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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 March 31, 1998
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
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(Exact name of small business issuer as specified in its charter)
Maryland 04-2782016
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In Thousands, Except Unit Data) 1998 1997
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<S> <C> <C>
Assets
Cash and cash equivalents $ 1,472 $ 1,484
Investments in Local Limited Partnerships 392 374
Other assets 74 60
Real estate (net of accumulated depreciation
of $2,751 in 1998 and $2,706 in 1997) 2,223 2,268
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Total Assets $ 4,161 $ 4,186
======== ========
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued interest and expenses $ 163 $ 153
Distribution payable 29 27
Mortgage payable 2,573 2,586
Subordinated loan payable 133 133
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Total Liabilities 2,898 2,899
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Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005 units authorized,
issued and outstanding 2,566 2,588
General Partners' deficit (1,303) (1,301)
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Total Partners' Capital 1,263 1,287
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Total Liabilities and Partners' Capital $ 4,161 $ 4,186
======== ========
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended
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March 31, March 31,
1998 1997
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<S> <C> <C>
Income:
Rental income $ 267 $ 261
Income from Local Limited Partnership cash distributions 14 -
Equity in income of Local Limited Partnerships 19 13
Interest 11 12
Other 8 8
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Total Income 319 294
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Expenses:
Operating 194 122
Interest 52 49
Depreciation and amortization 46 46
General and administrative 24 38
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Total Expenses 316 255
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Net income $ 3 $ 39
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Net income allocated to General Partners $ - $ 3
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Net income allocated to Limited Partners $ 3 $ 36
====== ======
Net Income per Unit of Limited Partnership Interest $ .12 $1.44
====== ======
Distributions per Unit of Limited Partnership Interest $1.00 $1.00
====== ======
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated 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
----------- --------- --------- -------
Balance-January 1, 1998 25,005 $(1,301) $2,588 $1,287
Net income - 3 3
Distributions (2) (25) (27)
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Balance - March 31, 1998 25,005 $(1,303) $2,566 $1,263
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See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
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March 31, March 31,
(In Thousands) 1998 1997
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 3 $ 39
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 45 45
Amortization 1 1
Equity in income of Local Limited Partnership (19) (13)
Changes in assets and liabilities:
Increase in other assets (14) (34)
Increase (decrease) in accounts payable
and accrued expenses 4 (16)
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Net cash provided by operating activities 20 22
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Cash Flows From Financing Activities:
Mortgage principal payments (13) (12)
Distributions to partners (25) (27)
Increase in accrued interest payable on subordinated loan 6 -
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Cash used in financing activities (32) (39)
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Net decrease in cash and cash equivalents (12) (17)
Cash and cash equivalents, beginning of period 1,484 980
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Cash and cash equivalents, end of period $1,472 $963
======= =====
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 48 $ 49
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Supplemental Disclosure of Non-Cash
Investing Activities
Accrued Distributions to Partners $ 27 $ 27
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</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions
should be read in conjunction with the financial statements,
related footnotes and discussions contained in the Partnership's
report on Form 10-KSB for the year ended December 31, 1997.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature. The balance sheet at
December 31, 1997, was derived from audited financial statements at
such date.
The results of operations for the three months ended March 31, 1998
and 1997, are not necessarily indicative of the results to be
expected for the full year.
2. Consolidation
The accompanying financial statements have been prepared on a
consolidated basis, including the accounts of Clear Creek, from the
date of transfer of control. All significant intercompany
transactions and balances have been eliminated. Prior to October
1996, Clear Creek was a Local Limited Partnership accounted for
under the equity method.
3. Transaction with Related Parties
An affiliate of the Managing General Partner received approximately
$36,000 and $29,000, in management fees from Local Limited
Partnerships during the three months ended March 31, 1998 and 1997,
respectively.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Partnership from time to time. The discussion
of the Partnership's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such
matters, does not take into account the effects of any changes to the
Partnership's operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as
a result of a number of factors, including those identified herein.
This Item should be read in conjunction with the financial statements
and other items contained elsewhere in the report.
Liquidity and Capital Resources
As of March 31, 1998, the Partnership retained an equity interest in
six Local Limited Partnerships, each of which owns a single apartment
complex. The Partnership also owns an 88.5% interest in a partnership
in which an affiliate of the Partnership's general partner became the
sole general partner in October 1996. The Partnership's primary
sources of income are distributions from the Local Limited
Partnerships and rental income from Clear Creek Apartments. The
Partnership requires cash to pay the operating expenses of Clear
Creek, for general and administrative expenses and to make capital
contributions and/or loans to any of the Local Limited Partnerships
which the Managing General Partner deems to be in the Partnership's
best 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 March 31, 1998, the Partnership had cash and cash
equivalents of $1,472,000. 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 Clear
Creek Apartments, as discussed below, the Partnership did not fund
any operating deficits to Local Limited Partnerships in 1998 and
1997.
The level of liquidity based on cash and cash equivalents experienced
a $12,000 decrease at March 31, 1998, as compared to December 31,
1997. The Partnership's $20,000 of cash provided by operating
activities and an increase in accrued interest on the subordinated
loan of $6,000 (financing activity) was more than offset by $13,000
of mortgage principal payments and $25,000 of cash distributed to
partners (financing activities).
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
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
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 Phase II, ("Dunhaven") is in
default. The Partnership was unable to reach an agreement 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 have been appointed as general partner of the
Dunhaven Local Limited Partnership and the Partnership, or its
affiliate, would satisfy the default on the loan. At March 31, 1998,
the Managing General Partner estimates the default to be
approximately $100,000. Unless an agreement is reached with the
existing general partner, it is possible that the Dunhaven property
could be lost through foreclosure.
During 1998, Partnership distributions (paid or accrued) aggregated
$25,000 ($1.00 per Unit) to its limited partners and $2,000 to the
general partners.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services Agreement with Coordinated
Services of Valdosta, LLC ("Coordinated Services") pursuant to which
Coordinated Services was retained to provide asset management and
investor services to the Partnership and certain affiliated
partnerships. As a result of this agreement, Coordinated Services has
the right to direct the day to day affairs of the Partnership,
including, without limitation, reviewing and analyzing potential
sale, refinancing or restructuring proposals by Local Limited
Partnerships, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the Partnership.
Coordinated Services is not permitted, however, without the consent
of the Managing General Partner, or as otherwise required under the
terms of the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement") to, among other things, cause the
Partnership to consent to a sale of an asset or cause the Partnership
to file for bankruptcy. As compensation for providing these services,
the Managing General Partner and its affiliates assigned to
Coordinated Services all of their rights to receive fees from the
Partnership as provided in the Partnership Agreement.
Results of Operations
Net income declined by $36,000 for the three months ended March 31,
1998, as compared to the three months ended March 31, 1997. The
decrease in net income is primarily due to the increase in Clear
Creek's operating expenses of $72,000, which was partially offset by
$14,000 of cash received from the local limited partnership owning
the Dunhaven Apartments, Section II-Phase I and a decline in general
and administrative expenses of $14,000. The decrease in general and
administrative expenses and the increase in Clear Creek's operating
expenses are primarily due to the timing of certain expenditures.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months
ended March 31, 1998.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WINTHROP RESIDENTIAL ASSOCIATES III,
A LIMITED PARTNERSHIP
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: May 15, 1998
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Exhibit Index
Exhibit Page No.
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27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 12
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1998
Supplementary information required pursuant to section 9.4 of the partnership
agreement:
1. Statement of Cash Available for Distribution for the three months ended March
31, 1998:
Net Income $ 3,000
Add: Depreciation and amortization 46,000
Less: Equity in income of Local Limited Partnerships (19,000)
Cash to reserves (3,000)
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Cash Available for Distribution $ 27,000
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Distributions allocated to General Partners $ 2,000
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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 March 31, 1998:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
------------ ------------ ------
<S> <C> <C>
General Partners Interest in Cash Available for Distribution $2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 5
</TABLE>
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<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,472,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,751,000)
<TOTAL-ASSETS> 4,161,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,573,000
0
0
<COMMON> 0
<OTHER-SE> 1,263,000
<TOTAL-LIABILITY-AND-EQUITY> 4,161,000
<SALES> 0
<TOTAL-REVENUES> 308,000
<CGS> 0
<TOTAL-COSTS> 240,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,000
<INCOME-PRETAX> 0
<INCOME-TAX> 3,000
<INCOME-CONTINUING> 3,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,000
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
