<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 2-81033
Winthrop Residential Associates III, A Limited Partnership
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(Exact name of small business issuer as specified in its charter)
Maryland 04-2782016
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
(In Thousands, Except Unit Data) 1998 1997
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Assets
Cash and cash equivalents $ 1,560 $ 1,484
Investments in Local Limited Partnerships 391 374
Other assets 83 60
Real estate (net of accumulated depreciation
of $2,795 in 1998 and $2,706 in 1997) 2,179 2,268
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Total Assets $ 4,213 $ 4,186
======= =======
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued interest and expenses $ 160 $ 153
Distribution payable 27 27
Mortgage payable 2,560 2,586
Subordinated loan payable 133 133
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Total Liabilities 2,880 2,899
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Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005 units
authorized, issued and outstanding 2,631 2,588
General Partners' deficit (1,298) (1,301)
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Total Partners' Capital 1,333 1,287
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Total Liabilities and Partners' Capital $ 4,213 $ 4,186
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See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Income:
Rental income $ 267 $ 266 $ 534 $ 527
Income from Local Limited Partnership cash distributions 115 335 129 335
Equity in income of Local Limited Partnership -- 3 19 16
Interest 17 16 28 28
Other 6 3 14 11
----- ----- ----- -----
Total Income 405 623 724 917
----- ----- ----- -----
Expenses:
Operating 188 166 382 321
Interest 51 58 103 107
Depreciation and amortization 45 45 91 91
General and administrative 24 30 48 35
----- ----- ----- -----
Total Expenses 308 299 624 554
----- ----- ----- -----
Net income $ 97 $ 324 $ 100 $ 363
===== ===== ===== =====
Net income allocated to General Partners $ 7 $ 24 $ 7 $ 27
===== ===== ===== =====
Net income allocated to Limited Partners $ 90 $ 300 $ 93 $ 336
===== ===== ===== =====
Net income per Unit of Limited Partnership Interest $3.60 $12.00 $3.72 $13.44
===== ===== ===== =====
Distributions per Unit of Limited Partnership Interest $1.00 $1.00 $2.00 $2.00
===== ===== ===== =====
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Consolidated Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Units of
Except Unit Data) Limited General Limited
Partnership Partners' Partners' Total
Interest Deficit Capital Capital
------- ------- ------- -------
Balance - January 1, 1998 25,005 $(1,301) $ 2,588 $ 1,287
Net income 7 93 100
Distributions (4) (50) (54)
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Balance - June 30, 1998 25,005 $(1,298) $ 2,631 $ 1,333
======= ======= ======= =======
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30, June 30,
(In Thousands) 1998 1997
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Cash Flows from Operating Activities:
Net income $ 100 $ 363
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 89 89
Amortization 2 2
Equity in income of Local Limited Partnership (19) (16)
Changes in assets and liabilities:
Increase in other assets (23) (82)
Decrease in accounts payable
and accrued expenses -- (1)
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Net cash provided by operating activities 149 355
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Cash Flows From Financing Activities:
Mortgage principal payments (26) (25)
Distributions to partners (54) (54)
Increase in accrued interest payable
on subordinated loan 7 --
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Cash used in financing activities (73) (79)
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Net increase in cash and cash equivalents 76 276
Cash and cash equivalents, beginning of period 1,484 980
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Cash and cash equivalents, end of period $ 1,560 $ 1,256
======= =======
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 96 $ 107
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Supplemental Disclosure of Non-Cash
Investing Activities
Accrued Distributions to Partners $ 27 $ 27
======= =======
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions should
be read in conjunction with the financial statements, related footnotes
and discussions contained in the Partnership's report on Form 10-KSB for
the year ended December 31, 1997.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. The balance sheet at December 31, 1997, was derived
from audited financial statements at such date.
The results of operations for the six months ended June 30, 1998 and
1997, are not necessarily indicative of the results to be expected for
the full year.
2. Consolidation
The accompanying financial statements have been prepared on a
consolidated basis, including the accounts of Clear Creek. All
significant intercompany transactions and balances have been eliminated.
3. Transaction with Related Parties
An affiliate of the Managing General Partner received approximately
$57,000 and $34,000, in management fees from Local Limited Partnerships
during the six months ended June 30, 1998 and 1997, respectively.
4. Mortgage Refinancing
On June 16, 1998, Fayettville Apartments Limited Partnership, one of the
Local Limited Partnerships which the Partnership has an equity interest,
refinanced its mortgage. The new mortgage in the amount of $1,850,000
replaced indebtedness of approximately $1,217,000. The mortgage bears
interest at 7.08%, requires monthly payments of approximately $12,000 and
matures on July 1, 2008, with a balloon payment of approximately
$1,630,000.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to
time. The discussion of the Partnership's liquidity, capital resources
and results of operations, including forward-looking statements
pertaining to such matters, does not take into account the effects of any
changes to the Partnership's operations. Accordingly, actual results
could differ materially from those projected in the forward-looking
statements as a result of a number of factors, including those identified
herein.
This Item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
As of June 30, 1998, the Partnership retained an equity interest in six
Local Limited Partnerships, each of which owns a single apartment
complex. The Partnership also owns an 88.5% interest in a partnership in
which an affiliate of the Partnership's general partner became the sole
general partner in October 1996. The Partnership's primary sources of
income are distributions from the Local Limited Partnerships and rental
income from Clear Creek Apartments. The Partnership requires cash to pay
the operating expenses of Clear Creek, for general and administrative
expenses and to make capital contributions and/or loans to any of the
Local Limited Partnerships which the Managing General Partner deems to be
in the Partnership's best interest.
To date, all cash requirements have been satisfied by interest income
earned on short-term investments, rental income from Clear Creek and cash
distributed to the Partnership by the Local Limited Partnerships. If the
Partnership funds any operating deficits, it will use monies from its
operating reserves. As of June 30, 1998, the Partnership had cash and
cash equivalents of $1,560,000, which has been invested primarily in
short-term certificates of deposit and money market accounts. The
Managing General Partner's current policy is to maintain a reserve
balance sufficient to provide the Partnership the flexibility to preserve
its economic interest in the Local Limited Partnerships. Therefore, a
lack of cash distributed by the Local Limited Partnerships to the
Partnership in the future should not deplete the reserves, though it may
restrict the Partnership from making distributions. The Partnership did
not fund any operating deficits to Local Limited Partnerships in 1998 and
1997.
The level of liquidity based on cash and cash equivalents experienced a
$76,000 increase at June 30, 1998, as compared to December 31, 1997. The
Partnership's $149,000 of cash provided by operating activities and an
increase in accrued interest on the subordinated loan of $7,000
(financing activity) was only partially offset by $26,000 of mortgage
principal payments and $54,000 of cash distributed to partners (financing
activities).
The Partnership is not obligated to provide any additional funds to the
Local Limited Partnerships to fund operating deficits. The Partnership
determines on a case by case basis whether to fund any operating
deficits. If a Local Limited Partnership sustains continuing operating
deficits and has no
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
other sources of funding, it is likely that it will eventually default on
its mortgage obligations and risk a foreclosure on its property by the
lender. If a foreclosure were to occur, the Local Limited Partnership
would lose its investment in the property and would incur a tax liability
due to the recapture of tax benefits taken in prior years. The
Partnership, as an owner of the Local Limited Partnership, would share
these consequences in proportion to its ownership interest in the Local
Limited Partnership.
On June 16, 1998, Fayettville Apartments Limited Partnership, one of the
Local Limited Partnerships which the partnership has an equity interest,
refinanced its mortgage. The new mortgage in the amount of $1,850,000
replaced indebtedness of $1,217,000. The mortgage bears interest at
7.08%, requires monthly payments of approximately $12,000 and matures on
July 1, 2008 with a balloon payment of approximately $1,630,000.
The loan encumbering Dunhaven Apartments Phase II, ("Dunhaven") is in
default. The Partnership was unable to reach an agreement with the
general partner of the Local Limited Partnership which holds title to
Dunhaven pursuant to which the Partnership, or an affiliate of the
Partnership, would have been appointed as general partner of the Dunhaven
Local Limited Partnership and the Partnership, or its affiliate, would
satisfy the default on the loan. At June 30, 1998, the Managing General
Partner estimates the default to be approximately $100,000. Unless an
agreement is reached with the existing general partner, it is possible
that the Dunhaven property could be lost through foreclosure.
During 1998, Partnership distributions (paid or accrued) aggregated
$50,000 ($2.00 per Unit) to its limited partners and $4,000 to the
general partners.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services Agreement with Coordinated Services of
Valdosta, LLC ("Coordinated Services") pursuant to which Coordinated
Services was retained to provide asset management and investor services
to the Partnership and certain affiliated partnerships. As a result of
this agreement, Coordinated Services has the right to direct the day to
day affairs of the Partnership, including, without limitation, reviewing
and analyzing potential sale, refinancing or restructuring proposals by
Local Limited Partnerships, preparation of all Partnership reports,
maintaining Partnership records and maintaining bank accounts of the
Partnership. Coordinated Services is not permitted, however, without the
consent of the Managing General Partner, or as otherwise required under
the terms of the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement") to, among other things, cause the Partnership to
consent to a sale of an asset or cause the Partnership to file for
bankruptcy. As compensation for providing these services, the Managing
General Partner and its affiliates assigned to Coordinated Services all
of their rights to receive fees from the Partnership as provided in the
Partnership Agreement.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Results of Operations
The Partnership's net income for the six months ended June 30, 1998 was
$100,000, as compared to $363,000 for six months ended June 30, 1997. The
decrease in net income is primarily due to a decline in Local Limited
Partnership cash distributions of $206,000 and an increase in Clear
Creek's operating expenses of $61,000. During the six months ended June
30, 1998, the Local Limited Partnerships owning Village Square Apartments
and Dunhaven Apartments, Section II - Phase I distributed $115,000 and
$14,000, respectively. During the six months ended June 30, 1997, the
Local Limited Partnership owning Village Square Apartments distributed
$335,000. All other items of income and expense remained relatively
constant.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months
ended June 30, 1998.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WINTHROP RESIDENTIAL ASSOCIATES III,
A LIMITED PARTNERSHIP
BY: ONE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
--------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
--------------------------
Edward V. Williams
Chief Financial Officer
Dated: August 12, 1998
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Exhibit Index
Exhibit Page No.
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27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 12
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<PAGE>
Exhibit 99
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1998
Supplementary information required pursuant to section 9.4 of the partnership
agreement:
1. Statement of Cash Available for Distribution for the three months ended
June 30, 1998:
Net Income $ 97,000
Add: Depreciation and amortization 45,000
Less: Cash to reserves (115,000)
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Cash Available for Distribution $ 27,000
=============
Distributions allocated to General Partners $ 2,000
=============
Distributions allocated to Limited Partners $ 25,000
=============
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended June
30, 1998:
Entity Receiving Form of
Compensation Compensation Amount
------------ ------------ ------
General Partners Interest in Cash Available
for Distribution $ 2,000
WFC Realty Co., Inc. Interest in Cash Available
(Initial Limited Partner) for Distribution $ 5
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates III, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,560,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,795,000)
<TOTAL-ASSETS> 4,213,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,560,000
<COMMON> 0
0
0
<OTHER-SE> 1,333,000
<TOTAL-LIABILITY-AND-EQUITY> 4,213,000
<SALES> 0
<TOTAL-REVENUES> 696,000
<CGS> 0
<TOTAL-COSTS> 473,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,000
<INCOME-PRETAX> 0
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,000
<EPS-PRIMARY> 3.72
<EPS-DILUTED> 3.72
</TABLE>
