<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 2-81033
Winthrop Residential Associates III, A Limited
----------------------------------------------
Partnership (Exact name of small business issuer as
specified in its charter)
Maryland 04-2782016
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, Massachusetts 02110
----------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
1 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Balance Sheets (Unaudited)
September 30, December 31,
(In Thousands, Except Unit Data) 1996 1995
------------- -------------
<S> <C> <C>
Assets
Investments in Local Limited Partnerships $ 425 $ 410
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Other Assets:
Cash and cash equivalents 1,437 1,609
Interest receivable -- 7
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Total other assets 1,437 1,616
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Total Assets $ 1,862 $ 2,026
============= =============
Liabilities and Partners' Capital
Liabilities:
Distribution payable $ 27 $ 189
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Total Liabilities 27 189
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Partners Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per Unit; authorized, issued
and outstanding - 25,005 Units 3,094 3,096
General Partners (deficit) (1,259) (1,259)
------------- -------------
Total Partners' Capital 1,835 1,837
------------- -------------
Total Liabilities and Partners' Capital $ 1,862 $ 2,026
============= =============
</TABLE>
See notes to financial statements.
2 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Income from Local Limited Partnership
cash distributions $ -- $ -- $ 287 $ 186
Equity in income of Local Limited Partnerships 2 36 18 54
Interest income 19 26 55 88
------------- ------------- ------------- -------------
Total income 21 62 360 328
------------- ------------- ------------- -------------
Expenses:
Amortization 1 1 3 3
General and administrative 17 5 62 35
------------- ------------- ------------- -------------
Total expenses 18 6 65 38
------------- ------------- ------------- -------------
Net income $ 3 $ 56 $ 295 $ 290
============= ============= ============= =============
Net income allocated to general partners $ -- $ 4 $ 22 $ 22
============= ============= ============= =============
Net income allocated to limited partners $ 3 $ 52 $ 273 $ 268
============= ============= ============= =============
Net income per Unit of Limited Partnership Interest $ .12 $ 2.08 $ 10.92 $ 10.72
============= ============= ============= =============
Distributions per Unit of Limited Partnership Interest $ 1.00 $ 7.00 $ 11.00 $ 27.00
============= ============= ============= =============
</TABLE>
See notes to financial statements.
3 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Except Unit Data) Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance - January 1, 1996 25,005 $ (1,259) $ 3,096 $ 1,837
Distributions (22) (275) (297)
Net income 22 273 295
------------- ------------- ------------- -------------
Balance - September 30, 1996 25,005 $ (1,259) $ 3,094 $ 1,835
============= ============= ============= =============
</TABLE>
See notes to financial statements.
4 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Statements of Cash Flows (Unaudited)
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1996 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 295 $ 290
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Amortization 3 3
Equity in income of Local Limited Partnerships (18) (54)
Income from Local Limited Partnership
cash distributions (287) (186)
Changes in assets and liabilities:
Decrease in interest receivable 7 3
------------- -------------
Net cash provided by operating activities -- 56
------------- -------------
Cash Flows From Investing Activities:
Cash distributions from Local Limited Partnership 287 186
------------- -------------
Cash provided by investing activities 287 186
------------- -------------
Cash Flows From Financing Activities:
Cash distributions (459) (811)
------------- -------------
Cash used in financing activities (459) (811)
------------- -------------
Net decrease in cash and cash equivalents (172) (569)
Cash and cash equivalents, beginning of period 1,609 2,339
------------- -------------
Cash and cash equivalents, end of period $ 1,437 $ 1,770
============= =============
</TABLE>
See notes to financial statements.
5 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Partnership's report on Form 10-K for the year
ended December 31, 1995.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. Certain amounts have been reclassified to conform to the
September 30, 1996 presentation. The balance sheet at December 31, 1995 was
derived from audited financial statements at such date.
The results of operations for the three and nine months ended September 30,
1996 and 1995, are not necessarily indicative of the results to be expected
for the full year.
2. Subsequent Event
The loan encumbering Clear Creek Landing Apartments ("Clear Creek") was in
default and was operating under a U.S. Housing and Urban Development
("HUD") provisional workout agreement (the "Agreement"). HUD sold the
mortgage and under the terms of the Agreement, the new lender had the
option to terminate such agreement on its anniversary date (November 1,
1996).
In order to reinstate the mortgage to a current status and to protect the
Partnership's interest in the property, in October 1996, the Partnership
loaned approximately $412,000 to the Local Limited Partnership which owns
Clear Creek. The Partnership will be entitled to a priority return on this
amount which will earn simple interest of 10% per annum. In addition, the
Partnership's $133,500 in previously subordinated loans to Clear Creek (as
well as the prior general partner's $133,500 in previously subordinated
loans), which had been converted to contributed capital, will revert back
to subordinated loan status. Also, an affiliate of the general partner of
the Partnership replaced the general partner of Clear Creek and became its
sole general partner. The property will continue to be managed by an
affiliate of the prior general partner.
6 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
2. Management's Discussion and Analysis or Plan of Operation
This Item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
As of September 30,1996, the Partnership retained an equity interest in
seven Local Limited Partnerships, each of which owns a single apartment
property. The Partnership's primary source of income is distributions from
the Local Limited Partnerships. The Partnership requires cash to pay its
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 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 September
30, 1996, the Partnership had cash and cash equivalents of $1,437,000, as
compared to $1,609,000 at December 31, 1995. 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. Therefore, a lack of cash distributed by the Local
Limited Partnerships to the Partnership in the future should not deplete
the reserves, though it may restrict the Partnership from making
distributions. With the exception of the Dunhaven Apartments and Clear
Creek Landings Apartments properties, as discussed below, the Partnership
does not anticipate funding any operating deficits of any Local Limited
Partnerships in 1996.
The level of liquidity based on cash and cash equivalents experienced a
$172,000 decrease at September 30, 1996, as compared to December 31, 1995.
The Partnership's $287,000 of cash distributions from Local Limited
Partnerships was more than offset by $459,000 distributed to partners.
The Partnership is not obligated to provide any additional funds to the
Local Limited Partnerships to fund operating deficits. The Partnership
determines 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, as an owner of the Local Limited Partnership, would share
these consequences in proportion to its ownership interest in the Local
Limited Partnership.
The loan encumbering Dunhaven Apartments, ("Dunhaven") is currently in
default. The Partnership is currently negotiating with the general partner
of the Local Limited Partnership which holds title to Dunhaven pursuant to
which the Partnership, or an affiliate of the Partnership, would be
appointed as general partner of the Dunhaven Local Limited Partnership
7 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
2. Management's Discussion and Analysis or Plan of Operation
(Continued)
and the Partnership, or its affiliate, would satisfy the default on the
loan. The current default amount is approximately $70,000. If the
Partnership is unable to finalize a deal with the existing general partner,
it is possible that the Dunhaven property could be lost through
foreclosure.
The loan encumbering Clear Creek was in default and was operating under a
HUD provisional workout agreement. HUD sold the mortgage and under the
terms of the Agreement, the new lender had the option to terminate such
agreement on its anniversary date (November 1, 1996).
In order to reinstate the mortgage to a current status and to protect the
Partnership's interest in the property, in October 1996, the Partnership
loaned approximately $412,000 to the Local Limited Partnership which owns
Clear Creek. The Partnership will be entitled to a priority return on this
amount which will earn simple interest of 10% per annum. In addition, the
Partnership's $133,500 in previously subordinated loans to Clear Creek (as
well as the prior general partners $133,500 in previously subordinated
loans), which had been converted to contributed capital, will revert back
to subordinated loan status. Also, an affiliate of the general partner of
the Partnership replaced the general partner of Clear Creek and became its
sole general partner. The property will continue to be managed by an
affiliate of the prior general partner.
As of September 30, 1996, Partnership distributions (paid or accrued)
aggregated $275,000 ($11.00 per Unit) to its limited partners and $22,000
to the general partners. The Managing General Partner reduced the third
quarter distribution to $27,000 and expects that the fourth quarter
distribution will also be at the $27,000 level. The Managing General
Partner will evaluate the level of future quarterly distributions in 1997
pending the financial performance of the Local Limited Partnerships.
Results of Operations
Net income increased for the nine months ended September 30, 1996 by
$5,000, as compared to 1995, due to an increase in income from Local
Limited Partnership cash distributions, which was substantially offset by
decreases in interest income and equity in income of Local Limited
Partnerships and an increase in general and administrative expenses. Net
income decreased for the three months ended September 30, 1996 by $53,000,
as compared to 1995, due to decreases in interest income and equity in
income of Local Limited Partnerships and an increase in general and
administrative expenses. The Local Limited Partnership owning Village
Square Apartments distributed $287,000 during the nine months ended
September 30, 1996 as compared to $186,000 during the comparable 1995
period. It is anticipated that no further cash distributions will be
received during 1996. No cash distributions were received during the fourth
quarter of 1995. Interest income decreased due to lower working capital
reserves available for investment during the nine months ended September
30, 1996, as compared to 1995. Expenses increased by $27,000 for the nine
months ended September 30, 1996, as compared to 1995, due to an increase in
professional fees and related costs.
8 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to Section 9.4
of the Partnership Agreement.
(b) Reports on Form 8-K:
On September 23, 1996 a current report on Form 8-K was filed with
respect to the Registrant's change of Independent Auditors.
9 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /S/ Michael L. Ashner
-------------------------------------
Michael L. Ashner
Chief Executive Officer
BY: /S/ Edward V. Williams
-------------------------------------
Edward V. Williams
Chief Financial Officer
Dated: November 7, 1996
10 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
SEPTEMBER 30, 1996
Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 12
11 of 12
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
September 30, 1996
Supplementary information required pursuant to section 9.4 of the partnership
agreement:
1. Statement of cash available for distribution for the three months ended
September 30, 1996:
Net Income $ 3,000
Add:Amortization expense 1,000
Cash from reserves 25,000
Less:Equity in income of Local Limited Partnerships (2,000)
--------
Cash Available for Distribution $ 27,000
========
Distributions allocated to General Partners $ 2,000
========
Distributions allocated to Limited Partners $ 25,000
========
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended
September 30, 1996:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
------------ ------------ ------
<S> <C> <C>
General Partners Interest in Cash Available for Distribution $ 2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 5
</TABLE>
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates III, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,437,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,862,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,835,000
<TOTAL-LIABILITY-AND-EQUITY> 1,862,000
<SALES> 0
<TOTAL-REVENUES> 305,000
<CGS> 0
<TOTAL-COSTS> 3,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 295,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 295,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295,000
<EPS-PRIMARY> 10.92
<EPS-DILUTED> 10.92
</TABLE>
