the Managing General Partner and $56,735 to the Associate
General Partner.
19
<PAGE>
PART IV
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
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 31 day of March
1997.
WINTHROP RESIDENTIAL ASSOCIATES II,
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 Ashner Chief Executive March 31, 1997
- ------------------ Officer and Director
Michael Ashner
/s/ Edward V. Williams Chief Financial Officer March 31, 1997
- ----------------------
Edward V. Williams
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Title of Document Page
- ------- ----------------- ----
3. Agreement and Certificate of Limited
Partnership of Winthrop Residential
Associates II, A Limited Partnership,
dated as of June 23, 1983 (incorporated
by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1983)
4. Agreement and Certificate of Limited
Partnership of Winthrop Residential
Associates II, A Limited Partnership,
dated as of June 23, 1983 (incorporated
herein by reference to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1983)
10. Agreement between Winthrop Residential
Associates II, A Limited Partnership
and The Artery Organization, Inc.
(incorporated herein by reference to the
Registrant's Registration Statement on
Form S-11, File No. 2-74784)
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates I, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,732,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,107,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,984,000
<TOTAL-LIABILITY-AND-EQUITY> 3,107,000
<SALES> 0
<TOTAL-REVENUES> 1,969,000
<CGS> 0
<TOTAL-COSTS> 124,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,871,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,871,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,871,000
<EPS-PRIMARY> 71.09
<EPS-DILUTED> 71.09
</TABLE>
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
DECEMBER 31, 1996
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement (Unaudited)
1. Statement of Cash Available for Distribution for the:
Year Ended Three Months Ended
December 31, 1996 December 31, 1996
----------------- -----------------
Net Income: $ 1,871,000 $ 11,000
Add: Cash from reserves - 42,000
Less Cash to reserves (1,003,000) -
------------ ----------
Cash Available for Distribution $ 868,000 $ 53,000
============ ==========
Distributions allocated to General
Partners $ 18,000 $ 3,000
============ ==========
Distributions allocated to Limited
Partners $ 850,000 $ 50,000
============ ==========
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, 1996:
Entity Receiving Form of
Compensation Compensation Amount
-------------------- ------------------------------- -------------
W.P. Management Co., Inc. Property Management Fees $ 25,000
General Partners Interest in Cash Available for
Distribution $ 3,000
WFC Realty Co., Inc.
(Initial Limited Partner Interest in Cash Available for
Distribution $ 20
