<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 March 31, 1998
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
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(Exact name of small business issuer as specified in its charter)
Maryland 04-2742158
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
1998 1997
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(In Thousands, Except Unit Data)
Assets
Cash and cash equivalents ............................. $ 1,337 $ 2,817
Escrow deposits ....................................... 132 177
Other assets .......................................... 224 115
Real estate (net of accumulated deprecation
of $3,260 in 1998 and $3,207 in 1997) .............. 2,418 2,450
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Total Assets ..................................... $ 4,111 $ 5,559
======= =======
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses ................. $ 213 $ 290
Distribution payable .................................. 28 1,452
Due to affiliate ...................................... 501 501
Mortgage payable ...................................... 2,178 2,183
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Total Liabilities ................................ 2,920 4,426
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Minority interest ..................................... 26 25
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Partners Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized, issued
and outstanding - 25,010 Units ..................... 2,156 2,102
General Partners' deficit ............................. (991) (994)
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Total Partners' Capital ...................... 1,165 1,108
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Total Liabilities and Partners' Capital ...... $ 4,111 $ 5,559
======= =======
See notes to consolidated financial statements
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Three Months Ended
March 31, March 31,
1998 1997
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Income:
Rental income .......................................... $ 280 $ 212
Income from Local Limited Partnership cash
distributions ........................................ 54 22
Interest income ........................................ 16 20
Other income ........................................... 4 6
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Total income ......................................... 354 260
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Expenses:
General and administrative ............................. 20 5
Operating .............................................. 113 124
Depreciation ........................................... 53 51
Interest ............................................... 50 38
Management fees ........................................ 34 33
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Total expenses ....................................... 270 251
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Net income before minority interest and
extraordinary item ..................................... 84 9
Minority interest ......................................... (1) --
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Income before extraordinary item .......................... 83 9
Extraordinary gain on extinguishment of debt .............. -- 2,522
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Net income ................................................ $ 83 $2,531
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Net income allocated to General Partners .................. $ 4 $ 127
====== ======
Net income allocated to Limited Partners .................. $ 79 $2,404
====== ======
Net income per Unit of Limited Partnership interest:
Income before extraordinary item ....................... $ 3.16 $ .32
Extraordinary gain ..................................... -- 95.80
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Net income ............................................. $ 3.16 $96.12
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Distributions per Unit of Limited Partnership Interest .... $ 1.00 $ 2.00
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See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated Statement of Changes in Partners' Capital (Unaudited)
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
------- ------- ------- -------
(In Thousands, Except Unit Data)
Balance - January 1, 1998 ..... 25,010 $ (994) $ 2,102 $ 1,108
Net income ................. 4 79 83
Distributions .............. (1) (25) (26)
------- ------- ------- -------
Balance - March 31, 1998 ...... 25,010 $ (991) $ 2,156 $ 1,165
======= ======= ======= =======
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
March 31, March 31,
(In Thousands) 1998 1997
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Cash Flows from Operating Activities:
Net income ............................................. $ 83 $ 2,531
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ...................................... 53 51
Amortization ...................................... 2 --
Extraordinary gain on extinguishment of debt ...... -- (2,522)
Minority interest in joint venture's operations ... 1 --
Changes in assets and liabilities:
Decrease in escrow deposits ................... 58 637
Increase in other assets ...................... (111) (29)
(Decrease) increase in accounts payable and
accrued expenses ........................... (77) 14
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Net cash provided by operating activities ......... 9 682
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Cash Flows From Investing Activities:
Deposits to replacement reserve ................... (13) --
Property improvements ............................. (21) (12)
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Cash used in investing activities ................. (34) (12)
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Cash Flows From Financing Activities:
Loan proceeds ..................................... -- 2,200
Satisfaction of mortgage payable .................. -- (4,148)
Mortgage principal payments ....................... (5) --
Cash distributions ................................ (1,450) (53)
Deferred loan costs ............................... -- (66)
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Net cash used in financing activities ............. (1,455) (2,067)
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Net decrease in cash and cash equivalents .............. (1,480) (1,397)
Cash and cash equivalents, beginning of period ......... 2,817 2,732
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Cash and cash equivalents, end of period ............... $ 1,337 $ 1,335
======= =======
Supplemental Disclosure of Cash Flow Information
Interest paid in cash ............................. $ 48 $ 38
======= =======
Supplemental Disclosure of Non-Cash Financing
Activities
Accrued Distributions to Partners ................. $ 26 $ 53
======= =======
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions
should be read in conjunction with the financial statements, related
footnotes and discussions contained in the Partnership's annual
report on Form 10-KSB for the year ended December 31, 1997.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included.
Certain amounts have been reclassified to conform to the March 31,
1998 presentation. The balance sheet at December 31, 1997 was derived
from audited financial statements at such date.
The results of operations for the three months ended March 31, 1998
and 1997, are not necessarily indicative of the results to be
expected for the full year.
2. Consolidation
The accompanying financial statements have been prepared on a
consolidated basis, including the accounts of Southwest Parkway. All
significant intercompany transactions and balances have been
eliminated. Prior to January 1, 1997, Southwest Parkway was a Local
Limited Partnership accounted for under the equity method.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Partnership from time to time. The discussion
of the Partnership's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such
matters, does not take into account the effects of any changes to
the Partnership's operations. Accordingly, actual results could
differ materially from those projected in the forward-looking
statements as a result of a number of factors, including those
identified herein.
This Item should be read in conjunction with the financial
statements and other items contained elsewhere in the report.
Liquidity and Capital Resources
As of March 31, 1998, the Partnership retained an equity interest in
seven Local Limited Partnerships owning nine 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 since 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, 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 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 Local Limited Partnership would
lose its investment in the property and would incur a tax liability
due to the recapture of tax benefits taken in prior years. The
Partnership would share in these consequences in proportion to its
ownership interest in the Local Limited Partnership.
To date, all cash requirements have been satisfied by interest
income earned on short-term investments, rental income from
Southwest Parkway 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.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
The level of liquidity based on cash and cash equivalents
experienced a $1,480,000 decrease at March 31, 1998, as compared to
December 31, 1997. The Partnership's $9,000 of cash provided by
operating activities was significantly offset by $34,000 of cash
used in investing activities and $1,455,000 of cash used in
financing activities. Investing activities consisted of property
improvements of $21,000 and deposits to replacement reserves of
$13,000. Financing activities consisted of cash distributed to
partners of $1,450,000 and mortgage principal payments of $5,000.
For the three months ended March 31, 1998, Partnership distributions
(accrued) aggregated $25,000 ($1.00 per Unit) to its limited
partners and $1,000 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 and Southwest Parkway.
On December 16, 1997, the Managing General Partner and certain of
its affiliates entered into a Services Agreement with Coordinated
Services of Valdosta, LLC ("Coordinated Services") pursuant to which
Coordinated Services was retained to provide asset management and
investor services to the Partnership and certain affiliated
partnerships. As a result of this agreement, Coordinated Services
has the right to direct the day to day affairs of the Partnership,
including, without limitation, reviewing and analyzing potential
sale, refinancing or restructuring proposals by Local Limited
Partnerships, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the
Partnership. Coordinated Services is not permitted, however, without
the consent of the Managing General Partner, or as otherwise
required under the terms of the Partnership's Agreement of Limited
Partnership (the "Partnership Agreement") to, among other things,
cause the Partnership to consent to a sale of an asset or cause the
Partnership to file for bankruptcy. As compensation for providing
these services, the Managing General Partner and its affiliates
assigned to Coordinated Services all of their rights to receive fees
from the Partnership as provided in the Partnership Agreement.
The Partnership is contemplating investing an additional $100,000 to
$150,000 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 an affiliate of Coordinated Services would assume
responsibility for managing Brookside. Such transfer would be
subject to the approval of the U.S. Department of Housing and Urban
Development.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Partnership's net income for the three months ended March 31,
1998, was $83,000, as compared to net income of $2,531,000, for the
three months ended March 31, 1997. Net income for 1997 includes a
$2,522,000 extraordinary gain on extinguishment of debt from
Southwest Parkway. Net income before the extraordinary item
increased by $74,000 for the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997. The increase is
primarily due to improved operations of $64,000 at Southwest Parkway
for the three months ended March 31, 1998, compared to the prior
comparative period.
Income from Local Limited Partnership cash distributions increased
by $32,000 for the three months ended March 31, 1998, as compared to
1997, due to the receipt of a residual cash distribution of $32,000
from Westbury Springs, Ltd. The Partnership sold its interest in
this Local Limited Partnership during 1997. The Partnership received
$22,000 of cash distributions from the Local Limited Partnership
which owns Crofton Village Apartments during the three months ended
March 31, 1998 and 1997. General and administrative expenses
declined due to the timing of certain expenses. All other expenses
remained relatively constant.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
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 March 31, 1998.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
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.
WINTHROP RESIDENTIAL ASSOCIATES II,
A LIMITED PARTNERSHIP
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
----------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
----------------------------
Edward V. Williams
Chief Financial Officer
Dated: May 18, 1998
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Exhibit Index
Exhibit Page No.
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27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three months
ended March 31, 1998:
Net Income $ 83,000
Add: Depreciation 53,000
Amortization 2,000
Minority interest in joint venture's operations 1,000
Less: Cash to reserves (113,000)
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Cash Available for Distribution $ 26,000
=========
Distributions allocated to General Partners $ 1,000
=========
Distributions allocated to Limited Partners $ 25,000
=========
2. Fees and other compensation paid or accrued by the Partnership to
the general partners, or their affiliates, during the three months
ended March 31, 1998:
Entity Receiving Form of
Compensation Compensation Amount
------------ ------------ ------
General Partners Interest in Cash Available
for Distribution $ 1,000
WFC Realty Co., Inc. Interest in Cash Available
(Initial Limited Partner) for Distribution $ 5
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<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,337,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,678,000
<DEPRECIATION> (3,260,000)
<TOTAL-ASSETS> 4,111,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,178,000
<COMMON> 0
0
0
<OTHER-SE> 1,165,000
<TOTAL-LIABILITY-AND-EQUITY> 4,111,000
<SALES> 0
<TOTAL-REVENUES> 338,000
<CGS> 0
<TOTAL-COSTS> 200,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,000
<INCOME-PRETAX> 83,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 83,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,000
<EPS-PRIMARY> 3.16
<EPS-DILUTED> 3.16
</TABLE>
