SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the year ended December 31, 1994 Commission File
Number 2-81033
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland 04-2782016
(State of Organization) (I.R.S. Employer I.D. No.)
One International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (617) 330-8600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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-K or any amendment to this
Form 10-K. [ X ]
No voting stock is held by nonaffiliates of the Registrant.
No market exists for the limited partnership interests of the Registrant,
and therefore, no aggregate market value can be computed.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part of the Document
Form 10-K Incorporated by Reference
I Pages 21-26 and 32-45 of the Prospectus of the Registrant dated
March 11, 1983 (the "Prospectus")
Pages1-10 of the Supplement to the Prospectus dated July 20, 1983
Pages17-20 of the Property Report of the Partnership dated
September 30, 1983
Pages 7-27 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1983
III Pages 16-18 and 30-32 of the Prospectus
<PAGE>
PART I
Item 1. Business.
Development
Winthrop Residential Associates III ("WRA III"), a limited partnership,
was originally organized under the Uniform Limited Partnership Act of the State
of Maryland on June 28, 1982, 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 which would be assisted by federal,
state and local government agencies ("Local Limited Partnerships") pursuant to
programs which would not significantly restrict distributions to owners or the
rates of return on investments in such complexes. On December 15, 1982, WRA III
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 III changed its name to Winthrop
Residential Associates III, A Limited Partnership (the "Partnership").
The General Partners of the Partnership are Two Winthrop Properties, Inc.
("Two Winthrop") and Linnaeus-Oxford Associates Limited Partnership
("Linnaeus-Oxford"). The Initial Limited Partner is WFC Realty Co., Inc.
("WFC"). Two Winthrop and WFC are Massachusetts corporations which are wholly
owned subsidiaries of First Winthrop Corporation ("First Winthrop"), a Delaware
corporation, which in turn is wholly-owned by Winthrop Financial Associates, A
Limited Partnership ("WFA"), a Maryland public limited partnership.
Linnaeus-Oxford is a Massachusetts limited partnership. The general partners are
Arthur J. Halleran, Jr. and Jonathan W. Wexler. As managing general partner, Mr.
Halleran has exclusive control over the management and operation of
Linnaeus-Oxford. Messrs. Halleran and Wexler are Directors of First Winthrop and
Two Winthrop and, prior to December 22, 1994, Mr. Halleran was the sole general
partner of the general partner of WFA. Two Winthrop is the Partnership's
Managing General Partner.
On December 22, 1994, pursuant to an Investment Agreement entered into
among Nomura Asset Capital Corporation ("NACC"), Mr. Halleran and certain other
individuals who comprise the senior management of WFA, the general partnership
interest in Linnaeus was transferred to W.L. Realty, L.P. ("W.L. Realty"). W.L.
Realty is a Delaware limited partnership, the general partner of which is A.I.
Realty Company, LLC ("Realtyco"). The equity securities of Realtyco are
currently held by certain employees of NACC. Such securities are subject to a
call option agreement pursuant to which NACC may, at any time, elect to purchase
such securities for $1.00.
The Partnership was initially capitalized with contributions totalling
$2,000 from its General Partners and $5,000 from WFC.
<PAGE>
In late 1982, the Partnership filed a Registration Statement on Form S-11
with the Securities and Exchange Commission with respect to a public offering of
25,000 Units of limited partnership interest ("Units") at a purchase price of
$1,000 per Unit (an aggregate of $25,000,000). The Registration Statement was
declared effective on March 8, 1983. The offering terminated in July 1983, at
which time subscriptions for 25,000 Units, representing capital contributions
from Investor Limited Partners of $25,000,000, had been accepted. Capital
contributions net of selling commissions, sales and registration costs, were
utilized to purchase investments in Local Limited Partnerships and temporary
short-term investments.
Description of Business
The only business of the Partnership is investing as a limited partner in
other limited partnerships that own, operate and otherwise deal with apartment
properties with financing insured by the U.S. Department of Housing and Urban
Development ("HUD"). The Partnership's investment objectives and policies are
described at pages 21-26 of its Prospectus dated March 11, 1983 (the
"Prospectus") under the caption "Investment Objectives and Policies," which
description is attached hereto as an exhibit and incorporated herein by this
reference. The Prospectus was previously filed with the Commission pursuant to
Rule 424(b).
Local Limited Partnerships
The Partnership has completed its eleventh full year of operations. The
Partnership initially acquired equity interests in the form of limited
partnership interests in 12 Local Limited Partnerships owing and operating
apartment properties. The Partnership sold its interests in four Local Limited
Partnerships owning the following properties: Fairfax Towers (October 1988);
Harborside Apartments Phase II (February 1989); and Hunter's Ridge Apartments
Phase I and Hunter's Ridge Apartments Phase II (October 1991). The Partnership
lost its ownership interest in a fifth property, Liberty Square Townhomes, when
HUD foreclosed on the Local Limited Partnership owning that property in February
1992.
The Partnership reduced its interest in two Local Limited Partnerships,
those owning Maple Manor and The Groves, during 1988. The Partnership accepted a
proposal of the local general partner of Fayetteville Apartments Limited
Partnership (which owns Maple Manor) and Savannah River Associates Limited
Partnership (which owns The Groves) whereby the local general partner will
contribute up to $250,000 in additional capital under specific circumstances to
prevent the mortgages secured by those properties from being assigned to HUD. In
exchange for this commitment, the ownership interest allocations as well as the
allocation provisions for the distribution of cash from these Local Limited
Partnerships were amended to increase the local general partner's share from 5%
to 50%. The partnership agreements were amended to reflect this change as well
as adding a provision enabling the local general partner to use any
distributable cash flow generated by one of these two Local Limited Partnerships
as a loan or capital contribution to the second Local Limited Partnership on
behalf of the Partnership and the local general partner if the second Local
Limited Partnership required additional funding. The effect of these changes on
the Partnership is to reduce the amount of cash it receives from these two Local
Limited Partnerships. However, by obtaining a source of funding for up to
$250,000 of operating deficits, the threat of losing the Partnership's
investment in these two Local Limited Partnerships through a foreclosure action
is decreased.
The following table sets forth certain information regarding the
properties owned by the seven Local Limited Partnerships in which the
Partnership has retained an interest and which continue to own apartment
properties as of March 15, 1995:
Mortgage
<TABLE>
Principal Mortgage Amortization
No. of Equity Amount of Interest Period (Years
Property Units Payments Mortgage(1) Rate Remaining)(2)
<S> <C> <C> <C> <C> <C>
1) Clear Creek Landing
Apartments(3)(4)
Houston, TX 200 $ 1,970,173 $ 3,042,856 7.5% 36 Years
2) Village Square
Apartments(5)
Manassas, VA 285 1,072,923 7,907,170 7.5% 38 Years
3) Dunhaven Apartments,
Section 2, Phase 1
Baltimore, MD 72 576,000 2,426,800 7.5% 36 Years
4) Dunhaven Apartments,
Section 2, Phase 2
Baltimore, MD(7) 72 671,560 2,718,700 7.5% 40 Years
5) The Groves
Apartments
North Augusta, SC 132 1,150,576 2,278,600 7.5% 36 Years
6) Autumn Chase
Apartments(3)(6)
Mobil, AL 120 895,000 3,129,800 7.5% 40 Years
7) Maple Manor
Apartments
Fayetteville, AR 128 1,197,982 1,641,791 7.0% 31 Years
------ --------- ---------
1,009 $ 7,534,214 $ 23,145,717
===== = ========== = ==========
</TABLE>
--------------------
(1) Represents the mortgage amount or mortgage commitment as of the time the
Partnership acquired its interest in the Local Limited Partnership.
(2) Represents the full term or the remaining term of the mortgage, as the case
may be, at the time the Partnership acquired its interest in the Local
Limited Partnership.
(3) This Local Limited Partnership's mortgage is held by HUD.
(4) This Local Limited Partnership is operating under a Provisional Workout
Arrangement with HUD which expires July 1995.
(5) This property is managed by Winthrop Management, an affiliate of WFA.
(6) This Local Limited Partnership is operating under a Provisional Workout
Arrangement with HUD which expires April 2000.
(7) This Local Limited Partnership is currently in default on its mortgage
obligation.
Descriptions of the properties and the terms upon which the Partnership
acquired them are set forth at pages 32-45 of the Prospectus under the caption
"Initial Investment"; pages 1- 10 of the Supplement to the Prospectus dated July
20, 1983 (the "July 20, 1983 Supplement"), under the caption "Investments in
Local Limited Partnerships"; pages 17-20 of the Property
<PAGE>
Report of the Partnership dated September 30, 1983, and pages 7-27 of the
Partnership's Annual Report on Form 10-K filed March 31, 1984 under the caption
"Item 1. Business," all of which descriptions are attached hereto as an Exhibit
and incorporated herein by this reference. The July 20, 1983 Supplement was
filed with the Commission as Post Effective Amendment No. 2 to the Partnership's
Registration Statement on Form S-11 (Registration No. 2-81033). See also Note 4
of Notes to Financial Statements included as a part of this Annual Report for
additional information concerning the properties.
Defaults
The Partnership holds limited partnership interests in Local Limited
Partnerships which own apartment properties, all of which are 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, or (ii) 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. If the owner
does default under the terms of the workout agreement or if HUD concludes that a
property in default lacks the ability to generate sufficient revenue to cure its
default, it may pursue its right to assume ownership of the property through
foreclosure.
Two Local Limited Partnerships (owning Autumn Chase and Clear Creek),
which were previously in default, currently have Provisional Workout
Arrangements in effect with HUD. The Partnership also holds an ownership
interest in a Local Limited Partnership (owning Dunhaven Apartments, Section 2,
Phase 2) which is currently in default on its mortgage obligation.
The Local Limited Partnership owning Autumn Chase defaulted on its
mortgage in November 1989 and the mortgage was assigned to HUD in 1990. In May
1991, the Local Limited Partnership negotiated a one-year workout agreement with
HUD and has subsequently obtained additional workout agreements, the most recent
agreement expiring in April 2000. The terms of the most recent agreement require
that in addition to payments for a service charge and real estate taxes, 110.89%
of the accruing interest on the outstanding loan be paid initially. The Local
Limited Partnership met the terms of the agreement throughout 1994.
The Local Limited Partnership owning Clear Creek defaulted on its mortgage
in May 1988 and the mortgage was assigned to HUD in July 1988. The property is
currently operating under a one-year workout agreement with HUD which will
expire in July 1995. The terms of the agreement require that, in addition to
payments for a service charge and real estate taxes, approximately 130% of the
accruing interest on the outstanding loan be paid currently. The Local Limited
Partnership met the terms of the agreement throughout 1994.
<PAGE>
The Local Limited Partnership Dunhaven Apartments, Section 2, Phase 2
defaulted on its mortgage obligation in June 1994. The mortgage is in the
process of being assigned to HUD.
Reserves
The Partnership originally set aside approximately $580,000 as operating
reserves from the proceeds of the original offering. The Partnership has added
funds to these reserves from its cash flow from the Local Limited Partnerships
and from a portion of the sale proceeds of Fairfax Towers and its interest in
Harborside Apartments Phase II, Hunter's Ridge Phase I and Hunters Ridge Phase
II. Such funds have been invested in short-term taxable money-market and
government instruments. To date, $291,489 has been contributed from the
operating reserve to assist the Local Limited Partnerships with operating
deficits. All advances made to the Local Limited Partnerships have been recorded
as capital contributions to the Local Limited Partnerships. However, the Local
Limited Partnerships have recorded only a portion of the advances as capital
contributions and the remaining amount as loans. In addition, in 1994, the
Partnership utilized $753,609 of these reserves to fund a portion of the cash
distribution to the Investor Limited Partners. As of December 31, 1994 there is
approximately $2,046,000 remaining in the operating reserves.
Employees
The Partnership does not have any employees. Services are performed for
the Partnership by the Managing General Partner, and agents retained by it.
Item 2. Properties.
Other than the limited partnership interests set forth in Item 1 above,
the Partnership does not own any property.
Item 3. Legal Proceedings. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholders
Matters.
The Registrant 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 December 31, 1994, there were 2,225 holders of the Units.
The Partnership Agreement requires that if the Partnership has Cash
Available for Distribution it be distributed quarterly to the Partners in
specified proportions. The Partnership Agreement defines Cash Available for
Distribution as Cash Flow less cash designated by the Managing General Partner
to be held for restoration or creation of reserves. Cash Flow, in turn, is
defined as cash derived from the Local Limited Partnerships (but excluding sale
or refinancing proceeds) and all cash derived from Partnership operations, less
cash used to pay operating expenses of the Partnership. For the years ended
December 31, 1994, 1993 and 1992, cash distributions paid or accrued to the
Limited Partners as a group were $1,000,000 each year.
Item 6. Selected Financial Data.
<TABLE>
For the Year Ended or as of December 31,
1994 1993 1992 1991 1990
------------- ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Income from Local Limited
Partnership Cash
Distributions.................. $ 263,298 $ 246,843
Income from Short-term
Investment..................... $ 107,868 $ 102,927 $ 192,875 $ 343,091 $ 408,874
Operating Expenses................. (47,258) (81,395) (66,385) (74,078) (79,771)
Equity in gain from sale of real
estate......................... -- -- -- 1,986,616 82,563
Equity in loss of Local Limited
Partnerships................... (19,668) (92,661) (231,237) (44,124) (713,615)
------- -------------- --------------- ------- --------
Net income (loss).................. $ 304,240 $ (175,714) $ (104,747) $ (2,211,505) $ (301,949)
- ------- --------------- --------------- - ---------- - --------
Net income (loss) per weighted
average Unit of Investor
Limited Partnership Inter-
est Outstanding................ $ 11.25 $ 6.50 $ (3.87) $ (87.77) $ (11.71)
- ----- - ---------- - ----------- - ------ - ------
Total Assets....................... $ 2,754,241 $ 3,531,298 $ 9,623,559 $ 8,493,514 $ 9,296,463
- --------- - ------------ - ---------- - --------- - ---------
Investments in Local Limited
Partnerships................... $ 404,805 $ 428,253 $ 524,695 $ 818,648 $ 2,934,530
- ------- - ---------- - ---------- - ---------- - ---------
Equity payments due to Local
Limited Partnerships $ -- $ -- $ -- $ -- $ --
- -- - ----------- - ----------- - ---------- - -----------
Total Cash Distributions per Unit of Investor Limited Partnership Interest,
including amounts distributed or to be distributed after year end with
respect to 1990, 1991, 1992, 1993
and 1994 $ 40 $ 40 $ 40 $ 210.00(2) $ 20.00(1)
- -- - ---- - ---- - ------ - -----
</TABLE>
---------------
(1) Includes $20.00 per Unit from a portion of the balance of the sale proceeds
from Fairfax Towers.
(2) Includes $160 per unit from the sale proceeds from Hunter's Ridge Phases I
and II and $24.12 from the balance of the sale proceeds of Fairfax Towers.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Reserves
As of March 15, 1995, the Partnership retained an equity interest in seven
Local Limited Partnerships. The Partnership follows the equity method of
accounting for these interests and ecognizes its proportionate share of income
and losses incurred by the Local Limited Partnerships. Generally, the
Partnership's equity in losses in the Local Limited Partnerships decrease over
time due to two factors; although in 1990 and 1992, the Partnership's equity in
losses increased over the previous years'. Losses attributable to a Local
Limited Partnership are not recognized if those losses would cause the
Partnership's investment account for that Local Limited Partnership to become
negative since the Partnership has no obligation to fund them. In 1990, the
equity in losses increased due to a revaluation of the value of Clear Creek,
which accelerated the recognition of losses to the extent of its remaining
investment account. In 1992, the equity in losses increased due to an increase
in vacancy and operating expenses at The Groves. In 1993, the equity in losses
decreased because The Groves' remaining investment account was not sufficient to
recognize all 1993 losses from the Local Limited Partnership. In 1994, the
equity in losses decreased since the only losses recognized by the Partnership
were from Maple Manor. For fiscal 1994, $357,648 of the Partnership's share of
losses from the Local Limited Partnerships were not recognized since the related
investments had been fully written off. Cumulatively through 1994, a total of
$4,479,983 of the Partnership's equity in losses from the Local Limited
Partnerships has been deferred.
The equity method of accounting is used solely for financial reporting
purposes; all losses continue to be recognized for tax purposes. The tax losses
of the Partnership will decrease over time because the advantages of accelerated
depreciation taken by the Local Limited Partnerships are greatest in the earlier
years. Also, the deductions for mortgage interest expense will steadily decrease
as the mortgage principals are amortized.
The Partnership requires cash to pay its general and administrative
expenses or to make advances to any of the Local Limited Partnerships 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 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. As of December 31, 1994, the Partnership held operating reserves of
approximately $2,046,000 which is expected to be sufficient to fund any
anticipated deficits. The Managing General Partner's current policy is to
maintain a reserve balance sufficient to provide, at a minimum, interest income
in an amount equal to the Partnership's annual general and administrative
expenses. Therefore, a lack of cash distributed by the Local Limited
Partnerships to the Partnership in the future will not deplete the reserves,
though it may restrict the Partnership from making distributions to the Investor
Limited Partners.
The Partnership has reserves which, in principal, could be used to make
advances to the Local Limited Partnerships. However, the Partnership does not
intend to make advances to fund any future operating deficits incurred by the
Local Limited Partnerships, but retains its prerogative to exercise a business
judgement to reverse this position if circumstances warrant a change in this
policy. Moreover, the Partnership is not obligated to provide any additional
funds to the Local Limited Partnerships to fund operating deficits. If a Local
Limited Partnership sustains continuing operating deficits and had no other
source of funding, it is likely that the Local Limited Partnership will
eventually default on its mortgage obligation and risk a foreclosure on its
property by the lender. If a foreclosure were to occur, the Local
<PAGE>
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 as an owner of the Local Limited Partnership, would share these
consequences in proportion to its ownership interest in the Local Limited
Partnership.
Results of Operations
A number of the properties owned by the Local Limited Partnerships in
which the Partnership has invested have operated at a deficit for many years due
to their location in areas with weak economies or overbuilt rental markets.
Economic and competitive forces also impede properties operating at break even
or better to improve their financial operating results, that is, to generate
increasing net cash flow in each subsequent year after operating expenses and
financial obligations. As markets deteriorated during the mid-1980's, the Local
Limited Partnerships experiencing financial difficulties sought alternative
sources of funding to cover operating deficits. In some cases, these Local
Limited Partnerships secured additional funding from their general partners.
From 1985 through 1988, the Partnership did provide some funding to five Local
Limited Partnerships to preserve its ownership interest in those properties.
However, as it became apparent that the recovery of these markets would be
prolonged and that the Partnership's resources were limited, funding was
discontinued. Consequently, some Local Limited Partnerships incurring continuing
deficits ceased making full debt service payments, putting the mortgages into
default, and instead began negotiating with lenders for mortgage modifications
to reduce debt service payments to a level property operations could support.
Three Local Limited Partnerships, owning Autumn Chase, Clear Creek and
Dunhaven Apartments, Section 2, Phase 2 have defaulted on their mortgage
obligations. Autumn Chase is currently operating under a Provisional Workout
Arrangement which is effective from July 1, 1994 through April 30, 2000. The
terms of the agreement require minimum monthly payments equal to 110.89% of
accruing interest as well as payments for a service charge and real estate
taxes. The two previous workout agreements which expired in April 1994 and April
1993 required minimum monthly debt service payments equal to 100% and 85%,
respectively, of the accruing interest as well as a service charge and real
estate tax payments. Autumn Chase has met the minimum debt service requirements
in 1992, 1993 and 1994. Due to the financial condition of Autumn Chase, however,
no cash distributions have been made to the Partnership in 1993 or 1994 and no
cash distribution will be made to the Partnership in 1995.
Clear Creek is currently operating under a Provisional Workout Arrangement
which is effective from August 1, 1994 through July 31, 1995. The terms of the
agreement require minimum monthly payments equal to approximately 130% of
accruing interest as well as payments for a service charge and real estate
taxes. The two previous workout agreements which expired in July 1994 and April
1995 required minimum monthly debt service payments equal to 110% and 100%,
respectively, of the accruing interest as well as a service charge and real
estate tax payments. Clear Creek has met the minimum debt service requirements
in 1992, 1993 and 1994. Due to the financial condition of Clear Creek, however,
no cash
<PAGE>
distributions have been made to the Partnership in 1993 or 1994 and no cash
distribution will be made to the Partnership in 1995.
The Local Limited Partnership owning Dunhaven Apartments, Section 2, Phase
2 defaulted on its mortgage obligation in June 1994. The mortgage is in the
process of being assigned to HUD. Due to Dunhaven's financial situation, no cash
distribution will be made to the Partnership in 1995 from 1994 operations. While
Dunhaven Apartments, Section 2, Phase 2 was able to meet its debt service
payments in 1993 and 1992 through funding by the local general partner and
Dunhaven Apartments, Section 2, Phase 1, no cash was distributed to the
Partnership from 1993 or 1992 operations.
The four properties owned by the remaining Local Limited Partnerships met
their financial obligations in 1994. Dunhaven Apartments, Section 2, Phase 1
incurred an operating deficit, Maple Manor operated at break even, and Village
Square and The Groves generated varying amounts of operating cash flow. Dunhaven
Apartments, Section 2, Phase 1 incurred a slight deficit in 1994 which was
funded by cash reserves. Accordingly, no cash distribution was made to the
Partnership in 1994. While Dunhaven Apartments, Section 2, Phase 1 was able to
generate a small amount of cash flow in 1993 and 1992, no cash distributions
were made to the Partnership.
Village Square generated substantial operating cash flow in 1994 and it is
anticipated that a cash distribution will be made to the Partnership in 1995
from the 1994 cash flow. The Partnership received cash distributions from
Village Square of $263,298 in 1994 and $246,843 in 1993 from cash flow generated
by Village Square in 1993 and 1992, respectively.
Maple Manor operated at break even in 1994 and will not be making a cash
distribution to the Partnership in 1995. In 1993 and 1992, Maple Manor generated
positive cash flow, a portion of which was used to make a capital contribution
to The Groves.
The Groves generated positive cash flow in 1994, however, will not be
making a cash distribution to the Partnership. In 1993 and 1992, The Groves
operated at a deficit. The improved operations are due, in part, to a reduction
in repair and maintenance expenditures. An aggressive repair and maintenance
program began in 1992 which was aimed at increasing the property's
competitiveness. This program was completed 1993, resulting in lower repair and
maintenance expenditures for 1994.
The Local Limited Partnerships' objectives are to improve operating
results for all properties and to continue to operate under HUD-sanctioned
workout agreements for those properties that are in default on their mortgage
obligations until any delinquencies are cured. The Partnership believes that as
long as the Local Limited Partnerships which own properties in default continue
to negotiate with HUD to work out their financial difficulties, the threat of
foreclosure is mitigated. Moreover, any workout agreement entered into between
HUD and the Local Limited Partnerships will have no affect on the Partnership's
ability to deduct mortgage interest expense unless HUD agrees to forgive such
interest indebtedness. As of March 15, 1995, none of the Local Limited
Partnerships had agreements with HUD which would forgive accrued interest.
<PAGE>
The results of operations for future years may differ from those in 1994
as a result of many factors. One will be the ability of the Local Limited
Partnerships which currently have provisional workout agreements with HUD to
extend those agreements until all mortgage delinquencies have been cured.
Another factor will be the ability of the Local Limited Partnership owning
Dunhaven Apartments, Section 2 Phase 1 to operate at break even or better.
Another factor will be the ability of each Local Limited Partnership to deal
with the consequences of changing economic conditions that affect property
operations. The Partnership's investment in Local Limited Partnerships owning
rental real estate is subject to the risk involved with the management and
ownership of rental real estate. Vacancy levels, rental payment defaults and
operating expenses are all dependent on general and local economic conditions.
Shifts in the economy could result in differing operating results for each
individual Local Limited Partnership. In these markets, operating results in
future years may depend on the properties' ability to maintain competitive
rental rates while using its available resources to fund necessary repairs and
replacements.
The Partnership's plan is to work with the Local Limited Partnerships to
maintain ownership of and seek workout agreements with HUD for those properties
in default on their mortgage. Although the Partnership has no ability to force a
sale of properties owned by the Local Limited Partnerships, the Partnership will
also work with the Local Limited Partnerships to investigate sale opportunities
for those properties generating positive cash flow and will continue to work
with the Local Limited Partnerships to improve the financial performance of all
the properties.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) and (b) Identification of directors and executive
officers.
The following table sets forth the names and ages of the directors and
executive officers of the Managing General Partner and the position held by each
of them.
<TABLE>
Position Held with the
Name Managing General Partner Age
<S> <C> <C>
Arthur J. Halleran, Jr. Director and President 47
Jonathan W. Wexler Director, Vice President, Assistant Clerk 44
and Treasurer
Richard J. McCready Director, Vice President and Clerk 36
</TABLE>
<PAGE>
Mr. Halleran has served in an executive capacity with the Managing General
Partner since its organization in 1978, Mr. Wexler was elected an officer in
1983 and Mr. McCready in 1990. All of these individuals will continue to serve
in such capacities until their successors are duly elected and qualified.
(c) Identification of certain significant employees. None.
(d) Family relationships. None.
(e) Business Experience.
The Managing General Partner was incorporated in Massachusetts in October
1978. The background and experience of the executive officers and directors of
The Managing General Partner, described above in Items 10(a) and (b), are as
follows:
Arthur J. Halleran, Jr. is the Chairman of WFA. He is also Director and
President of the Managing General Partner and other subsidiaries of WFA. In such
capacities he is responsible for all aspects of the business of WFA and its
subsidiaries, with special emphasis on the evaluation, acquisition and
structuring of real estate investments. Mr. Halleran joined the Winthrop
organization in 1977. He is a graduate of Villanova University and holds an
M.B.A. degree from the Harvard Business School.
Jonathan W. Wexler is a Vice Chairman and Vice President of WFA and a
Director, Vice President, Assistant Clerk and Treasurer of the Managing General
Partner and other subsidiaries of WFA. His primary responsibility is the
evaluation, acquisition and structuring of real estate investments. Mr. Wexler
joined the Winthrop organization in 1977. He is a graduate of the Massachusetts
Institute of Technology and holds a Master of Science degree from the Sloan
School of Management of the Massachusetts Institute of Technology.
Richard J. McCready is a Managing Director, Vice President and Clerk of WFA
and a Director, Vice President and Clerk of the Managing General Partner and all
other subsidiaries of WFA. He also has responsibility for all the legal affairs
of WFA and its affiliates. Mr. McCready joined the Winthrop organization in
1990. He is a graduate of the University of New Hampshire and holds a J.D.
degree from Boston College Law School.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners
81 Limited Partnership; Winthrop Residential Associates I, A Limited
Partnership; Winthrop Residential Associates II, A Limited Partnership; 1626 New
York Associates Limited Partnership; 1999 Broadway Associates Limited
Partnership; Indian River Citrus Investors Limited Partnership; Nantucket Island
Associates Limited Partnership; One Financial Place Limited Partnership;
Presidential Associates I Limited Partnership; Riverside Park Associates Limited
Partnership; Sixty-Six Associates Limited Partnership; Springhill Lake Investors
<PAGE>
Limited Partnership; Twelve AMH Associates Limited Partnership; Winthrop
California Investors Limited Partnership; Winthrop Growth Investors I Limited
Partnership; Winthrop Interim Partners I, A Limited Partnership; Winthrop
Financial Associates, A Limited Partnership; Southeastern Income Properties
Limited Partnership; Southeastern Income Properties II Limited Partnership;
Winthrop Miami Associates Limited Partnership; and Winthrop Apartment Investors
Limited Partnership.
<PAGE>
(f) Involvement in certain legal proceedings. None.
Item 11. Executive Compensation.
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. The amounts of these items and
the times at which they are payable to the General Partners and their affiliates
are described at pages 16-18 and 30-32 of the Prospectus under the captions
"Management Compensation" and "Profits or Losses for Tax Purposes and Cash
Distributions," which descriptions are incorporated herein by this reference.
For the year ended December 31, 1994, the Partnership allocated $29,413 of
tax loss to the Managing General Partner and $14,685 of loss to Linnaeus. See
Note 3 of Notes to Financial Statements for additional information about
transactions between the Partnership and the General Partners or their
affiliates. For the year ended December 31, 1994, Village Square paid $94,760 of
property management fees to Winthrop Management, an affiliate of WFA.
Item 12. 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 March 15, 1995. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited.
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 Partners, although approval of Linnaeus is required
as to all investments in Local Limited Partnerships and in connection with any
votes or consents arising out of the ownership of a Local Limited Partnership
interest.
(b) Security ownership of management.
As of March 15, 1995, one Partner of WFA owns five Units in the
Partnership and WFC Realty Co., Inc. owns 100 Units, which together is less than
1%. None of the officers, directors or the general partner of the General
Partners own any Units.
(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.
<PAGE>
PART IV
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with management and others.
Since the registrant is a limited partnership, it has no directors
or officers. In addition, the registrant has had no transactions with individual
officers or directors of the Managing General Partner other than any indirect
interest such officers and directors may have in the amounts paid to the
Managing General Partner or its affiliates by virtue of (i) their indirect
ownership interest in WFA, or any of its affiliates, or (ii) their partnership
interest in Linnaeus. Item 11 of this report which contains a discussion of the
amounts and times that fees and other compensation are paid or accrued by the
Partnership to the General Partners or their affiliates is incorporated herein
by this reference.
(b) Certain business relationships.
The Partnership's response to Item 13(a) is incorporated herein by
this reference. In addition, the Registrant has no business relationship with
entities of which the directors of the Managing General Partner are officers,
directors or 10 percent equity owners other than as set forth in the
Registrant's response on Item 13(a).
(c) Indebtedness of management. None.
(d) Transactions with promoters. None.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements - The Financial Statements listed on the
accompanying Index to Financial Statements and Schedule are filed as a part of
this Annual Report.
2. Financial Statement - Schedule. The Financial Statement Schedule
listed on the accompanying Index to Financial Statements and Schedule is
filed as a part of this Annual Report.
3. Exhibits - The exhibits listed in the accompanying Index to
Exhibits are filed as part of this Annual Report.
(b) Reports on Form 8-K - The Partnership filed one Current Report on Form
8-K during the fourth quarter of 1994. That report was filed on December 16,
1994 and reported a Change in Control of Registrant (Item 1 of Form 8-K). No
financial statements were filed with that Form 8-K.
<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, there unto duly authorized.
Date: March 31, 1995 WINTHROP RESIDENTIAL ASSOCIATES III,
A LIMITED PARTNERSHIP
By: ONE WINTHROP PROPERTIES, INC.
By: /s/ Jonathan W. Wexler
Jonathan W. Wexler
Vice President of Managing General Partner
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.
/s/ Jonathan W. Wexler Director, Vice President, Treasurer and
Jonathan W. Wexler Assistant Clerk of Managing General Partner
Date: March 31, 1995
/s/ Richard J. McCready Director, Vice President and Clerk of Managing
Richard J. McCready General Partner
Date: March 31, 1995
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
INDEX
FINANCIAL STATEMENTS
Reorts of Independent Public Accountants
Statements of Operations for the Years Ended December 31, 1994,
1993 and 1992
Balance Sheets as of December 31, 1994 and 1993
Statements of Changes in Partners' Capital for the Years Ended
December 31, 1994, and 1993 and 1992
Satements of Cash Flows for the Years Ended December 31, 1994,
1993 and 1992
Notes to Financial Statements
SCHEDULE
III - Real Estate and Accumulated Depreciation of Property Held by
Local Limited Partnerships as of December 31, 1994
All schedules prescribed Hy Regulations S-X other than the one indicated
above have been omitted as the required information is inapplicable or
the information is presented elsewhere in the financial statements or
related notes.
Independent Auditors' Reports for Certain of the Local Limited
Partnerships
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of WINTHROP RESIDENTIAL
ASSOCIATES III, A LIMITED PARTNERSHIP (a Maryland limited partnership) as of
December 31, 1994 and 1993, and the related statements of operations, changes in
partners' capital and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements and the schedule referred to below
are the responsibility of the Partnership's General Partners. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits. We did not audit the financial statements of certain Local Limited
Partnerships, the investments in which are reflected in the accompanying
financial statements using the equity method of accounting and have been written
down to zero (see Note 2). Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, insofar as it relates to the
amounts included for those Local Limited Partnerships, is based solely on the
reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED
PARTNERSHIP as of December 31, 1994 and 1993, and the results of its operations,
changes in partners' capital and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III, listed in the index to the
financial statements, is the responsibility of WINTHROP RESIDENTIAL ASSOCIATES
III, A LIMITED PARTNERSHIP management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not a required part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic financial statements and,
in our opinion, fairly states in all material respects, the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 23, 1995
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
----------------------------------------------------------------------------------------
For the Years Ended
December 31, 1994, 1993 and 1992 1994 1993 1992
-------------------------------- ---------- ---------- ------------
<S> <C> <C> <C>
Income from Local Limited Partnership cash
distributions............................ $ 263,298 $ 246,843 $ -
Interest income........................... 107,868 102,927 192,875
----------- ------------ ------------
371,166 349,770 192,875
----------- ------------ ------------
Expenses:
Amortization............................. 3,780 3,780 7,716
General and administrative............... 43,478 77,615 58,669
47,258 81,395 66,385
------------ ------------
Income from operations..................... 323,908 268,375 126,490
Equity in loss of Local Limited Partnerships (19,668) (92,661) (231,237)
-----------------------------------------
Net income (loss).......................... $ 304,240 $ 175,714 $ (104,747)
------------ ------------- ------------
Net income (loss) allocated to General
Partners................................. $ 22,818 $ 13,179 $ (7,856)
------------- ------------
Net income (loss) allocated to Limited
Partners................................. $ 281,422 $ 162,535 $ (96,891)
------------ ------------- ------------
Net income (loss) per Unit of Limited
Partnership Interest..................... $ 11.25 $ 6.50 $ (3.87)
------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BALANCE SHEETS
<TABLE>
---------------------------------------------------------------------------------------
December 31, 1994 and 1993 1994 1993
-------------------------- ------- -----------
ASSETS
<S> <C> <C>
Investments in Local Limited Partnerships (Note 4)....... $ 404,805 $ 428,253
Other Assets:
Cash and cash equivalents.............................. 2,338,714 3,095,286
Interest receivable.................................... 10,722 7,759
----------- -----------
Total assets........................................... $ 2,754,241 $ 3,531,298
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Distributions payable.................................. $ 270,324 $ 270,324
----------- -----------
Commitments and Contingencies (Note 6)
Partners' Capital:
Limited Partners
Units of Limited Partnership Interest, $1,000 stated
value per Unit; authorized, issued and
outstanding - 25,005 Units......................... 3,694,702 4,413,480
General Partners....................................... (1,210,785) (1,152,506)
---------------------------
Total Partners' Capital............................ 2,483,917 3,260,974
---------------------------
Total liabilities and Partners' Capital............ $ 2,754,241 $ 3,531,298
===========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
--------------------------------------------------------------------------------
<TABLE>
UNITS OF
LIMITED GENERAL LIMITED
For the Years Ended PARTNERSHIP PARTNERS' PARTNERS' TOTAL
December 31, 1994, 1993 and 1992 INTEREST CAPITAL CAPITAL CAPITA
-------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1991....................................... 25,005 $ (995,637) $ 6,348,236 $ 5,352,599
Cash distributions paid or accrued............................... (81,096) (1,000,200) (1,081,296)
Net loss......................................................... (7,856) (96,891) (104,747)
------- -------- --------
Balance, December 31, 1992....................................... 25,005 (1,084,589) 5,251,145 4,166,556
Cash distributions paid or accrued............................... (81,096) (1,000,200) (1,081,296)
Net income....................................................... 13,179 162,535 175,714
------- -------- -------
Balance, December 31, 1993....................................... 25,005 (1,152,506) 4,413,480 3,260,974
Cash distributions paid or accrued............................... (81,097) (1,000,200) (1,081,297)
Net income....................................................... 22,818 281,422 304,240
------- -------- -------
Balance, December 31, 1994....................................... 25,005 $(1,210,785) $3,694,702 $2,483,917
====== ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
For the Years Ended
December 31, 1994, 1993 and 1992 1994 1993 1992
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ 304,240 $ 175,714 $104,747)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization................................................. 3,780 3,780 7,716
Equity in net loss of Local Limited
Partnerships............................................... 19,668 92,661 231,237
Income from Local Limited Partnership
cash distributions......................................... (263,298) (246,843) -
Changes in assets and liabilities:
(Increase) decrease in receivables and
other assets........................................... (2,963) 33,103 23,296
Net cash provided by operating activities. 61,427 58,415 157,502
------- ------- -------
Cash flows from investing activities:
Cash distributions from Local Limited
Partnerships.................................................. 263,298 263,343 72,500
-------- ---------- ------
Net cash provided by investing activities........................ 263,298 263,343 72,500
-------- -------- ------
Cash flows from financing activities:
Cash distributions to Partners................................. (1,081,297) (1,081,296) (5,081,932)
Capital contributions to Local Limited
Partnerships.................................................. - (16,500) (17,500)
----- -------- -------
Net cash used by financing activities....................... (1,081,297) (1,097,796) (5,099,432)
----------- ----------- ----------
Net decrease in cash and cash
equivalents..................................................... (756,572) (776,038) (4,869,430)
Cash and cash equivalents, beginning of year..................... 3,095,286 3,871,324 8,740,754
---------- ---------- ---------
Cash and cash equivalents, end of year........................... $ 2,338,714 $ 3,095,286 3,871,324
= ========== = ========== =========
</TABLE>
...............................................................
Supplemental disclosure of noncash activities:
The Managing General Partner declared a fourth
quarter distribution of $270,324, which was
distributed February 14, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1. ORGANIZATION
Winthrop Residential Associates III, a Limited Partnership (the "Partnership")
was organized on June 28, 1982 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 that do not significantly restrict distributions to
owners or the rate of return on investments in such properties. On December 15,
l982, the Partnership elected to comply with and be governed by the Maryland
Revised Uniform Limited Partnership Act. The Partnership will terminate on
December 31, 2003, or sooner, in accordance with the terms of the Partnership
Agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
Financial Statements - The financial statements of the Partnership are prepared
on the accrual basis of accounting.
Cash and Cash Equivalents - Cash and cash equivalents consist of a mutual fund
that invests in treasury bills and repurchase agreements with original
maturities of three months or less. Cash equivalents are valued at cost which
approximates market value.
Income Taxes - No provision has been made for federal, state or local income
taxes in the financial statements of the Partnership. The Partners are required
to report on their individual tax returns their allocable share of income,
gains, losses, deductions and credits of the Partnership. The Partnership files
its tax returns on the accrual basis. On May 6, l983, the Internal Revenue
Service issued a ruling that the Partnership should be classified as a
partnership for federal income tax purposes.
Investments in Local Limited Partnerships - The Partnership accounts for its
investment in each Local Limited Partnership using the equity method. Under the
equity method of accounting, the investment cost (including amounts paid or
accrued) is subsequently adjusted by the Partnership's share of the Local
Limited Partnership's results of operations and by distributions received or
accrued. Equity in the loss of Local Limited Partnerships is not recognized to
the extent that the investment balance would become negative because the
Partnership has no obligation to fund these losses.
Distributions to Partners - Cash distributions from the Local Limited
Partnerships (Cash Flow) are included in the computation of the Partnership's
Cash Available for Distribution in the quarter received. As provided for in the
Partnership Agreement, quarterly distributions are payable to the Partners
within 60 days after the end of the quarter, exclusive of sales proceeds. From
July 1, 1987 through December 31, 1990, all cash flow, excluding Fairfax and
Harborside sale proceeds, was retained by the Partnership and added to operating
reserves. In 1991, the Partnership began to distribute cash on a quarterly
basis. The total amount distributed or accrued in 1994 and 1993 was
approximately $1,081,300 for each year.
3. TRANSACTIONS WITH RELATED PARTIES
Two Winthrop Properties, Inc. ("Two Winthrop"), the Managing General Partner, 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"). Linnaeus Oxford Associates, the other General Partner of
the Partnership, is a limited partnership of which some general partners are
partners of WFA. WFA and its affiliates manage or advise a large number of
partnerships organized to own or operate real estate as well as other
investments, or to invest in other limited partnerships that own or operate real
estate or other investments. WFA has formed directly or through affiliates,
additional partnerships or other entities, both public and private, some of
which may have the same investment objectives as the Partnership.
At December 31, 1994, a subsidiary of First Winthrop remains a comanaging
general partner in a Local Limited Partnership.
<PAGE>
The General Partners are entitled to 7.5% of Cash Available for Distribution.
For 1994, 1993 and 1992, the General Partners had been accrued or received cash
distributions of approximately $81,100 for each year.
During the liquidation stage of the Partnership, the General Partners and their
affiliates are entitled to receive certain distributions, subordinated to
specified minimum returns to the Limited Partners as described in the
Partnership Agreement.
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of December 31, 1994, the Partnership has limited partnership equity
interests in seven Local Limited Partnerships that own fully operating apartment
complexes. These Local Limited Partnerships have outstanding mortgages totaling
$21,363,052, which are secured by the Local Limited Partnerships' real property,
security interests, liens and endorsements common to first mortgage loans.
Since inception, the Partnership has made additional investments of $291,489 in
several Local Limited Partnerships, $154,382 of which has been accounted for as
operating deficit advances and $137,107 as capital contributions by the Local
Limited Partnerships. Additional investments in 1993 were $16,500. There were no
additional investments in 1994.
During 1988, the Partnership entered into agreements with the local General
Partner of the Savannah River Associates Limited Partnership and Fayetteville
Apartments. The agreement stipulates that the local General Partner will
contribute additional capital in the aggregate of $250,000, to avoid an
assignment of the mortgages by the mortgage lender to HUD. There is no
obligation on the part of the General Partner to make any contribution when, in
the exercise of reasonable business judgment, it is determined that it is not
reasonably likely that the partners will realize a return on their investment
sufficient to justify making such contribution. In exchange for this agreement
to fund additional capital, the Partnership's interest in the sharing
arrangements of profit, losses, cash flow and residuals has been reduced.
The investments in Local Limited Partnerships balances as of December 31, 1994
and 1993 are as follows:
<TABLE>
1994
1993 Activity 1994
<S> <C> <C> <C>
Equity Payments made (including equity payments
to partners of Local Limited Partnerships
totaling $1,683,895)................................. $ 19,619,971 $ 19,619,971
Additional investments made in and recognized
as operating deficit advances by Local
Limited Partnerships................................. 154,382 154,382
Capitalized costs........................................ 758,350 758,350
Cash distributions from Local Limited Partnerships....... (23,042,648) (263,298) (23,305,946)
Amortization of the capitalized costs and the
costs in excess of the Partnership's initial
basis in the net assets of the Local
Limited Partnerships................................. (536,234) (3,780) (540,014)
Equity in income (loss) of Local Limited
Partnerships......................................... 3,227,589 (19,668) 3,207,921
Income from Local Limited Partnership cash
distributions........................................ 246,843 263,298 510,141
------- ------- -------
Investment per balance sheet............................. 428,253 404,805
Difference in basis (including equity payments
paid to partners of Local Limited Partnerships
totaling $1,683,895)................................. (393,272) (393,272)
Additional investments made in and recognized as
operating deficit advances by Local Limited
Partnerships......................................... (39,482) (39,482)
Capitalized costs........................................ (758,350) (758,350)
Amortization of the capitalized costs and the costs
in excess of the Partnership's initial basis in
the net assets of the Local Limited Partnerships..... 536,234 3,780 540,014
Equity in loss of Local Limited Partnerships not
recognizable under the equity method of
accounting (Note 2).................................. (4,122,335) (357,648) (4,479,983)
Capital contributions not recognized by the Partnership 81,000 81,000
Distributions not recognized by the Partnership.......... (29,776) (29,776)
Income from Local Limited Partnership cash
distributions........................................ (246,843) (263,298) (510,141)
Sale of interest in Local Limited Partnership............ 2,213,406 2,213,406
--------- ---------
Equity per Local Limited Partnerships' combined
financial statements................................. $ (2,301,389) $ (2,971,779)
- ---------- - ----------
</TABLE>
The combined balance sheets of the Local Limited Partnerships at December 31,
1994 and 1993 are as follows:
<TABLE>
1994 1993
ASSETS
<S> <C> <C>
Real Estate, at cost:
Land.................................................. $ 1,864,526 $ 1,864,526
Buildings, net of accumulated depreciation of
$14,194,342 and $13,171,735 in 1994 and 1993,
respectively........................................ 11,985,885 12,848,494
Cash and cash equivalents............................... 624,056 734,264
Other assets, net of accumulated amortization of
$300,547 and $346,451 in 1994 and 1993,
respectively.......................................... 1,666,070 1,603,373
----------- -----------
Total Assets............................................ $16,140,537 $17,050,657
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to Winthrop Residential Associates III............ $ 33,407 $ 27,488
Notes payable......................................... 452,952 367,358
Mortgage notes payable................................ 21,363,052 21,550,495
Accounts payable and accrued expenses................. 1,296,663 1,274,477
----------- -----------
23,146,074 23,219,818
----------- -----------
Partners' Capital:
Winthrop Residential Associates III .................. (2,971,779) (2,301,389)
Other partners........................................ (4,033,758) (3,867,772)
------------ -----------
(7,005,537) (6,169,161)
------------ -----------
Total liabilities and Partners' Capital................. $16,140,537 $17,050,657
============ ===========
</TABLE>
The combined statements of operations of the Local Limited Partnerships for the
years ended December 31, 1994, 1993 and 1992 are as follows:
--------------------------------------------------------------------------------
<TABLE>
1994 1993 1992
--------- -------- -----------
<S> <C> <C> <C>
Revenues:
Rental income........................... $ 5,304,688 $ 5,262,935 $ 5,124,302
Other income............................ 145,854 183,019 155,117
----------- ----------- -----------
5,450,542 5,445,954 5,279,419
----------- ----------- -----------
Expenses:
Interest................................ 1,724,394 1,770,170 1,714,093
Depreciation and amortization........... 1,041,824 1,072,079 1,110,590
Taxes and insurance..................... 542,983 517,270 589,103
Development and management fees......... 282,787 278,528 247,092
Maintenance and service fees............ 910,475 1,060,232 894,403
General and administrative.............. 1,272,307 1,284,505 1,324,293
----------- ----------- -----------
5,774,770 5,982,784 5,879,574
----------- ----------- -----------
Net loss before gain on foreclosure....... (324,228) (536,830) (600,155)
------------ ------------ -----------
Gain on foreclosure....................... - - 469,582
-------- ---------------------------
Net loss.................................. $ (324,228) $ (536,830) $ (130,573)
============ ============ ===========
Net loss allocated to Winthrop
Residential Associates III.............. $ (377,316) $ (583,223) $ (248,048)
============ ============= ===========
Net income allocated to other
partners................................ $ 53,088 $ 46,393 $ 117,475
=========== ============ ===========
</TABLE>
5. TAXABLE INCOME
The Partnership's taxable income for 1994 differs from net income for financial
reporting purposes primarily due to accounting differences in the recognition of
construction period costs, calculation of depreciation incurred by the Local
Limited Partnerships, and losses not recognizable under the equity method. The
taxable income for 1994 is as follows:
<TABLE>
<S> <C>
Net income for financial reporting purposes.................. $ 304,240
Plus: Amortization of the capitalized costs and the costs
in excess of the Partnership's initial basis in the
net assets of the Local Limited Partnerships....... 3,780
Minus: Tax losses in excess of Equity in Local Limited
Partnerships' losses (due primarily to accelerated
depreciation)..................................... (150,352)
Income from Local Limited Partnership cash
distributions..................................... (263,298)
Equity in Local Limited Partnerships' losses for
financial statement purposes not recognizable
under the equity method of accounting (Note 2)..... (357,648)
----------
Tax loss.................................................... . $ (463,278)
==========
</TABLE>
6. LOCAL LIMITED PARTNERSHIPS
During 1992, the general partner of Liberty Square Town homes Limited
Partnership, in which the Partnership owns a limited partnership interest, was
notified that the United States Department of Housing and Urban Development
(HUD) foreclosed on its mortgage in February 1992. The Partnership's investment
in Liberty Square was zero at the time of foreclosure, and it has no obligation
to fund any liabilities related to Liberty Square Limited Partnership.
Two Local Limited Partnerships, owning Autumn Chase and Clear Creek, which have
been in default since 1989, secured Provisional Workout Arrangements with HUD
during 1994. The workout arrangements are effecitve through April 2000 and July
1995, respectively.
The Local Limited Partnership owning Dunhaven Apartments, Section 2, Phase 2,
defaulted on its mortgage obligation in June 1994. The mortgage is in the
process of being assigned to HUD by the mortgager.
The Partnership is unable to determine at this time if these Local Limited
Partnerships will be able to meet their financing requirements during the coming
year. The Partnership is not obligated to fund operating deficits or mortgage
loans of these Local Limited Partnerships. The Partnership's investment balance
in these Local Limited Partnerships is zero at December 31, 1994.
<PAGE>
SUPPLEMENTARY INFORMATION
REQUIRED PURSUANT TO SECTION 9.4 OF THE PARTNERSHIP AGREEMENT
--------------------------------------------------------------------------------
<TABLE>
December 31, 1994 Three Months Ended Year Ended
December 31, 1994 December 31, 1994
--------------------------------------------------------- -----------------------
1. Statement of Cash Available for Distribution:
<S> <C> <C>
Net (loss) income...................................... $ (3,102) $ 304,240
Add: Charges to income not affecting cash
available for distribution:
Amortization expense..................... 945 3,780
Cash distributions from Local Limited
Partnerships.............................. - 263,298
Equity in loss of Local Limited
Partnerships............................. 26,761 19,668
Income from Local Limited Partnership cash
distribution............................. - (263,298)
Cash from reserves........................ 245,720 753,609
---------- ----------
Cash Available for Distribution........................ $ 270,324 $1,081,297
========== ==========
Distributions allocated to General Partners ........... $ 20,274 $ 81,097
========== ==========
Distributions allocated to Limited Partners............ $ 250,050 $1,000,200
========== ==========
</TABLE>
2. Fees or other compensation were paid or accrued to the General Partners or
their affiliates during the three months ended December 31, 1994:
<TABLE>
Entity Receiving Form of
Compensation Compensation Amount
<S> <C> <C>
General Partners Interest in Cash
Available for Distribution $20,274
WFC Realty Co. Interest in Cash $ 50
Available for Distribution
</TABLE>
All other information required pursuant to Section 9.4 of the Partnership
Agreement is set forth in the attached financial statements and related notes or
Annual Partnership Report.
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III,
A LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
DECEMBER 31, 1994
SCHEDULE III
Initial cost to Local Limited Partnership
and gross amount at which it was carried as of
December 31, 1994 (A, B and C)
<TABLE>
Description Number
and Ownership of Outstanding Buildings and
Percentage Apts. Encumbrance Land Improvements Total
Apartment Complex,
Location:
<S> <C> <C> <C> <C> <C>
Clear Creek Landing
Apartments;
Houston, TX; 88.5% 200 $ 2,941,262 $ 500,000 $ 4,474,229 $ 4,974,229
Village Square
Apartments;
Manassas, VA; 50% 285 7,180,967 432,458 8,292,704 8,725,162
Dunhaven Apartments,
Section 2, Phase 1;
Baltimore, MD; 95% 72 2,211,697 133,676 2,100,339 2,234,015
Dunhaven Apartments,
Section 2, Phase 2;
Baltimore, MD; 92% 72 2,549,110 301,077 2,186,341 2,487,418
The Groves Apartments;
North Augusta, SC; 95% 132 2,047,678 167,056 3,193,992 3,361,048
Autumn Chase Apartments;
Mobile, AL; 98.93% 120 3,073,456 193,549 3,259,678 3,453,227
Maple Manor Apartments;
Fayetteville, AK; 95% 128 1,358,882 136,710 2,672,944 2,809,654
----------- ---------- ------------ -----------
$21,363,052 $1,864,526 $26,180,227 $28,044,753
=========== ========== ============ ===========
</TABLE>
<PAGE>
<TABLE>
Accumulated
Depreciation
Description as of Construc- Date Depre-
and Ownership December 31, tion Interest ciable
Percentage 1994 (D) Period Acquired Life
---------- -------- ------ -------- ----
Clear Creek Landing
Apartments;
<S> <C> <C> <C> <C>
Houston, TX; 88.5% $2,171,145 (E) 4/28/83 10-25 yrs.
Village Square
Apartments;
Manassas, VA; 50% 5,422,291 (E) 1/31/83 10-25 yrs.
Dunhaven Apartments,
Section 2, Phase 1;
Baltimore, MD; 95% 1,217,101 (E) 11/9/83 10-25 yrs.
Dunhaven Apartments,
Section 2, Phase 2;
Baltimore, MD; 92% 1,107,599 (E) 6/24/83 10-25 yrs.
The Groves Apartments;
North Augusta, SC; 95% 1,554,199 (E) 7/29/83 10-25 yrs.
Autumn Chase Apartments;
Mobile, AL; 98.93% 1,463,269 5/83-7/84 9/19/83 10-25 yrs.
Maple Manor Apartment
Fayetteville, AK; 95% 1,258,738 (E) 11/30/83 10-25 yrs.
---------
</TABLE>
(A) Substantially all project costs, including costs such as construction
period interest and various fees are capitalized as part of the cost of the
properties. These costs are amortized over the lives of the related assets.
(B) The total cost of land and buildings and improvements less accumulated
depreciation at December 31, 1994 for federal income tax purposes is
$8,443,660.
(C) Reconciliation of Cost:
Balance as of December 31, 1993...................... $27,884,755
Additions during 1994, net of deletions.............. 159,998
---------
Balance as of December 31, 1994...................... $28,044,753
===========
D) Reconciliation of Accumulated Depreciation:
Balance as of December 31, 1993...................... $13,171,735
Depreciation expense in 1994, net of deletions . . 1,022,607
---------
Balance as of December 31, 1994...................... $14,194,342
===========
Independent Auditors' Report
To the Partners
Autumn Chase, Ltd.
We have audited the accompanying balance sheets of Autumn Chase, Ltd. (a limited
partnership) as of December 31, 1994 and 1993, and the related statements of
operations, partners' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those stands require taht we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note B, the mortgage is in default as of the date of the audit
and could result in foreclosure. Foreclosure by HUD would seriously impair the
partnership's ability to continue as a going concern and to realize its
investment in assets through future successful operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Because of the significance of the uncertainty about the partnership's ability
to continue as a going concern, as discussed in the preceding paragraph, we are
unable to express, and we do not express, an opinion on these financial
statements.
Kenmore, Gray and Co., P.C.
February 3, 1995
Montgomery, Alabama
<PAGE>
Independent Auditor's Report
To the Partners
Clear Creek LTD.
(A Limited Partneship)
We have audited the accompanying balance sheet of Clear Creek LTD., Project No.
114-35215 PM (a limited partnership), as of December 31, 1994 and the related
statements of income, changes in partners' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
It is the partnership's policy to prepare its financial statements in the format
prescribed by the Consolidated Audit Guide for Audits of HUD Programs issued
July 1993. The formats for the financial statements prescribed by that Guide
differ somewhat from those prescribed by generally accepted accounting
principles.
We conducted the audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that the audit be planned and performed
to obtain reasonable asurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above, present fairly in
all material respects, the financial position of Clear Creek LTD. at December
31, 1994 and the results of its operations, changes in partners' equity and cash
flows for the year then ended in confomrtiy with generally accepted accounting
principles, except for the format differences explained in the second paragraph
above, applied on a basis consistent with that of the preceding year. Our audit
was conducted for the purpose of forming an opinion on the basic financial
statement stake nas a whole. The supporting information included in the report
(shown on pages 14 to 32) is presented for the purpose of additional analysis
and is not a required part of the basic financial statements of HUD Project No.
114-35215PM. Such information has been subjected to the same auditing procedures
applied in the examination of the basic financial statements and, in our
opinion, is presented fairly in all mateiral respects in relation to the
financial statements taken as a whole.
The accompanying financial statements have been prepared assuming the
partnership will continue as a going concern. In lieu of foreclosure because of
mortgage payment delinquencies, the Department of House and Urban Develompent
has agreed to a "Provisional Workout Agreement". The necessity of the
"Provisional Workout Agreement" has raised substantial doubt about the
partnership's ability to continue as a going concern. Under certain
circumstances (as described in Note 2) HUD may foreclose the property in
satisfaction of the outstanding debt. The financial statements do not include
any adjustments that might result from the outcome of any foreclosure
proceedings.
CRABTREE, CRABTREE & HATTER
Certified Public Accountants
Azle, Texas
January 25, 1995
<PAGE>
REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
INDEPENDENT AUDITORS' REPORT
To the Partners
Walkint Limited Partnership
Baltimore, Maryland
Re: .....Dunhaven Apartments - Section II - Phase II
......................HUD Project Number 052-35831 PM
We have audited the accompanying balance sheets of Walkint Limited Partnership
as of December 31, 1993, and the related statements of income, changes in
partners' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Walkint Limited Partnership as
of December 31, 1994 and 1993, and the results of its operations and its changes
in partners' capital and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
partnership will continue as a going concern. The partnership is in default on
its mortgage note at December 31, 1994 and the note can be foreclosed. This
condition raises substantial doubt about the partnership's ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
the report (shown on pages 13 through 22) is presented for the purposes of
additional analysis and is not a required part of the basic financial statements
of Walkint Limited Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ISAAC & ISAAC, P.A.
Baltimore, Maryland
February 1, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Walther Limited Partnership
Baltimore, Maryland
Re:........Dunhaven Apartments - Section II - Phase I
......................HUD Project Number 052-35299 PM
We have audited the accompanying balance sheets of Walther Limited Partnership
as of December 31, 1993, and the related statements of income, changes in
partners' capital, and cash flows for the years then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Walther Limited Partnership as
of December 31, 1994 and 1993, and the results of its operations and its changes
in partners' capital and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Title of Document
3.A. Agreement and Certificate of Limited Partnership of Winthrop Residential
Associates III, A Limited Partnership, dated as of June 28, 1982
(incorporated herein by reference to the Fund's Registration Statement on
Form S-11, File No. 2-81033).
3.B. Twelfth Amendment dated as of January 24, 1984 to the Agreement and
Certificate of Limited Partnership (incorporated herein by reference to the
Partnership's Annual Report on Form 10-K filed March 30, 1984, File No.
2-81033).
4. Agreement and Certificate of Limited Partnership of Winthrop Residential
Associates III, A Limited Partnership, dated as of June 28, 1982
(incorporated herein by reference to Exhibit 3A hereto).
10.A.Sales Agency Agreement between Winthrop Residential Associates III, A
Limited Partnership and Winthrop Securities Co., Inc. (incorpo- rated
herein by reference to the Registrant's Registration Statement on Form
S-11, File No. 2-81033).
10.B.Escrow Deposit Agreement among Winthrop Residential Associates III, A
Limited Partnership, Winthrop Securities Co., Inc. and United States Trust
Company (incorporated herein by reference to the Registrant's Registration
Statement on Form S-11, File No. 2- 81033).
28.A.Pages 16-18, 21-26 and 30-45 of Partnership's Prospectus dated March 11,
1983, which was filed with the Commission pursuant to Rule 424(b) P
28.B.Pages 1-10 of the Supplement to the Prospectus dated July 20, 1983 P
28.C. Pages 17-20 of the Property Report dated September 30, 1983 P
28.D.Pages 7-27 of the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1983 P
