<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, 1999 Commission File
----------------- Number 0-11063
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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 of organization) (I.R.S. Employer I.D. No.)
5 Cambridge Center, Cambridge, Massachusetts 02142
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 234-3000
--------------
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. [ ]
Registrant's revenues for its most recent fiscal year were $1,784,000.
No market for the Limited Partnership Units exists and therefore, a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
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 limited partnership. One Winthrop is the Partnership's
managing general partner. See "Employees" below.
In late 1982 the Partnership sold, pursuant to a Registration Statement
filed with the Securities and Exchange Commission, 25,000 Units of limited
partnership interest ("Units") at a purchase price of $1,000 per Unit (an
aggregate of $25,000,000). Capital contributions, net of selling commissions,
sales and registration costs, were utilized to purchase interests in 10 Local
Limited Partnerships and temporary short term investments.
The Partnership invests 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").
2
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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
and a second in 1997. See "Item 2, Description of Properties" for information
relating to these properties.
In November 1997, the Partnership sold its interest in Westbury
Springs, L.P., a Local Limited Partnership, to an affiliate of the general
partner of the Local Limited Partnership for $1,447,000. As a result of the
Partnership's investment account having a zero balance at the date of sale, the
Partnership recognized a gain on sale of $1,447,000. The Partnership distributed
these proceeds during the first quarter of 1998.
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 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. Over time, the Local Limited Partnership submitted
various proposals to HUD to cure the mortgage default, all of which had 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 order to effect this transaction, the
Partnership invested an additional $1,799,000 in Southwest Parkway as a capital
3
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contribution and Southwest Parkway obtained a new first mortgage loan in the
amount of $2,200,000. As a result of this transaction, the Partnership
recognized an extraordinary gain of $2,522,000 on extinguishment of debt in
1997. See "Item 2, Description of Properties" for information with respect to
the origination of funds used to satisfy the outstanding indebtedness.
Employees
- ---------
The Partnership does not have any employees. Until December 16, 1997,
Services were performed for the Partnership by the Managing General Partner, and
agents retained by it, including Winthrop Management, an affiliate of the
Managing General Partner. On October 28, 1997, affiliates of the Managing
General Partner and Insignia Financial Group, Inc. ("Insignia") entered into an
agreement pursuant to which, among other things, an affiliate of Insignia was to
be retained as the property manager at the Local Limited Partnership properties
then managed by Winthrop Management. This transfer of property management was
subject to certain conditions including HUD approval. As of March 1, 1998, HUD
approval had been obtained with respect to Southwest Parkway. The remaining
Local Limited Partnerships properties are managed by the Local Limited
Partnerships' respective general partners. Insignia subsequently merged with and
into Apartment Investment and Management Company, a publicly traded real estate
investment trust.
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
right to receive fees from the Partnership as provided in the Partnership
4
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Agreement. See "Item 12. Certain Relationships and Related Transactions."
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.
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, 2000:
<TABLE>
<CAPTION>
Date of
Property Name Location Acquisition(1) Number of Units
- ------------- -------- -------------- ---------------
<S> <C> <C> <C>
Whisper Lake Apartments Orlando, FL 2/24/82 400
Sanford Landing Apartments Sanford, FL 4/06/82 264
Honeywood Apartments Roanoke, VA 1/05/83 300
Brookside Apartments(2) Sylacauga, AL 4/20/82 80
Southwest Parkway Apartments Wichita Falls, TX 6/22/82 200
(3)
Wedgewood Creek Apartments Gurnee, IL 6/24/82 198
Mountain Vista I Albuquerque, NM 10/28/82 124
Mountain Vista II Albuquerque, NM 10/28/82 96
Cibola Village Apartments Albuquerque, NM 10/28/82 128
Crofton Village Apartments (3) Crofton, MD 10/04/82 258
</TABLE>
- --------------------
5
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(1) Represents the date on which the Partnership made its initial investment
in the Local Limited Partnership
(2) Consolidated effective November 1, 1998
(3) Consolidated effective January 1, 1997.
The following table sets forth information relating to the first
mortgage encumbering each of the Local Limited Partnership's properties:
<TABLE>
<CAPTION>
Principal
Balance at Principal
December 31, Interest Period Maturity Balance Due
Property 1999 Rate Amortized Date at Maturity
- -------- ---- ---- --------- ---- -----------
<S> <C> <C> <C> <C> <C>
Whisper Lake $11,587,868 7.675% 40 years 4/1/2024 (1)
Sanford Landing $9,240,139 (2) 40 years 6/1/2024 (1)
Honeywood $5,491,400 7.5% 40 years 12/1/2019 (1)
Brookside $1,362,274 7.5% 40 years 2/1/2023 (1)
Southwest Parkway $2,136,274 8.75% 27.5 years 2/1/2007 $1,898,000
Wedgewood Creek $8,675,551 7.5% 40 years 8/1/2024 (1)
Mountain Vista I $1,788,689 7.5% 38 years 10/1/2018 (1)
Mountain Vista II $1,904,932 7.5% 38 years 5/1/2020 (1)
Cibola Village $1,800,861 7.5% 37 years 2/1/2019 (1)
Crofton Village $9,324,683 8.2% 38 years 9/1/2006 (1)
</TABLE>
(1) Loan at maturity is fully amortized.
(2) $5.270,862 bears interest at 8.75% and $3,969,277 bears interest at 6.93%.
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 27.5
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 pursuant to the
Bankruptcy Plan, the Partnership made a capital contribution of approximately
$1,799,000 and the balance was funded from the Local Limited Partnership's cash
reserves.
6
<PAGE>
The following table sets forth the Partnership's ownership interest in
each of the Local Limited Partnerships:
Apartment Complexes Owned by
The Local Limited Partnerships Ownership Interest
- ------------------------------ ------------------
Whisper Lake Apartments 99%
Sanford Landing Apartments 98%
Honeywood Apartments 95%
Brookside Apartments 99%
Southwest Parkway Apartments 97%
Wedgewood Creek Apartments 99%
Mountain Vista I 90%
Mountain Vista II 90%
Cibola Village Apartments 90%
Crofton Village Apartments 44%
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:
<TABLE>
<CAPTION>
Average Monthly Average Monthly Rental
Occupancy Rate Rate per Unit
-------------- -------------
Property 1999 1998 1999 1998
-------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Whisper Lake (1) 96% (1) $649
Sanford Landing (1) 96% (1) $585
Honeywood 94% 97% $522 $519
Brookside 94% 94% $321 $300
Southwest Parkway 97% 95% $428 $445
Wedgewood Creek 96% 96% $758 $749
Mountain Vista I (1) 80% (1) $555
Mountain Vista II (1) 86% (1) $555
Cibola Village (1) 90% (1) $509
Crofton Village 98% 98% $800 $727
</TABLE>
(1) Information has not been provided by the Local Limited Partnership.
7
<PAGE>
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, 1999 (in thousands):
<TABLE>
<CAPTION>
Property Gross Federal
Carrying Accumulated Tax
Value Depreciation Rate Method Basis
----- ------------ ---- ------ -----
<S> <C> <C> <C> <C> <C>
Whisper Lake $14,250 $8,922 10-25 yrs. S/L $1,102
Sanford Landing $9,043 $5,800 7-25 yrs. S/L $460
Honeywood $6,154 $3,979 5-30 yrs. S/L $599
Brookside $2,038 $1,282 10-25 yrs. S/L $276
Southwest Parkway $6,075 $3,637 10-25 yrs. S/L $854
Wedgewood Creek $11,186 $6,972 10-25 yrs. S/L $1,472
Mountain Vista I $3,307 $2,088 5-27.5 yrs. S/L (1)
Mountain Vista II $2,993 $1,886 5-27.5 yrs. S/L (1)
Cibola Village $3,115 $1,886 5-27.5 yrs. S/L (1)
Crofton Village $10,697 $6,586 10-25 yrs. S/L $1,517
</TABLE>
(1) The Partnership's aggregate Federal Tax Basis in the Local Limited
Partnership which owns Mountain Vista I, Mountain Vista II and Cibola Village is
$1,341.
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.
8
<PAGE>
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 2000, there were 2,463 Holders of 25,010 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 each of the years
ended December 31, 1999 and 1998, cash distributions paid or accrued to the
Investor Limited Partners as a group totaled $100,000.
Over the past few years many companies have begun making "mini-tenders"
(offers to purchase an aggregate of less than 5% of the total outstanding units)
for limited partnership interests in the Partnership. Pursuant to the rules of
the Securities and Exchange Commission, when a tender offer is commenced for
Units the Partnership is required to provide limited partners with a statement
setting forth whether it believes limited partners should tender or whether it
is remaining neutral with respect to the offer. Unfortunately, the rules of the
Securities and Exchange Commission do not require that the bidders in certain
tender offers provide the Partnership with a copy of their offer. As a result,
the Managing General Partner often does not become aware of such offers until
shortly before they are scheduled to expire or even after they have expired.
Accordingly, the Managing General Partner does not have sufficient time to
advise you of its position on the tender. In this regard, please be advised that
pursuant to the discretionary right granted to the Managing General Partner of
your partnership in the Partnership Agreement to reject any transfers of units,
the Managing General Partner will not permit the transfer of any Unit in
connection with a tender offer unless: (i) the Partnership is provided with a
copy of the bidder's offering materials, including amendments thereto,
simultaneously with their distribution to the limited partners; (ii) the offer
provides for withdrawal rights at any time prior to the expiration date of the
offer and, if payment is
9
<PAGE>
not made by the bidder within 60 days of the date of the offer, after such 60
day period; and (iii) the offer must be open for at least 20 business days and,
if a material change is made to the offer, for at least 10 business days
following such change.
10
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
The matters discussed in this Form 10-KSB 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-KSB 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 December 31, 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 to be used for capital improvements in
Brookside in 1998 and an additional $31,000 in 1999. 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
11
<PAGE>
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.
The level of liquidity based on cash and cash equivalents experienced a
$168,000 increase at December 31, 1999, as compared to December 31, 1998. The
Partnerships $354,000 of net cash provided by operating activities was partially
offset by $34,000 of net cash used in investing activities and $152,000 of cash
used in financing activities. Cash used in investing activities included
$466,000 of property improvements which was significantly offset by $407,000 of
distributions received from Local Limited Partnerships and $25,000 in
withdrawals from replacement reserves. Cash used in financing activities
included $105,000 of distributions to partners and $47,000 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 each of the years ended December 31, 1999 and 1998, Partnership
distributions (paid or accrued) aggregated $100,000 ($4.00 per unit) to its
limited partners and $5,000 to the general partners. The ability of the
Partnership to continue to make distributions to its partners is dependent upon
the financial performance of the Local Limited Partnerships and its
Subsidiaries.
Southwest Parkway currently has a housing assistance contract with the
Federal Housing Administration which accounts
12
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for approximately 29% of rental revenue. This contract expires on June 30, 2000.
Management has filed to renew the contract and is awaiting approval from the
Federal Housing Administration. Based upon current market conditions, if the
Partnership's contract is not approved, the Partnership does not expect that
this will have a significant impact on rental operations.
Results of Operations
---------------------
Net income increased by $32,000 for the year ended December 31, 1999,
as compared to 1998, due to an increase in income of $308,000 which was
significantly offset by an increase in expenses of $276,000.
Income increased for the year ended December 31, 1999, as compared to
1998, primarily due to an increase in rental income of $291,000 due to the
consolidation of the Partnership's Brookside property for a full year and an
increase in rental income at the Partnership's Southwest Parkway property.
Brookside's income and expenses remained relatively constant in 1999 as compared
to 1998. During the year ended December 31, 1999, the Partnership received
$267,000 and $140,000 of cash distributions from the Local Limited Partnerships
which own the Honeywood Apartments and the Crofton Village Apartments,
respectively. During the year ended December 31, 1998, the Partnership received
cash distributions from the Local Limited Partnerships of $406,000 ($263,000
from Honeywood, $111,000 from Crofton Village and a residual cash distribution
of $32,000 from Westbury Springs, Ltd, which was sold in 1997). 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.
13
<PAGE>
Item 7. Financial Statements
--------------------
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 and 1998
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report............................................................................F - 2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998............................................F - 3
Consolidated Statements of Income for the Years Ended
December 31, 1999 and 1998.........................................................................F - 4
Consolidated Statements of Partners' Capital for the Years Ended
December 31, 1999 and 1998.........................................................................F - 5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998.........................................................................F - 6
Notes to Consolidated Financial Statements..............................................................F - 7
</TABLE>
F - 1
<PAGE>
Independent Auditors' Report
To the Partners
Winthrop Residential Associates II, A Limited Partnership
We have audited the accompanying consolidated balance sheets of Winthrop
Residential Associates II, A Limited Partnership (a Maryland limited
partnership), and its subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, partners' capital and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. 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 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Winthrop Residential Associates II,
A Limited Partnership, and its subsidiaries as of December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Imowitz Koenig & Co., LLP
New York, New York
March 27, 2000
F - 2
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1998
1999 (As Restated)
--------------------- ---------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,472 $ 1,304
Escrow deposits 253 457
Other assets 185 172
Real estate, net 3,194 3,003
--------------------- ---------------------
Total Assets $ 5,104 $ 4,936
===================== =====================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable, accrued expenses and other liabilities $ 328 $ 268
Distribution payable 26 26
Loan payable - affiliate 501 501
Mortgage notes payable 3,499 3,546
--------------------- ---------------------
Total Liabilities 4,354 4,341
--------------------- ---------------------
Minority interest 30 28
--------------------- ---------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,010
units authorized, issued and outstanding 1,733 1,588
General Partners' deficit (1,013) (1,021)
--------------------- ---------------------
Total Partners' Capital 720 567
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 5,104 $ 4,936
===================== =====================
</TABLE>
See notes to consolidated financial statements.
F - 3
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C>
Income:
Rental income $ 1,280 $ 989
Income from Local Limited Partnership cash distributions 407 406
Interest income 52 60
Other income 45 21
--------------------- ---------------------
Total income 1,784 1,476
--------------------- ---------------------
Expenses:
General and Administrative 100 112
Operating 676 540
Depreciation 275 235
Interest 304 216
Management fees 169 147
--------------------- ---------------------
Total expenses 1,524 1,250
--------------------- ---------------------
Net income before minority interest 260 226
Minority interest (2) -
--------------------- ---------------------
Net income $ 258 $ 226
===================== =====================
Net income allocated to General Partners $ 13 $ 11
===================== =====================
Net income allocated to Limited Partners $ 245 $ 215
===================== =====================
Net income per Unit of Limited Partnership Interest $ 9.80 $ 8.60
===================== =====================
Distributions per Unit of Limited Partnership Interest $ 4.00 $ 4.00
===================== =====================
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1999 AND 1998
(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, 1998 25,010 $ 2,102 $ (994) $ 1,108
(As Previously Reported)
Prior Period Adjustment 101 5 106
--------------- ----------------- ---------------- ---------------
Balance - January 1, 1998
(As Restated) 25,010 2,203 (989) 1,214
Adjustment due to consolidation (730) (38) (768)
Net income 215 11 226
Distributions (100) (5) (105)
--------------- ----------------- ---------------- ---------------
Balance - December 31, 1998 25,010 1,588 (1,021) 567
Net income 245 13 258
Distributions (100) (5) (105)
--------------- ----------------- ---------------- ---------------
Balance - December 31, 1999 25,010 $ 1,733 $ (1,013) $ 720
=============== ================= ================ ===============
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 258 $ 226
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 275 235
Amortization 14 8
Minority interest 2 -
Income from Local Limited Partnership cash distributions (407) (406)
Adjustment to consolidate Local Limited Partnership - 19
Changes in assets and liabilities:
Decrease (increase) in escrow deposits 179 (170)
Increase in other assets (27) (4)
Increase (decrease) in accounts payable, accrued expenses
and other liabilities 60 (41)
------------------ ------------------
Net cash provided by (used in) operating activities 354 (133)
------------------ ------------------
Cash Flows From Investing Activities:
Distributions received from Local Limited Partnerships 407 406
Change in replacement reserve 25 (52)
Property improvements (466) (178)
------------------ ------------------
Net cash (used in) provided by investing activities (34) 176
------------------ ------------------
Cash Flows From Financing Activities:
Mortgage principal payments (47) (25)
Distributions to partners (105) (1,531)
------------------ ------------------
Cash used in financing activities (152) (1,556)
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 168 (1,513)
Cash and cash equivalents, beginning of year 1,304 2,817
------------------ ------------------
Cash and cash equivalents, end of year $ 1,472 $ 1,304
================== ==================
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 307 $ 207
================== ==================
Supplemental Disclosure of Non-Cash Financing Activities
Accrued Distributions to Partners $ 26 $ 26
================== ==================
</TABLE>
See Notes 1 and 7, with respect to consolidation of Local Limited Partnership in
1998.
See notes to consolidated financial statements.
F - 6
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 eight Local Limited Partnerships owning ten apartment
complexes located 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.
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.
Southwest Parkway was consolidated effective January 1, 1997 in
connection with a significant new capital contribution by the
Partnership and a substantive transfer of control to an affiliate of
the Partnership's general partners. Brookside was consolidated
effective November 1, 1998 when an affiliate of the general partners of
the Partnership assumed control as general partner of Brookside.
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 and disclosures in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
F - 7
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Real Estate
Real estate is stated at cost, less accumulated depreciation. The
Partnership records impairment losses for long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows are not sufficient to recover the asset's
carrying amount. The impairment loss is measured by comparing the fair
value of the asset to its carrying amount.
Depreciation
Depreciation is computed using the straight-line method over estimated
useful lives of 15 to 25 years for buildings and improvements and 5 to
10 years for personal property.
Loan Costs
At December 31, 1999 and 1998, loan costs of $172,000 respectively are
included in other assets in the accompanying balance sheet and are
being amortized on a straight-line basis over the life of the
respective loan. Accumulated amortization totaled $78,000 and $64,000,
at December 31, 1999 and 1998, respectively.
Investments in Local Limited Partnerships
The Partnership accounts for its investment in six of the Local Limited
Partnerships 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, amortization of
investment costs and costs in excess of initial basis are 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.
Net Income Per Limited Partnership Unit
Net income per limited partnership unit is computed by dividing net
income allocated to the limited partners by the 25,010 units
outstanding.
F - 8
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 certificates of deposit and a money market account held by banks
with original maturity dates of three months or less.
Segment Reporting
The Partnership has one reportable segment, residential real estate.
The Partnership evaluates performance based on net operating income,
which is income before depreciation, amortization, interest and
non-operating items.
Reclassification
Certain reclassifications have been made to the 1998 balances to
conform to the 1999 presentation.
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
are allocated 5% to the general partners and 95% to the limited
partners. Gains and 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, however, the general partner
is allocated at least 1% of the gain. In the event that there is no
cash to be distributed from a sale or refinancing, gains are allocated
5%, to the general partners and 95%, to the limited partners.
3. TRANSACTIONS WITH RELATED PARTIES
One Winthrop Properties, Inc. ("One Winthrop" or the "Managing General
Partner") is a wholly owned subsidiary of First Winthrop Corporation,
which in turn is controlled by Winthrop Financial Associates, A Limited
Partnership.
F - 9
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
3. TRANSACTIONS WITH RELATED PARTIES (Continued)
The Managing General Partner and certain of its affiliates have a
Services Agreement with Coordinated Services of Valdosta, LLC
("Coordinated Services") pursuant to which Coordinated Services
provides 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. 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 to, among other
things, cause the Partnership to consent to a sale of an asset or cause
the Partnership to file for bankruptcy. Coordinated Services is
entitled to receive fees from the Partnership 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 minimum fee is $100,000 per annum. In connection
therewith, Coordinated Services, which is a related party for financial
reporting purposes only, earned fees of $100,000 for the years ended
December 31, 1999 and 1998. Coordinated Services is affiliated with the
management agent of Brookside. For the year ended December 31, 1999 and
1998, the management agent received management and other fees of
approximately $17,000 and $31,000, respectively.
As of December 31, 1999 and 1998, Southwest Parkway is obligated to its
general partner for an operating deficit loan payable of $501,000. The
loan is non-interest bearing and is repayable from available cash flow.
4. REAL ESTATE
Real estate is comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1999 1998
------------------ ----------------
<S> <C> <C>
Land $ 318,000 $ 318,000
Buildings, Improvements and
Personal Property 7,795,000 7,329,000
------------------ ----------------
8,113,000 7,647,000
Accumulated Depreciation (4,919,000) (4,644,000)
------------------- ----------------
$ 3,194,000 $ 3,003,000
================== ================
</TABLE>
F - 10
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
5. MORTGAGE NOTES PAYABLE
The mortgage note payable encumbering Southwest Parkway in the amount
$2,136,000 bears interest at 8.75%, requires monthly payments of
$17,647 and is being amortized over approximately 27 years. The loan
matures on February 1, 2007, with a balloon payment of approximately
$1,898,000, and is secured by the deed of trust on the rental property.
As specified in the loan agreement, Southwest Parkway is required to
make monthly payments of approximately $4,000 to a replacement reserve
account for future capital improvements.
The mortgage note payable encumbering Brookside in the amount of
$1,363,000 is self amortizing and is payable in monthly installments of
$10,348, including interest at 7 1/2%, through February 1, 2023, the
date of maturity. The mortgage is collateralized by the rental
property, security interest, liens and endorsements common to first
mortgage loans.
The estimated fair value of the Partnership's debt approximates its
carrying amount.
Principal payments on the mortgage notes are due as follows:
2000 $ 49,000
2001 53,000
2002 57,000
2003 62,000
2004 67,000
Thereafter 3,211,000
-------------------
$ 3,499,000
===================
6. PRIOR PERIOD ADJUSTMENT
The Partnership's financial statements have been restated to correct
errors in a prior period related to an overstatement of accrued wages
and other accrued liabilities at the Partnership's Southwest Parkway
subsidiary. The previous period to which the errors relate cannot be
determined. Partner's capital at January 1, 1998 was restated to
reflect an increase of $106,000 and minority interest was restated to
reflect an increase of $3,000.
F - 11
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
7. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of December 31, 1999, the Partnership's equity interests in six
Local Limited Partnerships is summarized, as follows:
<TABLE>
<CAPTION>
Local Limited Partnership Percentage Ownership
----------------------------------------------------------------------------------------- --------------------------
<S> <C>
Whisper Lake, Ltd. (Whisper Lake Apartments) 99
Sanford Landing Apartments, Ltd. (Sanford Landing Apartments) 98
Honeywood Associates (Honeywood Apartments) 95
Wedgewood Creek Limited Partnership (Wedgewood Creek Apartments) 99
First Investment Limited Partnership IX (Mountain Vista I, 90
Mountain Vista II and Cibola Village Apartments)
Crofton Village Limited Partnership (Crofton Village Apartments) 44
</TABLE>
In addition, the Partnership holds a 97% limited partnership interest
in Southwest Parkway, which was accounted for under the equity method
prior to January 1997, and a 99% limited partnership interest in
Brookside, which was accounted for under the equity method prior to
November 1998. Southwest Parkway currently has a housing assistance
contract with the Federal Housing Administration which accounts for
approximately 29% of rental revenue. This contract expires on June 30,
2000.
Effective November 1, 1998, an affiliate of the general partner of the
Partnership assumed control as general partner of Brookside. In
addition, an affiliate of Coordinated Services of Valdosta, LLC assumed
management responsibilities 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 1998 to be used for
capital improvements in Brookside and an additional $31,000 in 1999.
As of December 31, 1999, the Partnership has Limited Partnership equity
interests in six Local Limited Partnerships that own eight apartment
complexes. These Local Limited Partnerships have outstanding mortgages
totaling approximately $49,814,000 which are secured by the Local
Limited Partnerships' real property, security interests, liens and
endorsements common to first mortgage loans.
F - 12
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
7. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The combined balance sheets of the Local Limited Partnerships are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 4,025 $ 4,025
Buildings, net of accumulated depreciation
of $38,119 and $35,823 in 1999
and 1998, respectively 18,872 20,594
Cash and cash equivalents 960 1,138
Other assets, net of accumulated amortization
of $1,591 and $1,519 in 1999 and
1998, respectively 3,226 3,380
--------------------- ---------------------
Total Assets $ 27,083 $ 29,137
===================== =====================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Notes payable $ 1,656 $ 2,012
Loans payable 473 473
Mortgage notes payable 49,814 50,470
Accounts payable and accrued expenses 2,771 2,465
--------------------- ---------------------
Total Liabilities 54,714 55,420
--------------------- ---------------------
Partners' Deficit:
Winthrop Residential Associates II (25,106) (23,869)
Other partners (2,525) (2,414)
--------------------- ---------------------
Total Deficit (27,631) (26,283)
--------------------- ---------------------
Total Liabilities and Partners' Deficit $ 27,083 $ 29,137
===================== =====================
</TABLE>
F - 13
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
7. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The combined statements of operations of the Local Limited Partnerships
are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C>
Income:
Rental income $ 12,308 $ 12,121
Other income 536 580
--------------------- ---------------------
Total Income 12,844 12,701
--------------------- ---------------------
Expenses:
Interest 3,953 4,061
Depreciation and amortization 2,367 2,418
Taxes and insurance 1,317 1,271
Other operating expenses 5,959 5,828
--------------------- ---------------------
Total Expenses 13,596 13,578
--------------------- ---------------------
Net loss $ (752) $ (877)
===================== =====================
Net loss allocated to
Winthrop Residential Associates II $ (830) $ (918)
===================== =====================
Net income allocated to
other partners $ 78 $ 41
===================== =====================
</TABLE>
F - 14
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(Continued)
8. PROFORMA FINANCIAL INFORMATION
The following proforma condensed, consolidated statement of operations
assumes that the Partnership, Southwest Parkway and Brookside were
consolidated at January 1, 1998 (in thousands):
Year Ended
December 31,
1998
-------------------
Total revenue $ 1,732
-------------------
Operating and other expenses 946
Depreciation 290
Mortgage interest 295
-------------------
Total expenses 1,531
-------------------
Net income $ 201
===================
The proforma results do not necessarily represent the results which
would have occurred if the transaction had taken place on the basis
assumed above, nor are they indicative of the results of future
operations.
9. TAXABLE INCOME
The Partnership's taxable income differs from net income for financial
reporting purposes as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
Net income for financial reporting purposes $ 258 $ 226
Differences in equity in Local Limited
Partnership's income/loss for financial
reporting and tax reporting purposes 1,239 510
Income from Local Limited Partnership cash
distributions (407) (406)
------------------- --------------------
Taxable income $ 1,090 $ 330
=================== ====================
</TABLE>
F - 15
<PAGE>
Item 8. Changes in and Disagreements on Accounting and
- ------ ----------------------------------------------
Financial Disclosure.
--------------------
There were no disagreements with Imowitz Koenig & Co., LLP regarding
the 1999 or 1998 audits of the Partnership's financial statements.
29
<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 affecting
its business. As of March 1, 2000, 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
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President 1-96
Carolyn Tiffany Chief Operating Officer 10-95
and Clerk
Michael L. Ashner, age 47, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner 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.
Thomas C. Staples, age 44, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 48, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of
30
<PAGE>
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.
Carolyn Tiffany, age 33, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.
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
Residential Associates I, A Limited Partnership; Winthrop Residential Associates
III, A Limited Partnership; 1999 Broadway Associates Limited Partnership;
Nantucket Island Associates 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; and Winthrop Growth Investors
I 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.
31
<PAGE>
Effective December 16, 1997, the Managing General Partner and certain
of its affiliates entered into an agreement with Coordinated Services of
Valdosta, LLC ("Coordinated Services") to provide for the daily asset and
property management services and investor services for the Partnership. See
"Item 11, Security Ownership of Certain Beneficial Owners and Management."
Coordinated Services of Valdosta LLC is a Georgia limited liability corporation
with headquarters in Valdosta, Georgia. Founded in 1997, its managing member is
Investor Service Group, Inc., a Georgia Corporation. The principals of Investor
Service Group are Mary T. Johnson and James L. Dewar, Jr.
Mary T. Johnson is the Manager of Coordinated Services. Ms. Johnson is
also Executive Vice President of Dewar Realty, Inc. and Dewar Properties, Inc.
Ms. Johnson is a graduate of Valdosta State University and is a licensed Georgia
Real Estate Broker. Ms. Johnson has 21 years of experience in property
management, asset management, investor services, and development of apartment
and assisted living properties. Ms. Johnson is currently responsible for the
asset management of over 150 investor partnerships and property management of
over 50 apartment communities.
James L. Dewar, Jr. is the founder of Dewar Realty, Inc. and Dewar
Properties, Inc. Mr. Dewar is a graduate of the University of Georgia and is a
licensed Georgia Real Estate Broker. Mr. Dewar has 32 years experience in real
estate construction, property management and development of apartment and
assisted living properties. Mr. Dewar has produced over $100 million in
conventional and government funded family and elderly apartment communities.
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.")
32
<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, 1999. 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-Hawthorne 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, 1999 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.
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
33
<PAGE>
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
right to receive fees from the Partnership as provided in the Partnership
Agreement.
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
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.
Pursuant to the terms of the Services Agreement, the right to receive these fees
was assigned to Coordinated Services.
The Partnership's general partners are entitled to 5% of cash available
for distribution. The general partners received $5,285 of cash distributions in
1999 and 1998, respectively.
For the year ended December 31, 1999, the Partnership allocated $20,438
and $6,188 of taxable income to the Managing General Partner and $34,064 and
$10,314 to the Associate General Partner.
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
34
<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 13th day of April
2000.
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 April 13, 2000
- ------------------ Officer and Director
Michael Ashner
/s/ Thomas Staples Chief Financial Officer April 13, 2000
- ------------------
Thomas Staples
35
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Title of Document Page
--- ----------------- ----
<S> <C> <C>
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)
10.1 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)
10.2 Service Agreement, dated December 16, 1997, by and
between First Winthrop Corporation, Winthrop
Financial Co., Inc., WFC Realty Co., Inc., WFC
Realty Saugus, Inc., Winthrop Properties, Inc.,
Winthrop Metro Equities Corporation, Winthrop Lisbon
Realty, Inc. and Northwood Realty Co., Inc. and
Coordinated Services of Valdosta, LLC. (incorporated
by reference to the Registrant's Annual Report on
Form 10KSB for the year ended December 31, 1998).
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
99. Supplementary Information required pursuant to Section
9.4 of the Partnership Agreement.
</TABLE>
36
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,472,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,113,000
<DEPRECIATION> (4,919,000)
<TOTAL-ASSETS> 5,104,000
<CURRENT-LIABILITIES> 0
<BONDS> 3,499,000
<COMMON> 0
0
0
<OTHER-SE> 720,000
<TOTAL-LIABILITY-AND-EQUITY> 5,104,000
<SALES> 0
<TOTAL-REVENUES> 1,732,000
<CGS> 0
<TOTAL-COSTS> 1,120,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,000
<INCOME-PRETAX> 258,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 258,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,000
<EPS-BASIC> 9.80
<EPS-DILUTED> 9.80
</TABLE>
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES II, A LIMITED PARTNERSHIP
DECEMBER 31, 1999
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement (Unaudited)
1. Statement of Cash Available for Distribution for the:
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1999 December 31, 1999
----------------------- ------------------------
<S> <C> <C>
Net Income $ 258,000 $ 245,000
Add: Depreciation 275,000 52,000
Amortization 14,000 7,000
Minority interest 2,000 -
Less: Cash to reserves (444,000) (278,000)
----------------------- ------------------------
Cash Available for Distribution $ 105,000 $ 26,000
======================= ========================
Distributions allocated to General Partners $ 5,000 $ 1,000
======================= ========================
Distributions allocated to Limited Partners $ 100,000 $ 25,000
======================= ========================
</TABLE>
2. Fees and other compensation paid or accrued by the Partnership
to the General Partners, or their affiliates, during the three
months ended December 31, 1999:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
----------------------------- ------------------------------------------------- ------------------------
<S> <C> <C>
General Partners Interest in Cash Available for Distribution $ 1,000
WFC Realty Co., Inc. Interest in Cash Available for Distribution $ 5
(Initial Limited Partner)
</TABLE>
