<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
- ------------------------------- ------------------------------------
(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
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FORM 10-QSB JUNE 30, 1999
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(In Thousands, Except Unit Data) 1999 1998
------- ------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 1,195 $ 1,304
Escrow deposits 321 457
Other assets 225 172
Real estate, net of accumulated depreciation
of $4,789 in 1999 and $4,644 in 1998 3,083 3,003
------- -------
Total Assets $ 4,824 $ 4,936
======= =======
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Accounts payable, accrued expenses and other liabilities $ 317 $ 377
Distribution payable 26 26
Loan payable - affiliate 501 501
Mortgage notes payable 3,525 3,546
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Total Liabilities 4,369 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 1,460 1,487
General Partners' deficit (1,028) (1,026)
------- -------
Total Partners' Capital 432 461
------- -------
Total Liabilities and Partners' Capital $ 4,824 $ 4,936
======= =======
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1999
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Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Rental income $ 315 $ 184 $ 623 $ 464
Income from Local Limited Partnership cash distributions 34 179 67 233
Interest income 12 13 24 29
Other income 9 5 21 9
----------- ----------- ----------- -----------
Total income 370 381 735 735
----------- ----------- ----------- -----------
Expenses:
General and administrative 27 35 52 55
Operating 154 157 283 270
Depreciation 73 54 145 107
Interest 79 49 150 99
Management fees 43 37 83 71
----------- ----------- ----------- -----------
Total expenses 376 332 713 602
----------- ----------- ----------- -----------
Net income (loss) before minority interest (6) 49 22 133
Minority interest 2 1 2 --
----------- ----------- ----------- -----------
Net income (loss) $ (4) $ 50 $ 24 $ 133
=========== =========== =========== ===========
Net income allocated to General Partners $ -- $ 3 $ 1 $ 7
=========== =========== =========== ===========
Net income (loss) allocated to Limited Partners $ (4) $ 47 $ 23 $ 126
=========== =========== =========== ===========
Net income (loss) per Unit of Limited Partnership Interest $ (.16) $ 1.88 $ .92 $ 5.04
=========== =========== =========== ===========
Distributions per Unit of Limited Partnership Interest $ 1.00 $ 1.00 $ 2.00 $ 2.00
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1999
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Consolidated Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Units of
Limited Limited General Total
Partnership Partners' Partners' Partners'
Interest Capital Deficit Capital
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance - January 1, 1999 25,010 $ 1,487 $ (1,026) $ 461
Net income -- 23 1 24
Distributions -- (50) (3) (53)
----------- ----------- ----------- -----------
Balance - June 30, 1999 25,010 $ 1,460 $ (1,028) $ 432
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1999
-------------------------
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended
June 30, June 30,
(In Thousands) 1999 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 24 $ 133
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 145 107
Amortization 4 4
Minority interest (2) --
Changes in assets and liabilities:
Decrease in escrow deposits 163 32
Increase in other assets (57) (50)
Decrease in accounts payable and
accrued expenses (60) (40)
------------ ------------
Net cash provided by operating activities 217 186
------------ ------------
Cash Flows From Investing Activities:
Deposits to replacement reserve (27) (26)
Property improvements (225) (62)
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Cash used in investing activities (252) (88)
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Cash Flows From Financing Activities:
Mortgage principal payments (21) (10)
Distributions to partners (53) (1,479)
------------ ------------
Cash used in financing activities (74) (1,489)
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Net decrease in cash and cash equivalents (109) (1,391)
Cash and cash equivalents, beginning of period 1,304 2,817
------------ ------------
Cash and cash equivalents, end of period $ 1,195 $ 1,426
============ ============
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 146 $ 95
============ ============
Supplemental Disclosure of Non-Cash Financing Activities
Accrued Distributions to Partners $ 26 $ 26
============ ============
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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 six months ended June 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 JUNE 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 June 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 JUNE 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources (Continued)
The level of liquidity based on cash and cash equivalents
experienced a $109,000 decrease at June 30, 1999, as compared
to December 31, 1998. The Partnership's $217,000 of net cash
provided by operating activities was more than offset by
$252,000 of cash used in investing activities and $74,000 of
cash used in financing activities. Cash used in investing
activities included $225,000 of property improvements and
$27,000 of additions to replacement reserves. Cash used in
financing activities included $53,000 of distributions to
partners and $21,000 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 six months ended June 30, 1999, Partnership
distributions (paid or accrued) aggregated $50,000 ($2.00 per
unit) to its limited partners and $3,000 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 which are easily
upgraded to be Year 2000 compliant. In addition, to the extent
that custom programs
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
Year 2000 (Continued)
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 $109,000 for the six months ended June
30, 1999 as compared to the comparable period in 1998, due to
an increase in expenses.
Total income remained constant for the six months ended June
30, 1999 and 1998 as increases in rental income and other
income were offset by decreases in Local Limited Partnership
cash distributions and interest income. Rental income
increased by $159,000 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 offset by a decrease in income from Local Limited
Partnership cash distributions of $166,000. The Partnership
received $67,000 of cash distributions from the Local Limited
Partnership which owns the Crofton Village Apartments during
the six months ended June 30, 1999. During the six months
ended June 30, 1998, the Partnership received residual cash
distributions of $32,000 from the Local Limited Partnership
which owns Westbury Springs, Ltd., which was sold in 1997, and
$156,000 and $45,000 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 JUNE 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 six months
ended June 30, 1999.
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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: August 13, 1999
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WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Exhibit Index
Exhibit Page No.
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
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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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,195,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,872,000
<DEPRECIATION> (4,789,000)
<TOTAL-ASSETS> 4,824,000
<CURRENT-LIABILITIES> 0
<BONDS> 3,525,000
<COMMON> 0
0
0
<OTHER-SE> 432,000
<TOTAL-LIABILITY-AND-EQUITY> 4,824,000
<SALES> 0
<TOTAL-REVENUES> 711,000
<CGS> 0
<TOTAL-COSTS> 509,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,000
<INCOME-PRETAX> 24,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,000
<EPS-BASIC> .92
<EPS-DILUTED> .92
</TABLE>
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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
June 30, 1999:
Net Loss $ (4,000)
Add: Depreciation 73,000
Amortization 2,000
Less: Minority interest (2,000)
Cash to reserves (42,000)
-----------
Cash Available for Distribution $ 27,000
===========
Distributions allocated to General Partners $ 2,000
===========
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 June 30, 1999:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
------------------------- ------------------------------------------- ----------
<S> <C> <C>
General Partners Interest in Cash Available for Distribution $ 2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution 5
</TABLE>
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