<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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
incorporation or organization) Identification No.)
Five Cambridge Center, Cambridge, MA 02142-1493
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
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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 SEPTEMBER 30, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands, Except Unit Data) 1999 1998
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,195 $ 1,304
Escrow deposits 285 457
Other assets 228 172
Real estate, net of accumulated depreciation
of $4,867 in 1999 and $4,644 in 1998 3,083 3,003
------- -------
Total Assets $ 4,791 $ 4,936
======= =======
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued expenses and other liabilities $ 333 $ 377
Distribution payable 26 26
Loan payable - affiliate 501 501
Mortgage notes payable 3,513 3,546
------- -------
Total Liabilities 4,373 4,450
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Minority interest 23 25
------- -------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,010 units authorized,
issued and outstanding 1,424 1,487
General Partners' deficit (1,029) (1,026)
------- -------
Total Partners' Capital 395 461
------- -------
Total Liabilities and Partners' Capital $ 4,791 $ 4,936
======= =======
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Rental income $ 314 $ 228 $ 937 $ 692
Income from Local Limited Partnership cash distributions 33 33 100 266
Interest income 13 15 37 44
Other income 15 4 36 13
------------ ------------ ------------ ------------
Total income 375 280 1,110 1,015
------------ ------------ ------------ ------------
Expenses:
General and administrative 27 26 79 81
Operating 163 69 446 339
Depreciation 78 53 223 160
Interest 75 50 225 149
Management fees 43 37 126 108
------------ ------------ ------------ ------------
Total expenses 386 235 1,099 837
------------ ------------ ------------ ------------
Net income (loss) before minority interest (11) 45 11 178
Minority Interest -- -- 2 --
------------ ------------ ------------ ------------
Net income (loss) $ (11) $ 45 $ 13 $ 178
============ ============ ============ ============
Net income (loss) allocated to General Partners $ -- $ 2 $ 1 $ 9
============ ============ ============ ============
Net income (loss) allocated to Limited Partners $ (11) $ 43 $ 12 $ 169
============ ============ ============ ============
Net income (loss) per Unit of Limited Partnership Interest $ (.44) $ 1.72 $ 0.48 $ 6.76
============ ============ ============ ============
Distributions per Unit of Limited Partnership Interest $ 1.00 $ 1.00 $ 3.00 $ 3.00
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
Units of
Limited Limited General Total
Partnership Partners' Partners' Partners'
Interest Capital Deficit Capital
----------- --------- --------- ---------
Balance - January 1, 1999 25,010 $ 1,487 $(1,026) $ 461
Net income -- 12 1 13
Distributions -- (75) (4) (79)
------- ------- ------- -------
Balance - September 30, 1999 25,010 $ 1,424 $(1,029) $ 395
======= ======= ======= =======
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1999 1998
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 13 $ 178
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 223 160
Amortization 7 6
Minority interest (2) --
Changes in assets and liabilities:
Decrease in escrow deposits 214 13
Increase in other assets (63) (23)
Decrease in accounts payable and
accrued expenses (44) (78)
------- -------
Net cash provided by operating activities 348 256
------- -------
Cash Flows From Investing Activities:
Deposits to replacement reserve (42) (40)
Property improvements (303) (146)
------- -------
Cash used in investing activities (345) (186)
------- -------
Cash Flows From Financing Activities:
Mortgage principal payments (33) (16)
Distributions to partners (79) (1,505)
------- -------
Cash used in financing activities (112) (1,521)
------- -------
Net decrease in cash and cash equivalents (109) (1,451)
Cash and cash equivalents, beginning of period 1,304 2,817
------- -------
Cash and cash equivalents, end of period $ 1,195 $ 1,366
======= =======
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 218 $ 143
======= =======
Supplemental Disclosure of Non-Cash Financing Activities
Accrued Distributions to Partners $ 26 $ 26
======= =======
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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, 1998.
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. The balance sheet at December 31, 1998 was derived from
audited financial statements at such date.
The results of operations for the nine months ended September 30, 1999 and
1998, are not necessarily indicative of the results to be expected for the
full year.
2. Consolidation
The consolidated financial statements of the Partnership include the
accounts of the Partnership and two subsidiaries, Southwest Parkway, Ltd.
("Southwest Parkway") and Brookside, Ltd. ("Brookside"), which are Local
Limited Partnerships previously accounted for under the equity method of
accounting. All significant intercompany transactions and balances have
been eliminated.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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 September 30, 1999, the Partnership retained an equity interest
in six Local Limited Partnerships owning eight apartment properties.
The Partnership also owns a 97% limited partnership interest in
Southwest Parkway Ltd. ("Southwest Parkway") and a 99% limited
partnership interest in Brookside, Ltd. ("Brookside") (collectively
referred to as the "Subsidiaries"). Affiliates of the general
partners of the Partnership are the general partners of the
Subsidiaries. Effective November 1, 1998, an affiliate of the general
partner of the Partnership assumed control as general partner of
Brookside. As a result of the transfer of control of Brookside, the
Partnership has consolidated the accounts of Brookside effective
November 1, 1998. Prior to November 1, 1998, Brookside was a Local
Limited Partnership accounted for under the equity method. The
Partnership invested $176,000 in November 1998 to be used for capital
improvements in Brookside. The Partnership's primary sources of
income are distributions from the Local Limited Partnerships and
rental income from the Subsidiaries. The Partnership requires cash to
pay the operating expenses of the Subsidiaries, 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.
To date, all cash requirements have been satisfied by interest income
earned on short-term investments, rental income from the Subsidiaries
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 SEPTEMBER 30, 1999
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 $109,000 decrease at September 30, 1999, as compared to December
31, 1998. The Partnership's $348,000 of net cash provided by
operating activities was more than offset by $345,000 of cash used in
investing activities and $112,000 of cash used in financing
activities. Cash used in investing activities included $303,000 of
property improvements and $42,000 of additions to replacement
reserves. Cash used in financing activities included $79,000 of
distributions to partners and $33,000 of mortgage principal payments.
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.
For the nine months ended September 30, 1999, Partnership
distributions (paid or accrued) aggregated $75,000 ($3.00 per unit)
to its limited partners and $4,000 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 its Subsidiaries.
Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The
Partnership is dependent upon the General Partner and its affiliates
and Coordinated Services for management and administrative services.
Any computer programs or hardware that have date-sensitive software
or embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
During the first half of 1998, Coordinated Services, the General
Partner and its affiliates completed their assessment of the various
computer software and hardware used in connection with the management
of the Partnership. This review indicated that significantly all of
the computer programs used by the Managing General Partner and its
affiliates are off-the-shelf "packaged" computer programs
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Year 2000 (Continued)
which are easily upgraded to be Year 2000 compliant. In addition, to
the extent that custom programs are utilized by the Managing General
Partner and its affiliates, such custom programs are Year 2000
compliant.
Following the completion of its assessment of the computer software
and hardware, Coordinated Services, the General Partner and its
affiliates began upgrading those systems which required upgrading. To
date, significantly all of these systems have been upgraded. The
Partnership has to date not borne, nor is it expected that the
Partnership will bear, any significant costs in connection with the
upgrade of those systems requiring remediation.
To date, neither Coordinated Services or the General Partner are
aware of any external agent with a Year 2000 issue that would
materially impact the Partnership's results of operations, liquidity
or capital resources. However, the Managing General Partner has no
means of ensuring that external agents will be Year 2000 compliant.
The General Partner does not believe that the inability of external
agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or
results of operations of the Partnership. However, the effect of
non-compliance by external agents is not readily determinable.
Results of Operations
Net income decreased by $165,000 for the nine months ended September
30, 1999 as compared to the comparable period in 1998 due to an
increase in expenses of $260,000, which more than offset an increase
in income of $95,000.
Income increased for the nine months ended September 30, 1999, as
compared to the comparable period in 1998, primarily due to an
increase in rental income of $245,000 due to the consolidation of the
Partnership's Brookside property and an increase in rental income at
the Partnership's Southwest Parkway property which was partially
offset by a decrease in income from Local Limited Partnership cash
distributions of $166,000. During the nine months ended September 30,
1999, the Partnership received $100,000 of cash distributions from
the Local Limited Partnership which owns the Crofton Village
Apartments. During the nine months ended September 30, 1998, the
Partnership received a residual cash distribution of $32,000 from
Westbury Springs, Ltd., which was sold in 1997, and $156,000 and
$78,000 of cash distributions from the Local Limited Partnerships
which own the Honeywood Apartments and the Crofton Village
Apartments, respectively. Expenses increased due to increases in
operating, management, interest and depreciation expenses. The
increases were primarily due to expenses of the Partnership's
Brookside property, which was consolidated effective November 1,
1998.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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 period ended
September 30, 1999.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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/ Thomas C. Staples
--------------------------------
Thomas C. Staples
Chief Financial Officer
Dated: November 12, 1999
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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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<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement
1. Statement of Cash Available for Distribution for the three months
ended September 30, 1999:
Net Loss $ (11,000)
Add: Depreciation 78,000
Amortization 3,000
Less: Cash to reserves (44,000)
----------
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 September 30, 1999:
Entity Receiving Form of
Compensation Compensation Amount
------------------- ------------------------------ -----------
General Partners Interest in Cash Available for $ 1,000
Distribution
WFC Realty Co., Inc. Interest in Cash Available for 5
(Initial Limited Distribution
Partner)
13 of 13
<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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,195,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,950,000
<DEPRECIATION> (4,867,000)
<TOTAL-ASSETS> 4,791,000
<CURRENT-LIABILITIES> 0
<BONDS> 3,513,000
0
0
<COMMON> 0
<OTHER-SE> 395,000
<TOTAL-LIABILITY-AND-EQUITY> 4,791,000
<SALES> 0
<TOTAL-REVENUES> 1,073,000
<CGS> 0
<TOTAL-COSTS> 793,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,000
<INCOME-PRETAX> 13,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,000
<EPS-BASIC> .48
<EPS-DILUTED> .48
</TABLE>
