<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, 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 (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)
Five Cambridge Center, Cambridge, MA 02142-1493
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
--------------
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands, Except Unit Data) 1998 1997
--------------------- --------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,791 $ 1,484
Investments in Local Limited Partnerships 105 374
Other assets 85 60
Real estate (net of accumulated depreciation
of $2,840 in 1998 and $2,706 in 1997) 2,134 2,268
--------------------- --------------------
Total Assets $ 4,115 $ 4,186
===================== ====================
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued interest and expenses $ 160 $ 153
Distribution payable 27 27
Mortgage payable 2,546 2,586
Subordinated loan payable 133 133
--------------------- --------------------
Total Liabilities 2,866 2,899
--------------------- --------------------
Partners' Capital:
Limited Partners --
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005 units authorized,
issued and outstanding 2,553 2,588
General Partners' deficit (1,304) (1,301)
--------------------- --------------------
Total Partners' Capital 1,249 1,287
--------------------- --------------------
Total Liabilities and Partners' Capital $ 4,115 $ 4,186
===================== ====================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
<S> <C> <C> <C> <C>
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------------- ----------------------- ------------------ ------------------
Income:
Rental income $ 284 $ 269 $ 818 $ 796
Income from Local Limited Partnership
cash distributions - - 129 335
Equity in (loss) income of Local
Limited Partnership (35) 2 (16) 18
Interest 17 16 45 44
Other 9 6 23 17
------------------- ------------------------ ------------------ ------------------
Total Income 275 293 999 1,210
------------------- ------------------------ ------------------ ------------------
Expenses:
Operating 211 192 593 513
Interest 51 53 154 160
Depreciation and amortization 46 46 137 137
General and administrative 24 21 72 56
-------------------- ----------------------- ------------------ ------------------
Total Expenses 332 312 956 866
------------------- ------------------------ ------------------ ------------------
Net (loss) income $ (57) $ (19) $ 43 $ 344
=================== ======================== ================== ==================
Net (loss) income allocated to
General Partners $ (4) $ (1) $ 3 $ 26
=================== ======================== ================== ==================
Net (loss) income allocated
to Limited Partners $ (53) $ (18) $ 40 $ 318
=================== ======================== ================== ==================
Net (loss) income per Unit of
Limited Partnership Interest $ (2.12) $ (.72) $ 1.60 $ 12.72
=================== ======================== ================== ==================
Distributions per Unit of
Limited Partnership Interest $ 1.00 $ 1.00 $ 3.00 $ 3.00
=================== ======================== ================== ==================
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Consolidated Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
------------------ ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Balance - January 1, 1998 25,005 $ (1,301) $ 2,588 $ 1,287
Net income 3 40 43
Distributions (6) (75) (81)
------------------ ------------------- ------------------- --------------------
Balance - September 30, 1998 25,005 $ (1,304) $ 2,553 $ 1,249
================== =================== =================== ====================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1998 1997
--------------------- --------------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 43 $ 344
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 134 133
Amortization 3 4
Equity in (loss) income of Local Limited Partnership 16 (18)
Changes in assets and liabilities:
Increase in other assets (25) (98)
(Decrease) increase in accounts payable
and accrued expenses (3) 21
--------------------- --------------------
Net cash provided by operating activities 168 386
--------------------- --------------------
Cash Flows From Investing Activities:
Distributions received from Local Limited Partnership 250 -
--------------------- --------------------
Cash provided by investing activities 250 -
--------------------- --------------------
Cash Flows From Financing Activities:
Mortgage principal payments (40) (37)
Distributions to partners (81) (81)
Increase in accrued interest on subordinated loan 10 -
--------------------- --------------------
Net cash used in financing activities (111) (118)
--------------------- --------------------
Net increase in cash and cash equivalents 307 268
Cash and cash equivalents, beginning of period 1,484 980
--------------------- --------------------
Cash and cash equivalents, end of period $ 1,791 $ 1,248
===================== ====================
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 144 $ 147
===================== ====================
Supplemental Disclosure of Non-Cash
Investing Activities
Accrued Distributions to Partners $ 27 $ 27
===================== ====================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 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 nine months ended September 30,
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. All
significant intercompany transactions and balances have been
eliminated.
3. Transaction with Related Parties
An affiliate of the Managing General Partner received
approximately $57,000 and $51,000, in management fees from Local
Limited Partnerships during the nine months ended September 30,
1998 and 1997, respectively.
4. Mortgage Refinancing
On June 16, 1998, Fayettville Apartments Limited Partnership, one
of the Local Limited Partnerships in which the Partnership has an
equity interest, refinanced its mortgage. The new mortgage in the
amount of $1,850,000 replaced indebtedness of approximately
$1,217,000. The mortgage bears interest at 7.08%, requires
monthly payments of approximately $12,000 and matures on July 1,
2008, with a balloon payment of approximately $1,630,000. During
September 1998, the Local Limited Partnership distributed
$250,000 of refinancing proceeds to the Partnership. The
Partnership expects to distribute the proceeds during the fourth
quarter.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 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 September 30, 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, rental income from Clear Creek 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, 1998, the Partnership
had cash and cash equivalents of $1,791,000, which has been invested
primarily in short-term certificates of deposit and money market
accounts. 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. 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
$307,000 increase at September 30, 1998, as compared to December 31,
1997. The Partnership's $168,000 of cash provided by operating
activities and $250,000 of cash from investing activities, were only
partially offset by $111,000 of cash used in financing activities.
During September 1998, Fayettville Apartments Limited Partnership
distributed $250,000 of refinancing proceeds to the Partnership. The
Partnership expects to distribute the proceeds during the fourth
quarter. Cash used in financing activities consisted of $40,000 of
mortgage principal payments and $81,000 of cash distributions to
partners, which was only partially offset by an increase in accrued
interest on the subordinated loan of $10,000.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
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.
On June 16, 1998, Fayettville Apartments Limited Partnership, one of
the Local Limited Partnerships in which the partnership has an equity
interest, refinanced its mortgage. The new mortgage in the amount of
$1,850,000 replaced indebtedness of $1,217,000. The mortgage bears
interest at 7.08%, requires monthly payments of approximately $12,000
and matures on July 1, 2008 with a balloon payment of approximately
$1,630,000.
The loan encumbering Dunhaven Apartments Phase II, ("Dunhaven") is in
default and is held by the U.S. Department of Housing and Urban
Development. 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 September 30,
1998, the Managing General Partner estimates the default to be
approximately $165,000. 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
$75,000 ($3.00 per Unit) to its limited partners and $6,000 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.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
The Partnership is dependent upon Coordinated Services and the
management agents of the Local Limited Partnerships for management and
administrative services. Coordinated Services has completed an
assessment and believes that their computer systems will function
properly with respect to dates in the Year 2000 and thereafter (the
"Year 2000 Issue"). The management agents of the Local Limited
Partnerships are at various stages of completing an assessment of their
computer systems. These Year 2000 costs, if any, are the responsibility
of the individual management agents. The Partnership does not expect
that it will incur any material costs associated with, or be materially
affected by, the Year 2000 Issue.
Results of Operations
The Partnership's net income for the nine months ended September 30,
1998 was $43,000, as compared to $344,000 for nine months ended
September 30, 1997. The decrease in net income is primarily due to a
decline in Local Limited Partnership cash distributions of $206,000, an
increase in Clear Creek's operating expenses of $80,000, and a decrease
in equity in income of Local Limited Partnership of $34,000. Clear
Creek's operating expenses increased primarily due to higher repairs
and maintenance for the nine months ended September 30, 1998, as
compared to the comparative period. During the nine months ended
September 30, 1998, the Local Limited Partnerships owning Village
Square Apartments and Dunhaven Apartments, Section II - Phase I
distributed $115,000 and $14,000, respectively. During the nine months
ended September 30, 1997, the Local Limited Partnership owning Village
Square Apartments distributed $335,000. All other items of income and
expense remained relatively constant.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 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
September 30, 1998.
10 of 13
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 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: November 12, 1998
11 of 13
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1998
Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
12 of 13
<PAGE>
Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 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
September 30, 1998:
Net Loss $ (57,000)
Add: Depreciation and amortization 46,000
Distribution received from Local Limited
Partnership 250,000
Less: Cash to reserves (212,000)
-----------
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, 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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,791,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,840,000)
<TOTAL-ASSETS> 4,115,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,546,000
0
0
<COMMON> 0
<OTHER-SE> 1,249,000
<TOTAL-LIABILITY-AND-EQUITY> 4,115,000
<SALES> 0
<TOTAL-REVENUES> 954,000
<CGS> 0
<TOTAL-COSTS> 730,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,000
<INCOME-PRETAX> 0
<INCOME-TAX> 43,000
<INCOME-CONTINUING> 43,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,000
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
</TABLE>
