<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the year ended December 31, 1997 Commission File
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Number 2-81033
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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 of Organization) (I.R.S. Employer I.D. No.)
5 Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 234-3000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $1,751,000.
No market exists for the limited partnership interests of the Registrant, and
therefore, no aggregate market value can be computed.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
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Item 1. Description of Business.
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Development
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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. Two
Winthrop is the Partnership's Managing General Partner. See "Change in
Control".
In 1983, the Partnership sold, pursuant to a Registration Statement on
Form S-11 filed with the Securities and Exchange Commission, 25,000 Units of
limited partnership interest ("Units") at a purchase price of $1,000 per Unit
(an aggregate of $25,000,000). Capital contributions net of selling commissions,
sales and registration costs, were utilized to purchase investments in Local
Limited Partnerships and temporary short-term investments.
The Partnership invests as a limited partner in other limited partnerships
that own, operate and otherwise deal with apartment properties with original
financing insured by the U.S. Department of Housing and Urban Development
("HUD").
2
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Local Limited Partnerships
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The Partnership initially acquired equity interests in the form of limited
partnership interests in 12 Local Limited Partnerships owning 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. In addition, the Partnership reduced its residual interest in two Local
Limited Partnerships, those owning Maple Manor and The Groves, during 1988 to
50%. See Item 2, "Description of Properties" for information relating to the
Local Limited Partnerships' properties."
Defaults
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The Partnership holds limited partnership interests in Local Limited
Partnerships which own apartment properties, all of which were originally
financed with HUD-insured first mortgages. If a Local Limited Partnership
defaults on a HUD-insured mortgage, the mortgagee can assign the defaulted
mortgage to HUD and recover the principal owed on its first mortgage from HUD.
HUD, in its discretion, may then either (i) negotiate a workout agreement with
the Local Limited Partnership, (ii) sell the mortgage to another lender, or
(iii) pursue its right to transfer the ownership of the property from the Local
Limited Partnership to HUD or a new lender if HUD sells its mortgage
(collectively, the "Lender") through a foreclosure action. The objective of a
workout agreement between an owner and the Lender is to secure the Lender`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, the Lender 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 the Lender
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.
Dunhaven Apartments, Section 2 Phase 2 - The loan encumbering this
property is currently in default. The
3
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Partnership was unable to successfully complete negotiations with the general
partner of the Local Limited Partnership pursuant to which the Partnership, or
an affiliate of the Partnership, would be appointed as general partner of the
Local Limited Partnership and the Partnership, or its affiliate, would have
satisfied the default on the loan. On February 27, 1998, the Partnership
received a notice of foreclosure from HUD. The current default is approximately
$96,523. If the default is not cured, it is likely that the property will be
lost through foreclosure.
Clear Creek - The loan encumbering Clear Creek was in default and was
operating under a Provisional Workout Agreement with HUD. HUD sold the mortgage
and under the terms of the Agreement, the new lender had the option to terminate
such agreement on November 1, 1996. In order to reinstate the loan to 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. In connection with this loan, the interests
of the general partners in the Local Limited Partnership owning Clear Creek were
converted into Class B Limited Partner interests and an affiliate of the
Partnership was appointed as the general partner of Clear Creek, Ltd. For
additional information with respect to this loan see "Item 7, Financial
Statements - Note 4."
Change in Control
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On July 18, 1995 Londonderry Acquisition II Limited Partnership
("Londonderry II"), a Delaware limited partnership, and affiliate of Apollo Real
Estate Advisors, L.P. ("Apollo"), acquired, among other things, Realtyco's
general partner interest in W.L. Realty, L.P. ("W.L. Realty") and a sixty four
percent (64%) limited partnership interest in W.L. Realty, and WFA acquired the
sole general partnership interest in Linnaeus-Oxford.
As a result of the foregoing acquisitions, Londonderry II is the sole
general partner of W.L. Realty which is the sole general partner of Linnaeus,
and which in turn is the sole general partner of WFA. As a result of the
foregoing, effective July 18, 1995, Londonderry II, an affiliate of Apollo,
became the controlling entity of the General Partners. In connection with the
transfer of control, the officers and directors of Two Winthrop resigned and
Londonderry II appointed new officers and directors. See Item 9, "Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act."
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Employees
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The Partnership does not have any employees. Services are performed for the
Partnership by the Managing General Partner, and agents retained by it.
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"), the general partner of the Local Limited
Partnerships which own The Groves and Maple Manor Apartments, pursuant to which
Coordinated Services was retained to provide asset management and investor
services to the Partnership and certain affiliated partnerships. As a result of
this agreement, Coordinated Services has the right to direct the day to day
affairs of the Partnership, including, without limitation, reviewing and
analyzing potential sale, refinancing or restructuring proposals by Local
Limited Partnerships, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the Partnership.
Coordinated Services is not permitted, however, without the consent of the
Managing General Partner, or as otherwise required under the terms of the
Partnership's Agreement of Limited Partnership (the "Partnership Agreement") to,
among other things, cause the Partnership to consent to a sale of an asset or
cause the Partnership to file for bankruptcy. As compensation for providing
these services, the Managing General Partner and its affiliates assigned to
Coordinated Services all of their right to receive fees from the Partnership as
provided in the Partnership Agreement. See "Item 12., Certain Relationships and
Related Transactions."
5
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Item 2. Description of Properties.
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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, 1998:
Date of Number of
Property Name Location Acquisition(1) Units
- ------------- -------- -------------- -----
Clear Creek Landing Houston, TX 4-28-83 200
Apartments
Village Square Manassas, VA 4-28-83 285
Apartments
Dunhaven Apartments, Baltimore, MD 6-24-83 72
Section 2, Phase 1
Dunhaven Apartments, Baltimore, MD 6-24-83 72
Section 2, Phase 2
The Groves Apartments North Augusta, SC 7-29-83 132
Autumn Chase Mobile, AL 9-19-83 120
Apartments
Maple Manor Fayetteville, AR 10-30-83 128
Apartments
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(1) Represents the date on which the Partnership made its initial investment in
the Local Limited Partnership
The following table sets forth information relating to the first mortgage
encumbering each of the Local Limited Partnership's properties:
Principal Principal
Balance at Balance
December 31, Interest Period Maturity Due at
Property 1997 Rate Amortized Date Maturity
- -------- ---- ---- --------- ---- --------
Clear Creek $2,586,159 7.5% 36 years 10/1/2018 (1)
Village Square $6,872,670 7.5% 38 years 9/1/2020 (1)
Dunhaven
Apartments,
Section 2, Phase 1 $2,124,024 7.5% 36 years 2/1/2022 (1)
Dunhaven
Apartments,
Section 2, Phase 2 $2,516,765 7.5% 40 years 2/1/2022 (1)
The Groves $1,946,547 7.5% 36 years 2/1/2019 (1)
Apartments
Autumn Chase $3,109,762 7.5% 40 years 11/1/2024 (1)
Maple Manor $1,236,543 7.0% 31 years 2/1/2014 (1)
(1) Loan is a self-amortizing loan.
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The following table sets forth the Partnership's ownership interest in each
of the Local Limited Partnerships:
Local Limited Partnership Ownership Interest
-------------------------
Clear Creek Landing Apartments 88.5%
Village Square Apartments 50%
Dunhaven Apartments,
Section 2, Phase 1 95%
Dunhaven Apartments,
Section 2, Phase 2 92%
The Groves Apartments 95%
Autumn Chase Apartments 99%
Maple Manor Apartments 95%
The following chart provides comparative data for each property owned by the
Local Limited Partnerships regarding occupancy rates and average market rental
rates per apartment unit, for the last two years, where that data is available
to the Partnership:
Average Monthly
Average Rental
Monthly Rate per Unit
Occupancy Rate
Property 1997 1996 1997 1996
-------- ---- ---- ---- ----
Clear Creek Landing 90.1% 94.1% $496 $474
Village Square 93.4% 88.6% $672 $645
Dunhaven Apartments, 89.6% 92.0% $565 $555
Section 2, Phase 1
Dunhaven Apartments, 83.6% 90.0% $569 $561
Section 2, Phase 2
The Groves 83.7% 100.0% $395 $339
Autumn Chase 96.6% 96.0% $450 $441
Maple Manor 96.3% 100.0% $358 $330
Set forth below is a table showing the gross carrying value and
accumulated depreciation and federal tax basis of each of the Partnership's
properties as of December 31, 1997 (in thousands):
Property Gross Federal
Carrying Accumulated Tax
Value Depreciation Rate Method Basis
----- ------------ ---- ------ -----
Clear Creek Landing $4,974 $(2,706) 3-25 yrs. S/L $ 545
Village Square $8,939 $(6,247) 3-30 yrs. S/L $2,396
Dunhaven Apartments, $2,234 $(1,447) 3-30 yrs. S/L,DD $ 787
Section 2, Phase 1
Dunhaven Apartments, $2,486 $(1,349) 3-30 yrs. S/L,DD $1,136
Section 2, Phase 2
The Groves $3,361 $(1,917) 10-25 yrs. S/L $ 258
Autumn Chase $3,460 $(1,838) 7-30 yrs. S/L $ 404
Maple Manor $2,809 $(1,561) 10-25 yrs. S/L $ 266
7
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Item 3. Legal Proceedings.
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The Partnership is not a party, nor to the Partnership's knowledge are any
of the Local Limited Partnerships, subject to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
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No matter was submitted to a vote of security holders during the period
covered by this report.
8
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PART II
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Item 5. Market for the Registrant's Common Stock and Related
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Stockholders Matters.
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The Partnership is a partnership and thus has no common stock. There is no
active market for the Units. Trading in the Units is sporadic and occurs solely
through private transactions.
As of March 15, 1998, there were 2,220 holders of the 25,000 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. During the years ended
December 31, 1997 and 1996, the Partnership has made the following cash
distributions with respect to the Units to holders thereof as of the dates set
forth below in the amounts set forth opposite such dates:
Amount of
Distribution
Per Unit
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Distribution with
Respect to
Quarter Ended 1997 1996
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March 31 1.00 5.00
June 30 1.00 5.00
September 30 1.00 1.00
December 31 1.00 1.00
9
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Item 6. Management's Discussion and Analysis or Plan of Operation
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The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Partnership from time to time. The discussion of
the Partnership's business 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 business and results of operation. 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.
Liquidity and Capital Resources
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As of December 31, 1997, 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 December 31, 1997, the
Partnership had cash and cash equivalents of $1,484,000, as compared to $980,000
at December 31, 1996. 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 1997 and 1996.
10
<PAGE>
The level of liquidity based on cash and cash equivalents experienced a
$504,000 increase at December 31, 1997, as compared to December 31, 1996. The
Partnership's $649,000 of cash provided by operating activities and an increase
in accrued interest on the subordinated loan of $13,000 (financing activity) was
partially offset by $50,000 of mortgage principal payments and $108,000 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
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. On
February 27, 1998, the Partnership received a notice of foreclosure from HUD. At
December 31, 1997, the Managing General Partner estimates the default to be
approximately $100,000. If the default is not cured it is likely that the
Dunhaven property will be lost through foreclosure.
During 1997, Partnership distributions (paid or accrued) aggregated
$100,000 ($4.00 per Unit) to its limited partners and $8,000 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
11
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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.
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 its
computer systems will function properly with respect to dates in the year 2000
and thereafter (the "Year 2000 Issue"). 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 year ended December 31, 1997 was
$439,000, as compared to $180,000 for the year ended December 31, 1996. The
increase in net income is primarily due to an increase in Local Limited
Partnership cash distributions of $350,000, which was partially offset by an
increase in Clear Creek's net loss of $156,000. The Local Limited Partnership
owning Village Square Apartments distributed $600,000 (of which $335,000,
relates to 1996, and $365,000, relates to the first half of 1997) during 1997,
as compared to $250,000 (which relates to 1995), during 1996. Interest income
declined due to a decrease in average working capital reserves available for
investment. General and administrative expenses declined due to a decrease in
professional fees.
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Item 7. Financial Statements
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CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEAR ENDED DECEMBER 31, 1997
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INDEX
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Page
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Independent Auditors' Report.............................................F - 2
Financial Statements:
Consolidated Balance Sheets as of December 31,
1997 and 1996............................................................F - 3
Consolidated Statements of Income for the Years
Ended December 31, 1997 and 1996......................................F - 4
Consolidated Statements of Partners' Capital for
the Years Ended December 31, 1997 and 1996............................F - 5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997 and 1996......................................F - 6
Notes to Consolidated Financial Statements...............................F - 7
F-1
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Independent Auditors' Report
----------------------------
To the Partners
Winthrop Residential Associates III, a Limited Partnership
Boston, Massachusetts
We have audited the accompanying consolidated balance sheets of Winthrop
Residential Associates III, a Limited Partnership (a Maryland limited
partnership) and its subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of income, partners' capital and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the financial statements of certain Local Limited Partnerships,
the investments in which are reflected in the accompanying financial statements
using the equity method of accounting and were written down to zero (see Note
1). Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for those Local Limited Partnerships, is based solely on the reports of other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Winthrop Residential
Associates III, a Limited Partnership, and its subsidiary as of December 31,
1997 and 1996, and the consolidated results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Imowitz Koenig & Co., LLP
New York, New York
March 17, 1998
F-2
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
----------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
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(In Thousands, Except Unit Data)
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
ASSETS
Investments in Local Limited Partnerships $ 374 $ 390
Cash and Cash Equivalents 1,484 980
Other Assets 60 64
Real Estate, net 2,268 2,446
------------ ------------
Total Assets $ 4,186 $ 3,880
============ ============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Liabilities:
Accounts Payable and Accrued Expenses $ 109 $ 97
Distribution Payable 27 27
Mortgage Payable 2,586 2,636
Accrued Interest - Subordinated Loan Payable 44 31
Subordinated Loan Payable 133 133
------------ ------------
Total Liabilities 2,899 2,924
------------ ------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005
units authorized, issued and outstanding 2,588 2,282
General Partners' deficit (1,301) (1,326)
------------ ------------
Total Partners' Capital 1,287 956
------------ ------------
Total Liabilities and Partners' Capital $4,186 $3,880
============ ============
See notes to consolidated financial statements.
F - 3
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
----------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In Thousands, Except Unit Data)
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996
-------------- ----------------
Income:
Rental Income $1,069 $ 267
Income from Local Limited
Partnerships cash distributions 600 250
Equity in loss of Local Limited Partnerships (12) (17)
Interest 60 77
Other 34 7
------------ ------------
Total Income 1,751 584
------------ ------------
Expenses:
Operating 840 196
Interest 211 56
Depreciation and amortization 182 49
General and Administrative 79 103
------------ ------------
Total Expenses 1,312 404
------------ ------------
Net Income $ 439 $ 180
============ ============
Net income allocated to General Partners $ 33 $ 13
============ ============
Net income allocated to Limited Partners $ 406 $ 167
============ ============
Net Income per Unit of Limited Partnership
Interest $16.24 $ 6.68
============ ============
Distributions per Unit of Limited
Partnership Interest $ 4.00 $12.00
============ ============
See notes to consolidated financial statements.
F - 4
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
----------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
--------------------------------------------
YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------------------
(In Thousands, Except Unit Data)
Units of
Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
---------- ---------- ----------- ---------
Balance - January 1, 1996 25,005 $ (1,260) $ 3,097 $ 1,837
Net Income 13 167 180
Distributions (24) (300) (324)
Adjustment due to Consolidation (55) (682) (737)
---------- ---------- ----------- ---------
Balance - December 31, 1996 25,005 (1,326) 2,282 956
Net Income 33 406 439
Distributions (8) (100) (108)
---------- ---------- ----------- ---------
Balance - December 31, 1997 25,005 $ (1,301) $ 2,588 $ 1,287
========== ========== =========== =========
See notes to consolidated financial statements.
F - 5
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Except Unit Data)
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 439 $ 180
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 178 45
Amortization 4 4
Equity in net loss of Local Limited
Partnership 12 17
Changes in assets and liabilities:
Decrease in other assets 4 28
Increase (decrease) in accounts payable and
accrued expenses 12 (135)
------------ ------------
Net cash provided by operating activities 649 139
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (50) (281)
Distributions to partners (108) (487)
Increase in accrued interest payable on
subordinated loan 13 -
------------ ------------
Cash used in financing activities (145) (768)
------------ ------------
Net increase (decrease) in cash and cash 504 (629)
equivalents
Cash and Cash Equivalents, Beginning of Year 980 1,609
------------ ------------
Cash and Cash Equivalents, End of Year $ 1,484 $ 980
============ ============
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
Cash paid for interest $ 198 $ 185
============ ============
Supplemental Disclosure of Non-Cash Financing
- ---------------------------------------------
and Investing Activities
------------------------
Accrued Distributions to Partners $ 27 $ 27
============ ============
See Notes 1 and 4 with respect to consolidation of Clear Creek
See notes to consolidated financial statements.
F - 6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
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 and which do not significantly
restrict distributions to owners or the rate of return on investments in such
properties. The Partnership has investments in six Local Limited Partnerships
each owning an apartment complex. Additionally, the Partnership owns an 88.5%
limited partnership interest in Clear Creek Ltd. ("Clear Creek") a partnership
in which an affiliate of the Partnership became the Managing General Partner in
October 1996.
The Partnership was capitalized with $25,000,000 of contributions
representing 25,000 investor limited partnership units. The offering closed in
July, 1983. The general partners and the initial limited partner (5 units)
contributed $8,000. At December 31, 1997 and 1996, there were 25,005 limited
partnership units issued and outstanding.
Consolidation
- -------------
In conjunction with the October 1996 transfer of control of Clear Creek to
an affiliate of the Partnership's general partner, 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. Losses of Clear Creek have not
been allocated to its minority interests since there is no obligation on the
part of the minority partners to fund such losses. Prior to October 1996, Clear
Creek was a Local Limited Partnership accounted for under the equity method.
Real Estate
- -----------
Real estate is stated at cost, less accumulated depreciation. The
Partnership records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets.
F-7
<PAGE>
Cash and Cash Equivalents
- -------------------------
The Partnership considers all highly liquid investments with an original
maturity of three months or less at the time of purchase to be cash equivalents.
The carrying amount of cash and cash equivalents approximates its fair value
due to its short term nature.
Uses of Estimates
- -----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts in the financial statements and accompanying
notes. Actual results could differ from those estimates.
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 is subsequently adjusted by the Partnership's share of the Local
Limited Partnership's results of operations and by distributions received. Costs
relating to the acquisition and selection of the investment in the Local Limited
Partnerships are capitalized to the investment account and amortized over the
life of the investment. Costs in excess of the Partnership's initial basis in
the net assets of the Local Limited Partnership are amortized over the estimated
useful lives of the underlying assets. Equity in loss of Local Limited
Partnerships and amortization of investment costs and costs in excess of initial
basis are not recognized to the extent that the investment balance would become
negative since the Partnership is not obligated to advance funds to the Local
Limited Partnerships.
Depreciation
- ------------
Depreciation is computed by the straight-line method over an estimated
useful life of 25 years for buildings and improvements and 3 to 5 years for
furnishings.
Net Income Per Limited Partnership Unit
- ---------------------------------------
The net income per limited partnership unit is computed by dividing net
income allocated to the limited partners by the 25,005 units outstanding.
F - 8
<PAGE>
Income Taxes
- ------------
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
Concentration of Credit Risk
- ----------------------------
Principally all of the Partnership's cash and cash equivalents consist of
a mutual fund that invests in U.S. treasury bills and repurchase agreements with
original maturity dates of three months or less.
2. ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS
In accordance with the partnership agreement, profits and losses and cash
available for distribution not arising from a sale or refinancing are allocated
7.5% to the general partners and 92.5% to the limited partners. Distributions of
proceeds arising from a sale or refinancing are allocated first to the limited
partners to the extent of their Adjusted Capital Contribution (as defined) and
then in accordance with the partnership agreement.
3. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
Two Winthrop Properties, Inc. ("Two Winthrop" or the "Managing General
Partner"), is a wholly owned subsidiary of First Winthrop Corporation ("First
Winthrop"), which in turn is controlled by Winthrop Financial Associates, A
Limited Partnership ("WFA"). A subsidiary of First Winthrop is one of the
general partners in a Local Limited Partnership.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services Agreement with Coordinated Services of
Valdosta, LLC ("Coordinated Services") pursuant to which Coordinated Services
was retained to provide asset management and investor services to the
Partnership and certain affiliated partnerships. As a result of this agreement,
Coordinated Services has the right to direct the day to day affairs of the
Partnership. 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
F - 9
<PAGE>
Partnership, as provided in the Partnership Agreement. Coordinated Services is
affiliated with the general partner and managing agent of certain Local
Limited Partnerships, in which the Partnership has invested. During 1997,
Coordinated Services received $221,000 in management fees and expense
reimbursements for managing these Local Limited Partnerships.
An affiliate of the Managing General Partner received $96,000 and $102,000
in management fees from Local Limited Partnerships during 1997 and 1996,
respectively. This affiliate was also entitled to receive 25% or approximately
$13,000, for 1997, and $3,000, for 1996, of the Clear Creek management fee (see
Note 4).
4. MORTGAGE PAYABLE
----------------
During 1996, the mortgage loan encumbering the Partnership's Clear Creek
Apartments property was sold by HUD to a new lender unaffiliated with the
Partnership. Clear Creek was in default at that time. The new lender
subsequently demanded payment of all past due interest and principal. In October
1996, the Partnership loaned Clear Creek $412,000, which is due on demand and
bears interest at 10% per annum, to bring the loan to current status.
In conjunction with the loan to Clear Creek, an affiliate of the Managing
General Partner of the Partnership became the sole general partner of Clear
Creek. Additionally, the Partnership's $133,000 in previously subordinated loans
to Clear Creek as well as the prior general partner's $133,000 in previously
subordinated loans, which had been converted to contributed capital, reverted
back to subordinated loan status. The subordinated loans, accrue interest at 10%
and are due on sale of the property. The prior general partner will continue to
manage the property. Clear Creek's management fee has remained the same,
however, a portion of the fee is now being paid to an affiliate of the
Partnership's Managing General Partner for supervisory services.
The mortgage, which is collateralized by the property, bears interest at
7.5% per annum, requires monthly payments of approximately $20,000 and matures
in October 2018.
F - 10
<PAGE>
Principal payments on the mortgage note are due as follows:
1998 $ 54,000
1999 58,000
2000 62,000
2001 67,000
2002 72,000
Thereafter 2,273,000
------------
$ 2,586,000
============
The estimated fair value of the Partnership's debt approximates its
carrying amount.
5. REAL ESTATE
-----------
Real estate is comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1997 1996
------------------------------ --------------------------
<S> <C> <C>
Land $ 500,000 $ 500,000
Buildings and Improvements 4,457,000 4,457,000
Furnishings 17,000 17,000
--------------- -------------
4,974,000 4,974,000
Accumulated Depreciation (2,706,000) (2,528,000)
--------------- -------------
$ 2,268,000 $ 2,446,000
=============== =============
</TABLE>
6. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
-----------------------------------------
As of December 31, 1997, the Partnership has Limited Partnership equity
interests in six Local Limited Partnerships each owning one apartment complex.
Such interests are summarized as follows:
Percentage
Local Limited Partnership Ownership
- --------------------------------------------------------- ---------------
Village Square Associates 50
Walther Limited Partnership (Dunhaven Apartments 95
Phase I)
Walkinit Limited Partnership (Dunhaven Apartments 92
Phase II)
Savannah River Associates Limited Partnership (the
Groves Apartments) 50
Autumn Chase, Ltd. 99
Fayetteville Apartments Limited Partnership (Maple
Manor Apartments) 50
F - 11
<PAGE>
In addition, the Partnership also holds an 88.5% limited partnership
interest in Clear Creek, which was accounted for as a Local Limited Partnership
prior to consolidation in October 1996.
The above Local Limited Partnerships have outstanding mortgages, as of
December 31, 1997, totaling $17,806,000, which are secured by the Local Limited
Partnerships' real property, security interests, liens and endorsements common
to first mortgage loans.
During 1997 and 1996, the Partnership made no additional capital
contributions in the Local Limited Partnerships. The Partnership loaned $412,000
to Clear Creek in 1996 (see Note 4). As of December 31, 1997, the net cumulative
operating deficits advanced to the Local Limited Partnerships was $154,000,
which the Partnership has recorded as capital contributions.
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. On
February 27, 1998, the Partnership received a notice of foreclosure from HUD.
The current default is approximately $97,000. If this default is not cured, it
is likely the Dunhaven property will be lost through foreclosure.
F - 12
<PAGE>
The combined balance sheets of the Local Limited Partnerships are as follows (in
thousands):
DECEMBER 31
-----------
1997 1996
---- ----
ASSETS
Real estate, at cost:
Land $ 1,365 $ 1,365
Buildings, net of accumulated
Depreciation of $14,361 and $13,583 in
1997 and 1996, respectively 7,564 8,278
Cash and cash equivalents 615 891
Other assets, net of accumulated
amortization of $354 and $336 in 1997
and 1996, respectively 1,346 1,461
--------------- ------------
Total Assets $ 10,890 $ 11,995
=============== ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Notes payable $ 540 $ 534
Loans payable 33 33
Mortgage notes payable 17,806 18,068
Accounts payable and accrued expenses 569 517
--------------- -------------
Total Liabilities 18,948 19,152
--------------- -------------
Partners' Capital:
Winthrop Residential Associates III (3,972) (3,326)
Other partners (4,086) (3,831)
--------------- -------------
(8,058) (7,157)
--------------- -------------
Total Liabilities and Partners' Capital $ 10,890 $ 11,995
================ =============
F - 13
<PAGE>
The combined statements of operations of the Local Limited Partnerships are as
follows (in thousands):
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---- ----
Income:
Rental Income $ 4,516 $ 5,343
Other Income 264 186
-------------- -------------
Total Income 4,780 5,529
-------------- -------------
Expenses:
Interest 1,392 1,580
Depreciation and amortization 796 927
Taxes and insurance 384 547
Management and administration fees 255 301
Repairs and maintenance 1,096 798
General and administrative 565 1,194
-------------- -------------
Total Expenses 4,488 5,347
-------------- -------------
Net income $ 292 $ 182
============== =============
Net income (loss) allocated to Winthrop
Residential Associates III $ 33 $ (69)
============== ============
Net income allocated to other partners $ 259 $ 251
============== ============
F - 14
<PAGE>
7. TAXABLE LOSS
------------
The Partnership's taxable loss differs from its net income for financial
reporting purposes, as follows (in thousands):
1997 1996
-------------- ----------------
Net income for financial reporting purposes $ 439 $ 180
Amortization of capitalized costs 4 4
and costs in excess of the
Partnership's initial basis in the
net assets of the Local Limited
Partnerships.
Differences in equity in Local
Limited Partnership's income/loss
for financial reporting and tax
reporting purposes 133 (195)
Income from Local Limited
Partnership cash Distributions (600) (250)
-------------- ----------------
Taxable loss $ ( 24) $ (261)
============== ================
<PAGE>
Item 8. Changes in and Disagreements on Accounting and
- ------ ----------------------------------------------
Financial Disclosure.
--------------------
There were no disagreements with Imowitz Koenig & Co., LLP regarding the
1997 or 1996 audits of the Partnership's financial statements.
28
<PAGE>
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------ ----------------------------------------------------------------
Compliance With Section 16(a) of the Exchange Act.
-------------------------------------------------
The Partnership has no officers or directors. Two Winthrop Properties,
Inc., the managing partner of the Partnership (the "Managing General Partner"),
manages and controls substantially all of the Partnership's affairs and has
general responsibility and ultimate authority in all matters affecting its
business. As of March 1, 1998, the names of the directors and executive officers
of the Managing General Partner and the position held by each of them, are as
follows:
Has Served as
Position Held with the a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Edward Williams Chief Financial Officer 4-96
Vice President and
Treasurer
Peter Braverman Senior Vice President 1-96
and Director
Carroll D. Vinson Vice President - Residential 10-97
Carolyn Tiffany Vice President and Clerk 10-95
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15,
1996. From June 1994 until January 1996, Mr. Ashner was a Director, President
and Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital
Corporation, a firm which has organized and administered real estate limited
partnerships.
Edward V. Williams, age 57, has been the Chief Financial Officer of WFA
since April 1996. From June 1991 through March 1996, Mr. Williams was Controller
of NPI and NPI Management. Prior to 1991, Mr. Williams held other real estate
related
29
<PAGE>
positions including Treasurer of Johnstown American Companies and Senior
Manager at Price Waterhouse.
Peter Braverman, age 46, has been a Senior Vice President of WFA since
January 1996. From June 1995 until January 1996, Mr. Braverman was a Vice
President of NPI and NPI Management. From June 1991 until March 1994, Mr.
Braverman was President of the Braverman Group, a firm specializing in
management consulting for the real estate and construction industries. From 1988
to 1991, Mr. Braverman was a Vice President and Assistant Secretary of Fischbach
Corporation, a publicly traded, international real estate and construction firm.
Carroll D. Vinson, age 57, has been Vice President Residential of the
General Partner since October 1997. He has acted as Chief Operating Officer of
Insignia Properties Trust since May 1997. During 1993 to August 1994, Mr. Vinson
was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in
various other investment and consulting activities which included portfolio
acquisitions, asset dispositions, debt restructurings and financial reporting.
Briefly, in early 1993, Mr. Vinson served as President and Chief Executive
Officer of Angeles Corporation, a real estate investment firm.
Carolyn Tiffany, age 31, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. From October 1995 to present
Ms. Tiffany has been a Vice President in the asset management and investor
relations departments of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop 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; Nantucket Island Associates Limited Partnership; One Financial
Place Limited Partnership; Presidential Associates I Limited Partnership;
Riverside Park Associates Limited Partnership; Springhill Lake Investors Limited
Partnership; Twelve AMH Associates Limited Partnership; Winthrop California
Investors Limited Partnership; Winthrop Growth Investors I Limited Partnership;
Winthrop Interim Partners I, A Limited
30
<PAGE>
Partnership; Southeastern Income Properties Limited Partnership; Southeastern
Income Properties II Limited Partnership; and Winthrop Miami Associates
Limited Partnership.
Except as indicated above, neither the Partnership nor the Managing
General Partner has any significant employees within the meaning of Item 401(b)
of Regulation S-B. There are no family relationships among the officers and
directors of the Managing General Partner.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in the Partnership that failed to file
on a timely basis, as disclosed in the above Forms, reports required by section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
Effective December 16, 1997, the Managing General Partner and certain of
its affiliates entered into an agreement with Coordinated Services of Valdosta,
LLC ("Coordinated Services") to provide for the daily asset and property
management services and investor services for the Partnership. See "Item 11,
Security Ownership of Certain Beneficial Owners and Management." Coordinated
Services of Valdosta LLC is a Georgia limited liability corporation with
headquarters in Valdosta, Georgia. Founded in 1997, its managing member is
Investor Service Group, Inc., a Georgia Corporation. The principals of Investor
Service Group are Mary T. Johnson and James L. Dewar, Jr.
Mary T. Johnson is the Manager of Coordinated Services. Ms. Johnson is
also Executive Vice President of Dewar Realty, Inc. and Dewar Properties, Inc.
Ms. Johnson is a graduate of Valdosta State University and is a licensed
Georgia Real Estate Broker. Ms. Johnson has 21 years of experience in property
management, asset management, investor services, and development of apartment
and assisted living properties. Ms. Johnson is currently responsible for the
asset management of over 150 investor partnerships and property management of
over 50 apartment communities.
James L. Dewar, Jr. is the founder of Dewar Realty, Inc. and Dewar
Properties, Inc. Mr. Dewar is a graduate of the University of Georgia and is
a licensed Georgia Real Estate Broker. Mr. Dewar has 32 years experience in
real estate construction, property management and development of apartment
and assisted
31
<PAGE>
living properties. Mr. Dewar has produced over $100 million in conventional
and government funded family and elderly apartment communities.
Item 10. Executive Compensation.
- ------- ----------------------
The Partnership is not required to and did not pay any compensation to
the officers or directors of the Managing General Partner. The Managing
General Partner does not presently pay any compensation to any of its
officers or directors. (See Item 13, "Certain Relationships and Related
Transactions.")
Item 11. Security Ownership of Certain Beneficial Owners and
- ------- ----------------------------------------------------
Management.
----------
(a) Security ownership of certain beneficial owners.
-----------------------------------------------
The General Partners own all the outstanding general partnership
interests. No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at March 15, 1998. 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-Oxford 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, 1998, WFC Realty Co., Inc. owns 95 Units, which 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. 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"), the general partner of the Local Limited
Partnerships which own The Groves and Maple Manor Apartments, pursuant to which
Coordinated Services was retained to provide asset management and investor
services to the
32
<PAGE>
Partnership and certain affiliated partnerships. As a result of this
agreement, Coordinated Services has the right to direct the day to day affairs
of the Partnership, including, without limitation, reviewing and analyzing
potential sale, refinancing or restructuring proposals by Local Limited
Partnerships, preparation of all Partnership reports, maintaining Partnership
records and maintaining bank accounts of the Partnership. Coordinated Services
is not permitted, however, without the consent of the Managing General
Partner, or as otherwise required under the terms of the Partnership's
Agreement of Limited Partnership (the "Partnership Agreement") to, among other
things cause the Partnership to consent to a sale of an asset or cause the
Partnership to file for bankruptcy. As compensation for providing these
services, the Managing General Partner and its affiliates assigned to
Coordinated Services all of their right to receive fees from the Partnership
as provided in the Partnership Agreement.
Item 12. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
For the years ended December 31, 1997 and 1996, the Partnership allocated
taxable loss to the General Partners of $1,789 and $22,417, respectively. For
the years ended December 31, 1997, and 1996, the Partnership paid or accrued
cash distributions to the General Partners of $8,110 and $24,189, respectively.
For the year ended December 31, 1997 and 1996, Village Square paid $64,200 and
$101,709, respectively, of property management fees to Winthrop Management, an
affiliate of the Managing General Partner. The management at this property was
transferred to an unaffiliated third party during the last quarter of 1997.
Item 13. Exhibits and Reports on Form 8-K.
- ------- --------------------------------
(a) Exhibits:
The Exhibits listed on the accompanying Index to Exhibits are filed
as part of this Annual Report and incorporated in this Annual Report
as set forth in said Index.
(b) Reports on Form 8-K - None
33
<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 as of this 31st day of
March 1998.
WINTHROP RESIDENTIAL ASSOCIATES III,
A LIMITED PARTNERSHIP
By: ONE WINTHROP PROPERTIES, INC.
By: /s/ Michael L. Ashner
----------------------------
Michael L. Ashner
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
- -------------- ----- ----
/s/ Michael L. Ashner Chief Executive March 30, 1998
- ----------------------
Michael L. Ashner Officer and Director
/s/ Edward V. Williams Chief Financial Officer March 30, 1998
- ----------------------
Edward V. Williams
/s/ Peter Braverman Senior Vice March 30, 1998
- ----------------------
Michael L. Ashner President and Director
34
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Title of Document Page
- ------ ----------------- ----
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 Partnership'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 the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1995)
10A. Sales Agency Agreement between Winthrop Residential Associates III, A
Limited Partnership and Winthrop Securities Co., Inc. (incorporated herein
by reference to the Registrant's Registration Statement on Form S-11, File
No. 2-81033).
10B. 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).
10C. Services Agreement, dated December 16, 1997, by and 37 between First
Winthrop Corporation, Winthrop Financial Co., Inc., WFC Realty Co., Inc.,
WFC Realty Saugus, Inc., Winthrop Properties, Inc., Winthrop Metro
Equities Corporation, Winthrop Lisbon Realty, Inc. and Northwood Realty
Co., Inc. and Coordinated Services of Valdosta, LLC.
16. Letter dated September 19, 1996 from Arthur Andersen LLP (incorporated by
referenced to the Partnership's Current Report on Form 8-K dated September
19, 1996).
35
<PAGE>
27. Financial Data Schedule
99. Supplementary Information Required
Pursuant to Section 9.4 of the Partnership
Agreement.
36
<PAGE>
DRAFT 3/27/98
SERVICES AGREEMENT
This Agreement (the "Services Agreement") is entered into as of this
_____ day of December, 1997 by and between First Winthrop Corporation, a
Delaware corporation ("FWC"), Winthrop Financial Co., Inc., a Massachusetts
corporation, WFC Realty Co., Inc., a Massachusetts corporation, WFC Realty
Saugus, Inc., a Massachusetts corporation, One Winthrop Properties, Inc., a
Massachusetts corporation, Two Winthrop Properties, Inc., a Massachuset
corporation, Three Winthrop Properties, Inc., a Massachusetts corporation,
Winthrop Metro Equities Corporation, a Delaware corporation, Winthrop Libson
Realty, Inc., a Massachusetts corporation, and Northwood Realty Co., Inc., a
Massachusetts corporation (FWC and the foregoing entities are sometimes
collectively referred to herein as "Winthrop"), and Coordinated Services of
Valdosta, LLC, a Georgia limited liability company ("Agent").
R E C I T A L S:
A. Winthrop provides asset management and investor services to the
partnerships listed on Schedule 1 attached hereto (the "Partnerships");
B. Winthrop also serves as a general partner of certain, but not all,
of the Partnerships;
C. Winthrop is entitled to: (i) certain fees from the Partnerships
for the provision of asset management and investor services as listed in
Column "A" on Schedule 1 (the "Asset Management Fees"), including the payment
of certain accrued fees from the Partnerships as listed in Column "B" on
Schedule 1 (the "Accrued Asset Management Fees"), and in certain instances,
reimbursement of its expenses incurred in the performance of such services to
the Partnerships as set forth in Column "F" on Schedule 1 (the
"Reimbursements"); and (ii) certain (x) cash distributions from operations
("Operating Distributions"), (y) cash distributions from the refinancing
("Refinancing Distributions") of properties owned by the Partnerships, and
(z) cash distributions from the sale ("Sale Distributions") of the properties
owned by the Partnerships, all in its capacity as a partner of the
Partnerships;
D. Winthrop has made certain loans to the Partnerships as listed in
Column "C" on Schedule 1 (the "Existing Loans") which loans have been
assigned by Winthrop to a third party pursuant to a separate agreement;
E. Winthrop maintains numerous bank accounts on behalf of the
Partnerships, including, without limitation, those accounts listed in Column
"I" on Schedule 1 (the "Operating Accounts"), which accounts contain the
operating reserves of the Partnerships which are available to pay third party
costs, including, when appropriate, the Asset Management Fees, Reimbursements
and loans made to the Partnerships; and
F. Winthrop, in its capacity as asset manager and investor services
agent of the Partnerships, desires to assign and appoint Agent to perform
such services, and Agent hereby accepts such assignment and appointment, all
subject to the terms and conditions set forth in this Services Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
ARTICLE 1 - Recitals
1.1 Recitals. The foregoing recitals are hereby affirmed by the
parties as true and correct and are incorporated herein by this reference.
ARTICLE 2 - Services
2.1 Assignment and Acceptance. Winthrop hereby assigns to Agent all
of its rights to perform the asset management and investor services duties
currently being performed by Winthrop on behalf of the Partnerships, and
Agent hereby accepts such appointment and agrees to perform all asset
management and investor services on behalf of the Partnerships, including,
without limitation, the following services:
2.1.1 Asset Management Services. Asset management services
shall include those duties and services which are necessary or appropriate in
connection with the business or operation of the Partnerships, and which are
customarily performed by an asset manager, including, without limitation, the
following:
(i) review and respond to proposals received from
operating partnerships or local general partners pertaining to the
refinancing, sale or restructuring of partnership properties;
(ii) coordinate the prosecution or defense of any
litigation with respect to any of the Partnerships in which Winthrop is the
controlling general partner (excluding any litigation instituted by or on
behalf of any limited partners of the Partnerships against any Partnership or
Winthrop);
(iii) preparation and review of partnership reports;
(iv) supervision and review of partnership bookkeeping,
accounting and audits for Winthrop Residential Associates I, A Limited
Partnership, Winthrop Residential Associates II, A Limited Partnership,
Winthrop Residential Associates III, A Limited Partnership, and Presidential
Associates I Limited Partnership;
(v) maintenance and updating of partnership records, as
appropriate;
(vi) supervision and review of partnership state and
federal tax returns for the Partnerships in which Winthrop serves as tax
matters partners;
(vii)supervision of professionals employed by a
Partnership in connection with any of the foregoing, including attorneys,
accountants and appraisers; and
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(viii) review of each investor Partnership's cash
reserves and approval of distributions to the partners of such Partnerships;
2.1.2 Investor Services. Investor services shall include those
duties and services which are necessary and appropriate in connection with
reporting and communicating with the limited partners of the Partnerships,
including, without limitation:
(i) maintenance and updating the Partnerships'
investors database, including the facilitation of partnership interest
transfers;
(ii) maintenance and updating of all limited partner
records, including, without limitation, limited partner correspondence;
(iii) communications with the limited partners of the
Partnerships in response to their telephone and/or written inquiries
regarding partnership operations and/or the availability of the Partnerships'
tax information;
(iv) preparation of any required limited partner
consent solicitation to any sale or refinancing of a partnership property, or
other major event requiring limited partner consent, and the subsequent
solicitation of any such consent;
(v) an annual mailing (or more frequent communication
as may be required) to the limited partners of the Partnerships with respect
to partnership operations, including annual financial statements of the
Partnerships;
(vi) the mailing to each limited partner of the
Partnerships' limited partner tax information (Schedule K-1);
(vii) analyze the federal income tax consequences of
the sale of any partnership property;
(viii) periodic mailings to limited partners of the
Partnership of partnership distribution checks, if any; and
(ix) upon termination of any Partnership, deliver to
Winthrop such Partnership's records;
2.1.3. Management of Partnership Accounts. Within ten (10)
business days after the full execution of this Services Agreement by all
parties (the "Effective Date"), Winthrop shall transfer the Operating
Accounts to Agent. Agent agrees to provide cash management services to the
Partnerships, subject to the following terms and conditions:
(i) all partnership cash shall be maintained in
segregated cash accounts;
(ii) each cash account shall be clearly identified as
belonging to a Partnership (e.g. XYZ Partnership Account);
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(iii) each account shall be an interest bearing account
for the benefit of the respective Partnership, and shall be maintained at a
federally insured depository institution;
(iv) each account shall be in an amount less than
$100,000 or otherwise invested in an account that is backed by government
securities; and
(v) a fidelity bond in the amount of $150,000 shall be
obtained covering all persons authorized to draw on such accounts, such bond
to be reasonably acceptable to Winthrop with respect to the issuing carrier,
and shall name Winthrop as an additional insured; and
2.1.4 Other Services. Agent or any affiliate thereof shall be
permitted to perform other services to the Partnerships as may be agreed to
between Agent and the Partnerships, provided that such services are not
duplicating the services to be performed hereunder (a property management fee
or a fee for services rendered in procuring a refinancing or sale shall not
be deemed duplicative) and such amounts are similar to those that would be
charged by an independent third party rendering comparable services.
2.2 Obligation to Loan Funds. Agent agrees to lend funds to the
Partnerships (the "Agent Loans") in an amount necessary to pay the costs
associated with the preparation of the tax returns for those Partnerships in
which Winthrop serves as tax matters partner and the distribution thereof to
the limited partners of the Partnerships, through June 30, 2002. The Agent
Loans will be repaid in accordance with Section 3.3 herein.
2.3 Winthrop Consent; Actions Regarding Approval. Winthrop, as
general partner of those Partnerships in which its serves as a general
partner, hereby consents to the services to be performed by Agent hereunder
on its behalf, and hereby agrees, subject to its fiduciary duties when acting
as a general partner of a Partnership, that Agent shall have the power and
authority to perform the necessary asset management and investor services
required to be performed hereunder for the Partnerships in which Winthrop
serves as a general partner (or limited partner to the extent Winthrop
possesses any special approval rights separate and apart from the other
limited partners of a Partnership), without any approval from Winthrop;
provided, however, Agent shall have no authority to perform the following
functions without the prior written approval of Winthrop:
(i) the sale, transfer, assignment or other disposition
of all or any portion of the properties owned by a Partnership;
(ii) filing for protection under the bankruptcy laws by
a Partnership;
(iii) surrender of a property of a Partnership to a
lender;
(iv) the filing of any reports required under the
Securities Exchange Act of 1934 (e.g. Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and any Current Reports required to be filed on Form
8-K);
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(v) the subordination of the Existing Loans to any
loans in excess of the outstanding principal balance of all indebtedness of
the respective Partnership as of the date of this Services Agreement;
(vi) transfer of partnership assets to a master limited
partnership or any other form of so-called partnership roll-up;
(vii) the tender or offer to purchase of any limited
partnership interests;
(viii) amending any partnership agreement as it affects
the rights or obligations of a general partner; and
(ix) the making of any future distributions to partners
of the Partnerships after Winthrop has given written notice to Agent that, in
the reasonable judgment of Winthrop, such future distributions will result in
an unacceptable amount of cash reserves available for future operations;
provided, however, that in any event a payment to Agent of the annual fee
shown on Schedule I shall not be affected.
In addition to the matters listed above, Winthrop shall
have the right, upon at least ten (10) days prior written notice to Agent, to
designate any additional action as an action that should require its prior
approval if, in its reasonable judgment, such designation is reasonably
necessary in order to permit Winthrop to carry out its fiduciary duty as a
general partner of a Partnership; provided Agent shall not be obligated to
increase its scope of services or liability under this Services Agreement,
nor decrease its compensation as a result thereof.
2.4 Standard of Performance. In performing the services required to
be performed by it pursuant to this Services Agreement, Agent shall perform
such services in accordance with all applicable laws, rules and regulations,
and in a manner that is consistent with all applicable provisions of the
partnership agreements of the Partnerships (and Agent shall take no action
with respect to any Partnership which cannot otherwise be taken by the
general partner or limited partner of any Partnership (the "Partner")), and,
subject to the provisions of and limitations set forth in Section 2.3, with
such care and in accordance with such standards of performance as would be
applied to a such Partner pursuant to the terms of any partnership agreement
if such Partner had performed such services directly.
2.5 Servicer not a Partner. No provision of this Services Agreement
shall be construed as stating or implying that Agent is acting or
substituting for Winthrop as a Partner of any of the Partnerships, or that
Agent has assumed any fiduciary duty or fiduciary responsibility that
Winthrop, as a Partner of a Partnership, may have as to the Partnership.
2.6 Power of Attorney. Upon the reasonable request of Agent and so
long as a power of attorney is necessary to consummate the action requested,
and, if required hereunder Winthrop has consented to such action, Winthrop
shall within ten (10) business days after written receipt of Agent's request,
deliver a power of attorney to enable Agent to act on behalf of Winthrop,
provided such action is consistent with the terms of this Services Agreement.
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ARTICLE 3 - Consideration
3.1 Winthrop Compensation. For and in consideration of the rights
transferred to Agent hereunder, Agent hereby agrees to pay Winthrop Six
Hundred Thousand Dollars ($600,000) in immediately available funds upon the
Effective Date of this Services Agreement. The parties hereto acknowledge
that the foregoing consideration is allocable as follows:
(i) $100,000 consulting fee with respect to the
transfer of the Partnerships' records;
(ii) $200,000 consulting fee with respect to the
potential sale of Irvington and New Brunswick; and
(iii) $300,000 in consideration for the fee income and
distributions assigned pursuant to Section 3.2 below.
As additional consideration, Agent shall pay to Winthrop one hundred
twenty-five thousand dollars ($125,000) within five (5) days after the
closing of the WMC Mortgage transaction, when and if such closing occurs.
3.2 Agent Compensation. For and in consideration of the assumption of
the rights, duties and obligations by Agent hereunder, Winthrop hereby
assigns to Agent all of its right, title and interest in and to the Asset
Management Fees, the Accrued Asset Management Fees, the Reimbursements, the
Operating Distributions and the Refinancing Distributions. Agent acknowledges
that Sale Distributions are not being assigned pursuant to the terms of this
Services Agreement, and that any Sale Distributions shall be paid to the
partners of the Partnerships, including Winthrop, as provided by the
appropriate Partnership's partnership agreement, with the exception of any
Sale Distributions attributable to Irvington and New Brunswick which shall be
paid to Agent.
3.3 Agent Loans. Agent Loans shall be repaid pursuant to the terms of
the respective partnership agreement as third party loans of the Partnerships
to which a loan was made. Notwithstanding Section 2.3(v) of this Services
Agreement, Agent Loans shall be repaid prior to the Existing Loans.
3.4 Fees Nonrecourse. Agent acknowledges that the services to be
provided hereunder are for the benefit of the Partnerships and not Winthrop,
and therefore, Agent agrees to look solely to the net assets of each
Partnership for the payment of the Asset Management Fees, the Accrued Asset
Management Fees, the Reimbursements, the Operating Distributions, the
Refinancing Distributions, and the repayment of any Agent Loans, and not to
the assets of any other Partnership or Winthrop (except to the extent any
sums received by Winthrop which should otherwise be paid to Agent pursuant to
the terms of this Services Agreement are not paid to Agent), and further
agrees that any deficit capital account of a partner in a Partnership shall
not be deemed an asset of the Partnership. The provisions of this Section 3.4
shall not apply to the obligations of Winthrop under Section 6.3 below.
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ARTICLE 4 - Partnership Information
4.1 Partnership Information. Winthrop, within five (5) business days
after the Effective Date, shall deliver the following information to Agent:
(i) all Partnership files, consisting of the
syndication and acquisition files of the Partnerships to the extent in
Winthrop's possession;
(ii) all Partnership records, consisting of the
Partnership Agreements and any amendments thereto;
(iii) all investors records, consisting of limited
partner lists and correspondence, including access to the existing Resource
Phoenix investor database;
(iv) federal tax returns for the Partnerships for the
years 1994, 1995 and 1996, to the extent in Winthrop's possession; and
(v) federal tax returns for years prior to 1994 on an
as requested basis with payment of a fee to Winthrop for retrieving such
information from its off-site storage facility, such fee to be determined in
writing by Winthrop prior to such retrieval.
Further, all information and payments relating to Partnerships
received by Winthrop after the Effective Date shall be promptly forwarded to
Agent.
4.2 Future Information. Agent agrees to deliver to Winthrop the
following reports after the Effective Date of this Services Agreement:
(i) all correspondence and other reports sent to the
limited partners of the Partnerships;
(ii) copies of all status reports for the Partnerships;
(iii) copies of all complaints, cease and desist orders
from federal or state regulatory authorities, notices threatening litigation
or regulatory proceedings, any other similar notices which relate to any of
the Partnerships;
(iv) annual financial reports and tax returns; and
(v) copies of such other documents and reports relating
to this Services Agreement as Winthrop may reasonably require.
ARTICLE 5 - Representations
5.1 Representations by Winthrop. Winthrop hereby represents and
warrants to Agent as follows:
(i) Each Winthrop entity (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation , and (b) has full
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corporate power to enter into this Services Agreement and to perform all of
the terms, conditions and provisions set forth herein to be performed by it;
(ii) the acceptance and performance of the terms and
provisions of this Services Agreement have been duly authorized and approved
by all necessary governmental authorities and this Services Agreement is
binding upon and enforceable against Winthrop in accordance with its terms;
(iii) none of the transactions hereby contemplated to
be performed by Winthrop, nor the fulfillment of the terms, provisions and
conditions hereof, will conflict with, or result in a breach of any of the
material terms, conditions, or provisions of, or constitute a default under,
any material agreement or instrument to which Winthrop is a party or by which
it is bound; and
(iv) Schedule 1 attached hereto is true, correct and
complete in all material respects;
5.2 Representations by Agent. Agent hereby represents and warrants to
FWC as follows:
(i) Agent (a) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of Georgia, and (b) has full power to enter into this Services Agreement and
to perform all of the terms, conditions and provisions set forth herein to be
performed by Agent;
(ii) the acceptance and performance of the terms and
provisions of this Services Agreement have been duly authorized and approved
by all necessary governmental authorities and this Services Agreement is
binding upon and enforceable against Agent in accordance with its terms; and
(iii) none of the transactions hereby contemplated to
be performed by Agent, nor the fulfillment of the terms, provisions and
conditions hereof, will conflict with, or result in a breach of any of the
material terms, conditions, or provisions of, or constitute a default under,
any material agreement or instrument to which Agent is a party or by which it
is bound.
5.3 Survival. All representations and warranties contained in this
Services Agreement or made pursuant hereto or in connection herewith shall
remain in effect for a period of five (5) years after the Effective Date,
after which they shall expire and cease to be of any force and effect,
provided that any representation or warranty which is not true when made and
which is made fraudulently and with intent to defraud or mislead shall
survive such 5-year period.
ARTICLE 6 - Term, Transfer and Termination
6.1 Term. This Services Agreement shall commence on the Effective
Date and shall continue with respect to each Partnership until the
liquidation of such Partnership and the distribution of all of its assets;
provided, however, that this Services Agreement shall terminate in any event
no later than June 30, 2014. Notwithstanding the foregoing, at any time after
June
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30, 2008, Winthrop may elect to request Agent (or affiliate(s) of
Agents, as Agent shall direct) to acquire (including by way of a transfer of
control of a Winthrop entity) its general partnership in all of the
Partnerships in which Winthrop acts as the general partner for the purchase
price of one thousand dollars ($1,000) (the "Purchase Price"). Such request
shall be made by Winthrop by delivering notice to Agent indicating Winthrop's
request under this Section 6.1. Within sixty (60) days following receipt of
such request, if Agent elects to agree to Winthrop's request,: (a) Agent
shall cause the Purchase Price to be paid by check to Winthrop; and (b)
Winthrop shall (i) provide appropriate documentation evidencing the transfer
of the general partnership to Agent or its designee, and (ii) deliver to
Agent an absolute and unconditional assignment of its rights to provide the
services contemplated by this Services Agreement, together with the fees
associated therewith, without representation or warranty. Upon closing of the
aforementioned transaction, this Services Agreement shall terminate, and
neither party shall have any further rights or obligations hereunder, except
those that expressly survive the termination of this Services Agreement. Upon
receipt of Winthrop's request, Agent may decline the same by written notice
to Winthrop within thirty (30) days. In such event, this Services Agreement
shall terminate fifteen (15) days after Agent's notice, and neither party
shall have any further rights or obligations hereunder, except those that
expressly survive the termination of this Services Agreement. In the event
that no offer is then outstanding under Section 6.2 below, Winthrop shall be
obligated to make an offer to Agent in accordance with the terms of this
Section 6.1 by May 1, 2014.
6.2 Transfer/Right of First Offer. Agent shall have no right to
transfer (including by way of a transfer of control of Agent) or assign this
Services Agreement without the consent of Winthrop, which may be given or
withheld in its sole discretion. Winthrop shall have the right to transfer
its general partner interest in any or all of the Partnerships in which it
acts as a general partner; provided, however, that if Winthrop elects to sell
its general partnership interest in a Partnership during the term of this
Services Agreement, Agent shall have the right of first offer set forth in
subsection (i) to purchase such interest:
(i) Winthrop shall give written notice to Agent of the
price and terms on which Winthrop desires to sell the general partnership
interest. Such notice shall constitute an offer by Winthrop to sell the
general partnership interest to Agent on an "as is" basis, without any
representations and warranties other than those as to ownership of such
interest. The price offered to Agent shall be the value of the interest
encumbered by this Services Agreement. Agent shall have thirty (30) days from
receipt of such notice to accept the offer by giving to Winthrop within such
period written notice of acceptance. If the offer is so accepted, the
purchase and sale of the interest shall be consummated within sixty (60) days
after such acceptance (or such longer period, not to exceed six (6) months,
as may be required solely to obtain the approval of any governmental
authority whose consent is required to transfer a general partnership
interest in any Partnership). If the purchase transaction is not consummated
within the foregoing 60-day period, Agent's rights pursuant to this Section
shall terminate.
(ii) In the event Agent rejects the offer or fails
timely to accept the offer made pursuant to subsection (i) above, Winthrop
may, during the six (6) month period next following the expiration of the
30-day offer period, enter into an agreement with any third person for the
sale of the interest at a price not less than the price contained in the
notice
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submitted to Agent and on terms not more favorable to the purchaser than the
terms contained in the notice submitted to Agent. Conditions to the
purchaser's obligation to buy and warranties concerning the interest shall
not be deemed terms more favorable to the purchaser. If no agreement is
entered into within such 6-month period, or if an agreement is entered into
within such 6-month period, but the purchase transaction has not been
consummated with sixty (60) days after expiration of such 6-month period (or
such longer period, not to exceed six (6) months, as may be required solely
to obtain the approval of any governmental authority whose consent is
required to transfer a general partnership interest in any Partnership), the
interest shall not thereafter be sold without first being reoffered to Agent
in accordance with the terms of this Section.
6.3 Termination by Winthrop. If, during the term of this Services
Agreement, Winthrop receives notice of the occurrence of any of the events
listed in this Section 6.3, Winthrop may terminate this Services Agreement
(either in total for the reasons set forth in clauses (i)or (ii) below, or as
to one or more of the Partnerships for the reasons set forth in clause (iii)
or clause (iv) below to the extent that such reasons are applicable to such
Partnership(s)), upon thirty (30) days written notice to Agent (or such
shorter period if required in the reasonable judgment of Winthrop to prevent
a disruption of continuous services to the Partnerships):
(i) a continuing material default by Agent to provide
the services to the Partnerships required herein and in the manner provided
herein, which default shall not be cured within thirty (30) days after
receipt of written notice thereof from Winthrop or within such longer period
(but in any event not to exceed one hundred and twenty (120) days), if any,
as may be reasonably required to effect such proceeding to effect such cure;
(ii) the discontinuance or cessation of business by
Agent, including by reason of the bankruptcy of Agent;
(iii) with respect to any one or more of the
Partnerships, a decision made in the good faith judgment of Winthrop that
termination is required to permit Winthrop to satisfy their fiduciary
obligations to such Partnership(s); or
(iv) at any time after the Effective Date, the adoption
or enactment of any applicable law or governmental rule, requirement,
guideline, order or regulation, or any change therein or change in the
interpretation or administration thereof, by any judicial or governmental
authority which shall make it illegal or impossible for Winthrop or the
Partnerships to engage Agent to provide the services described in this
Services Agreement; provided, however, that (a) Winthrop shall use its
reasonable efforts to eliminate such illegality or impossibility to the
extent reasonably possible, and shall have the right to terminate only those
portions of this Services Agreement which it has become illegal or impossible
for Winthrop or the Partnerships to engage Agent to perform, and (b) Winthrop
shall provide to Agent an opinion of Winthrop's counsel (which counsel shall
be reasonably satisfactory to Agent) confirming such illegality or
impossibility.
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In the event Winthrop elects to terminate this Services Agreement (in
whole or part) for the reasons set forth in clause (iii) above, Winthrop
shall pay Agent the following termination fee (the "Termination Fee"):
Years Termination Fee
1 - 5 Three (3) times the actual
collected Asset Management Fees and
Operating Distributions received
from the Partnerships for which
this Services Agreement is canceled
for the calendar year preceding
such termination
6 - 10 Two (2) times the actual collected
Asset Management Fees and Operating
Distributions received from the
Partnerships for which this
Services Agreement is canceled for
the calendar year preceding such
termination
11 - 15 One (1) times the actual collected
Asset Management Fees and Operating
Distributions received from the
Partnerships for which this
Services Agreement is canceled for
the calendar year preceding such
termination
In the event Winthrop elects to terminate this Services Agreement (in
whole or part) for the reasons set forth in clause (iv) above at any time
prior to June 30, 2002, Winthrop shall refund the consideration paid by Agent
under Section 3.1 (i), (ii), and (iii) less the amount of Asset Management
Fees, Accrued Asset Management Fees, Operation Distributions, Refinancing
Distributions, and Sale Distributions Agent has collected after deducting
Agent's reasonable direct costs and unreimbursed expenses which it has
incurred in the performance of its services hereunder.
Said Termination Fees, if any, will be paid within five (5) business
days after receipt from Agent of all Partnership information required to be
returned to Winthrop pursuant to the terms of this Services Agreement, and
the transfer of the Operating Accounts, if any, held by Agent pursuant to
Section 2.1.3 herein.
6.4 Termination by Agent. If, during the term of this Services
Agreement, Agent receives notice of the occurrence of any of the events
listed below, Agent may terminate this Services Agreement:
(i) at any time after the Effective Date, the adoption
or enactment of any applicable law or governmental rule, requirement,
guideline, order or regulation, or any change therein or change in the
interpretation or administration thereof, by any judicial or governmental
authority which shall make it illegal or impossible for Agent to provide the
services described herein; provided, however, that (a) Agent shall use its
reasonable efforts to
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eliminate such illegality or impossibility to the extent reasonably possible,
and shall have the right to terminate only those portions of this Services
Agreement which it has become illegal or impossible for Agent to perform, and
(b) Agent shall provide to Winthrop an opinion of Agent's counsel (which
counsel shall be reasonably satisfactory to Winthrop) confirming such
illegality or impossibility;
(ii) the material breach by Winthrop of any one or more
of the representations made in Section 5.1, but only where such material
breach has a material adverse effect on the business, condition (financial or
otherwise) or results of operations of Agent; or
(iii) with respect to any one or more of the
Partnerships, the amendment of the partnership agreement of a Partnership
upon the request or direction of Winthrop which has a material adverse effect
on Agent's rights, compensation or obligations under this Services Agreement
as to such Partnership.
In any event, Agent shall have the right to terminate this Services
Agreement on June 30, 2002, and each anniversary thereafter, upon six (6)
months prior written notice to Winthrop.
In the event this Services Agreement is terminated by Agent pursuant
to Section 6.4 (i) or (iii) above (in whole or part) at any time prior to
June 30, 2002, Winthrop shall refund the consideration paid by Agent under
Section 3.1 (i), (ii), and (iii) less the amount of Asset Management Fees,
Accrued Asset Management Fees, Operation Distributions, Refinancing
Distributions, and Sale Distributions Agent has collected after deducting
Agent's reasonable direct costs and unreimbursed expenses which it has
incurred in the performance of its services hereunder; said refund will be
paid within five (5) business days after receipt from Agent of all
Partnership information required to be returned to Winthrop pursuant to the
terms of this Services Agreement, and the transfer of Operating Accounts, if
any, held by Agent pursuant to Section 2.1.3 herein.
6.5 Effect of Termination. In the event of the termination of this
Services Agreement with respect to any one or more particular Partnership,
then the entitlement of Agent with respect to any compensation referred to in
Section 3.2 with respect to such Partnership shall terminate concurrently
therewith. Notwithstanding the foregoing, no termination of this Services
Agreement, either in total or with respect to any Partnership, shall impair
the rights of Agent to ultimately receive all amounts earned by Agent under
this Services Agreement prior to the effective date of any such termination.
6.6 Post-Termination Matters.
6.6.1 Servicer Cooperation. In the event of a termination of
this Services Agreement, in its entirety or as to one or more Partnerships,
Agent shall:
(i) turn over to Winthrop within five (5) business
days, without charge, all Partnership books and records, whether in writing
or stored in electro-magnetic form, all bank accounts maintained on behalf of
the Partnerships, all management summaries relating
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to the administration of Partnership business, and all management systems
utilized to provide services to the Partnerships, and all other materials
generally relating to the Partnerships;
(ii) consent, without the payment of any consideration,
to the employment by Winthrop, or any other person that Winthrop may retain
to provide services to the Partnerships, of any of Agent's employees
following termination of this Services Agreement which Agent shall not
require (in Agent's sole discretion) in order to continue its other business
activities; and
(iii) for such period as is reasonably required
therefor, generally cooperate in good faith with Winthrop in winding down its
activities under this Services Agreement and causing an orderly transition of
responsibility for the services to occur.
In the event this Services Agreement is terminated by Winthrop under
Section 6.3 (iv) or (v) or by Agent under Section 6.4 (i), (ii) or (iii),
Winthrop shall reimburse Agent for the cost of compliance with Section
6.6.1(i), provided, however, Agent shall not charge any fee in connection
with such matters.
6.6.2 Survival. The provisions of this Section of this
Services Agreement shall survive any termination hereof for a period of one
(1) year.
ARTICLE 7 - Miscellaneous
7.1 Access to Books and Records. Agent shall permit Winthrop and its
agents and representatives to have access, during normal business hours, to
all books and records of Agent and the Partnerships (as they relate to the
Partnerships) and to those management-level persons employed or retained by
Agent who provide services to any of the Partnerships, for the purpose of
permitting Winthrop to verify the performance by Agent of its obligations
under this Services Agreement. Agent shall also, from time to time, supply to
Winthrop such other information as Winthrop may reasonably request for such
purpose. All information and documents received hereunder by Winthrop shall,
unless the same have previously been made available to the public by Agent or
otherwise are generally known in the trade, be kept confidential by Winthrop
and its agents and representatives and shall not be disclosed or released to
any other person or entity without the express written consent of Agent or
the Partnerships. Winthrop shall provide similar access to Agent for any
records in its possession which relate to the Partnerships.
7.2 Successors and Assiqns. Without limiting the restrictions on
transfer set forth in Section 6.2, this Services Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns.
7.3 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Services
Agreement shall be governed by and construed and enforced in accordance with
the laws of the Commonwealth of Massachusetts applicable to contracts
intended to be performed entirely within such Commonwealth (without regard to
any choice of law provisions thereof). The parties each hereby irrevocably
consent and submit to the jurisdiction of the courts in the Commonwealth of
Massachusetts, for the purposes of all legal proceedings arising out of or
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relating to this Services Agreement, and agree that venue for any legal
action arising out of this Services Agreement shall be in Suffolk County,
Massachusetts.
7.4 Entire Agreement. This Services Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes any prior oral or written agreement between the parties respecting
the subject matter hereof.
7.5 Waivers. Neither this Services Agreement nor any of the terms
hereof may be terminated, amended or waived orally by the parties, but only
by an instrument in writing signed by the party against which enforcement of
the termination, amendment or waiver is sought. Notwithstanding the foregoing
provisions of this Section 7.5, the rights and obligations of the parties
hereunder shall be automatically modified from time to time hereunder to the
extent and in the manner necessary to make this Services Agreement and the
rights and obligations of the parties hereunder comply with any and all
applicable federal and state securities and real estate syndication laws,
rules and regulations.
7.6 Counterparts. This Services Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Services Agreement to produce or
account for more than one such counterpart.
7.7 Independent Contractor Relationship. This Services Agreement is
not intended to and shall not create any relationship of principal and agent,
partnership, joint venture, employer and employee or any other relationship,
association or affiliation whatsoever between the parties, except for that of
independent contractor.
7.8 Further Assurances. Each party covenants on behalf of itself, its
successors and assigns, to execute, with acknowledgment or affidavit if
required, any and all documents and writings which may be necessary or
desirable to carry out the purposes of this Services Agreement.
7.9 Severability. In the event that any provision of this Services
Agreement, or the application of such provision to any person, entity or set
of circumstances, shall be deemed invalid, unlawful or unenforceable to any
extent, the remainder of this Services Agreement, and the application of all
such provisions to persons, entities or circumstances other than those
determined invalid, unlawful or unenforceable shall not be affected and shall
continue to be enforceable to the fullest extent permitted by law.
7.10 Notices.
7.10.1 All notices, demands or requests provided for or
permitted to be given pursuant to this Services Agreement must be in writing.
All notices, demands and requests to be sent to Winthrop pursuant hereto
shall be deemed to have been properly given or served by personal delivery,
by depositing the same in the United States mail, postpaid and registered or
certified with return receipt requested or by depositing the same with any
reputable overnight mail courier at the following address:
14
<PAGE>
First Winthrop Corporation
5 Cambridge Center, 9th Floor
Cambridge, Massachusetts 02142
Attention: Carolyn Tiffany
and
First Winthrop Corporation
100 Jericho Quadrangle, Suite 214
Jericho, New York 11753
Attention: Peter Braverman
with a copy to: Post & Heymann, LLP
100 Jericho Quadrangle, Suite 214
Jericho, New York 11753
Attention: William W. Post, Esquire
7.10.2 All notices, demands or requests to be sent to Agent
pursuant hereto shall be deemed to have been properly given or served by
personal delivery, by depositing the same in the United States mail, postpaid
and registered or certified with return receipt requested or by depositing
the same with any reputable overnight mail courier at the following address:
2409 Bemiss Road
Valdosta, Georgia 31601
Attention: Mary T. Johnson
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Katharine E. Bachman, Esquire
7.10.3 Unless another requirement is specifically set forth in
any Section hereof, each notice, demand and request shall be effective upon
personal delivery or three (3) business days after the date on which the same
is deposited in the United States mail or the next business day after the
date on which the same is deposited with any reputable overnight mail courier
in accordance with the foregoing requirements. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no
notice was given shall not adversely impact the effectiveness of any such
notice, demand or request.
7.10.4 By giving to the other parties at least fifteen (15)
days written notice thereof, the parties hereto, and their respective
successors and assigns, shall have the right from time to time and at any
time during the term of this Services Agreement to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
15
<PAGE>
7.11 Titles and Captions. Paragraph titles or captions contained in
this Services Agreement are inserted only as a matter of convenience and for
reference. Such titles and captions in no way define, limit, extend or
describe the scope of this Services Agreement nor the intent of any
provisions hereof.
7.12 No Third Party Beneficiaries. Under no circumstances shall any
provision of this Services Agreement be deemed to be for the benefit of or
enforceable by any person or entity other than Winthrop, each of the
Partnerships (unless and until this Services Agreement is terminated with
respect to such Partnership) and Agent.
7.13 Attorneys' Fees. If any party hereto brings an action to enforce
the terms hereof or to obtain a declaration of the rights of such party
hereunder, the prevailing party in any such action, on trial or appeal, shall
be entitled to such party's reasonable attorneys' fees to be paid by the
losing party.
[SIGNATURE LINES ON SET FORTH ON NEXT PAGE]
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Services Agreement
as of the Effective Date.
COORDINATED SERVICES OF VALDOSTA, LLC
By:
--------------------------
Name:
Title:
FIRST WINTHROP CORPORATION
By:
--------------------------
Name:
Title:
WINTHROP FINANCIAL CO., INC.
By:
--------------------------
Name:
Title:
WFC REALTY CO., INC.
By:
--------------------------
Name:
Title:
WFC REALTY SAUGUS, INC.
By:
--------------------------
Name:
Title:
ONE WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
17
<PAGE>
TWO WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
THREE WINTHROP PROPERTIES, INC.
By:
--------------------------
Name:
Title:
WINTHROP METRO EQUITIES CORPORATION
By:
--------------------------
Name:
Title:
WINTHROP LIBSON REALTY, INC.
By:
--------------------------
Name:
Title:
NORTHWOOD REALTY CO., INC.
By:
--------------------------
Name:
Title:
18
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,484,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,706,000)
<TOTAL-ASSETS> 4,186,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,586,000
<COMMON> 0
0
0
<OTHER-SE> 1,287,000
<TOTAL-LIABILITY-AND-EQUITY> 4,186,000
<SALES> 0
<TOTAL-REVENUES> 1,691,000
<CGS> 0
<TOTAL-COSTS> 1,022,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 211,000
<INCOME-PRETAX> 439,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 439,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 439,000
<EPS-PRIMARY> 16.24
<EPS-DILUTED> 16.24
</TABLE>
<PAGE>
Exhibit 99
DECEMBER 31, 1997
-----------------
Supplementary Information Required Pursuant to Section 9.4 of the Partnership
Agreement (Unaudited)
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1997 December 31, 1997
---------------- --------------------
1. Statement of Cash Available for
Distribution:
<S> <C> <C>
Net Income $ 439,000 $ 95,000
Add: Consolidation of net loss of local
limited partnership 179,000 200,000
Depreciation 178,000 45,000
Amortization 4,000 1,000
Equity in loss of local limited
partnership 12,000 30,000
Less: Cash to reserves (704,000) (344,000)
---------- ----------
Cash Available for Distribution $ 108,000 $ 27,000
========== ==========
Distributions allocated to General
Partners $ 8,000 $ 2,000
========== ==========
Distributions allocated to Limited
Partners $ 100,000 $ 25,000
========== ==========
</TABLE>
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended
December 31, 1997:
<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. Interest in Cash Available for Distribution $ 100
</TABLE>
