<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
- --------------------------------------- ------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(In Thousands, Except Unit Data) 1999 1998
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,783 $ 1,723
Investment in Local Limited Partnership - 76
Other assets 151 98
Real estate (net of accumulated depreciation
of $3,018 in 1999 and $2,884 in 1998) 1,956 2,090
------- -------
Total Assets $ 4,890 $ 3,987
======= =======
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 86 $ 108
Distribution payable 27 277
Mortgage payable 2,490 2,533
Accrued interest - Subordinated Loan Payable 70 60
Subordinated Loan Payable 133 133
------- -------
Total Liabilities 2,806 3,111
------- -------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005 units authorized,
issued and outstanding 3,306 2,189
General Partners' deficit (1,222) (1,313)
------- -------
Total Partners' Capital 2,084 876
------- -------
Total Liabilities and Partners' Capital $ 4,890 $ 3,987
======= =======
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Unit Data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Rental income $ 278 $ 284 $ 843 $ 818
Income from Local Limited Partnership cash distributions 1,017 - 1,321 129
Equity in loss of Local Limited Partnership (15) (35) (47) (16)
Interest 20 17 52 45
Other 10 9 37 23
------- ------- ------- -------
Total Income 1,310 275 2,206 999
------- ------- ------- -------
Expenses:
Operating 182 211 567 593
Interest 50 51 151 154
Depreciation and amortization 45 46 136 137
General and administrative 26 24 63 72
------- ------- ------- -------
Total Expenses 303 332 917 956
------- ------- ------- -------
Net income (loss) $ 1,007 $ (57) $ 1,289 $ 43
======= ======= ======= =======
Net income (loss) allocated to General Partners $ 76 $ (4) $ 97 $ 3
======= ======= ======= =======
Net income (loss) allocated to Limited Partners $ 931 $ (53) $ 1,192 $ 40
======= ======= ======= =======
Net income (loss) per Unit of Limited Partnership Interest $ 37.23 $ (2.12) $ 47.67 $ 1.60
======= ======= ======= =======
Distributions per Unit of Limited Partnership Interest $ 1.00 $ 1.00 $ 3.00 $ 3.00
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statement of Changes in Partners' Capital (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Unit Data) Units of
Limited General Limited Total
Partnership Partners' Partners' Partners'
Interest Deficit Capital Capital
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance - January 1, 1999 25,005 $(1,313) $ 2,189 $ 876
Net income 97 1,192 1,289
Distributions (6) (75) (81)
------- ------- ------- -------
Balance - September 30, 1999 25,005 $(1,222) $ 3,306 $ 2,084
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1999 1998
------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,289 $ 43
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 133 134
Amortization 3 3
Equity in loss of Local Limited Partnership 47 16
Changes in assets and liabilities:
Increase in other assets (53) (25)
Decrease in accounts payable
and accrued expenses (22) (3)
Increase in accrued interest payable on subordinated loan 10 10
------- -------
Net cash provided by operating activities 1,407 178
------- -------
Cash Flows From Investing Activities:
Distribution received from Local Limited Partnership 27 250
------- -------
Cash provided by investing activities 27 250
------- -------
Cash Flows From Financing Activities:
Mortgage principal payments (43) (40)
Distributions to partners (331) (81)
------- -------
Cash used in financing activities (374) (121)
------- -------
Net increase in cash and cash equivalents 1,060 307
Cash and cash equivalents, beginning of period 1,723 1,484
------- -------
Cash and cash equivalents, end of period $ 2,783 $ 1,791
======= =======
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 141 $ 144
======= =======
Supplemental Disclosure of Non-Cash
Investing Activities
Accrued Distributions to Partners $ 27 $ 27
======= =======
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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
Annual Report on Form 10-KSB for the year ended December 31, 1998.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature. Certain amounts have
been reclassified to conform to the September 30, 1999
presentation. The balance sheet at December 31, 1998, was derived
from audited financial statements at such date.
The results of operations for the three and nine months ended
September 30, 1999 and 1998, 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 Ltd.
("Clear Creek"). All significant intercompany transactions and
balances have been eliminated.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosure contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Partnership from time to time. The
discussion of the Partnership's liquidity, capital resources and
results of operations, including forward-looking statements
pertaining to such matters, does not take into account the effects
of any changes to the Partnership's operations. Accordingly, actual
results could differ materially from those projected in the
forward-looking statements as a result of a number of factors,
including those identified herein.
This Item should be read in conjunction with the financial
statements and other items contained elsewhere in the report.
Liquidity and Capital Resources
As of September 30, 1999, the Partnership retained an equity
interest in five Local Limited Partnerships, each of which owns a
single apartment complex. The Partnership also owns an 88.5%
interest in Clear Creek Ltd. ("Clear Creek"), a partnership in
which an affiliate of the Partnership's general partner is the sole
general partner. The Partnership's primary sources of income are
distributions from the Local Limited Partnerships and rental income
from Clear Creek Apartments. The Partnership requires cash to pay
the operating expenses of Clear Creek, for general and
administrative expenses and to make capital contributions and/or
loans to any of the Local Limited Partnerships which the Managing
General Partner deems to be in the Partnership's best interest.
To date, all cash requirements have been satisfied by interest
income earned on short-term investments, rental income from Clear
Creek and cash distributed to the Partnership by the Local Limited
Partnerships. If the Partnership funds any operating deficits, it
will use monies from its operating reserves. As of September 30,
1999, the Partnership had cash and cash equivalents of $2,783,000,
as compared to $1,723,000 at December 31, 1998. 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 1999 and 1998.
The level of liquidity based on cash and cash equivalents
experienced a $1,060,000 increase at September 30, 1999, as
compared to December 31, 1998. The Partnership's $1,407,000 of net
cash provided by operating activities and $27,000 distribution
received from a Local Limited Partnership (investing activities)
was partially offset by $43,000 of mortgage principal payments and
$331,000 of cash distributed to partners (financing activities). On
June 16, 1998, Fayetteville Apartments Limited partnership
("Fayetteville") refinanced its mortgage. During September 1998,
Fayetteville distributed $250,000 of refinancing proceeds to the
Partnership. The Partnership distributed the proceeds of the
$250,000 distribution received from
7 of 13
<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Liquidity and Capital Resources (Continued)
Fayetteville during the first quarter of 1999. In addition, as of
September 30, 1999, Partnership distributions (paid or accrued)
aggregated $75,000 ($3.00 per Unit) to its limited partners and
$6,000 to the general partners. On May 27, 1999, Village Square
Associates ("Village Square") refinanced its mortgage. During
September 1999, Village Square distributed $942,000 of refinancing
proceeds to the Partnership. The Partnership anticipates
distributing a portion of the refinancing proceeds during the
fourth quarter of 1999 at an amount to be determined.
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") was
in default and held by the U.S. Department of Housing and Urban
Development. The Partnership was unable to reach an agreement with
the general partner of the Local Limited Partnership which holds
title to Dunhaven pursuant to which the Partnership, or an
affiliate of the Partnership, would have been appointed as general
partner of the Dunhaven Local Limited Partnership and the
Partnership, or its affiliate, would satisfy the default on the
loan. In June of 1999, the Department of Housing and Urban
Development foreclosed on the mortgage for Dunhaven. For financial
reporting purposes, the Partnership's investment in this Local
Limited Partnership had previously been written down to zero. For
tax reporting purposes, the Partnership will incur a tax liability
due to the recapture of tax benefits taken in prior years in
proportion to its ownership interest in the Local Limited
Partnership.
Clear Creek has two housing assistance contracts with the
Department of Housing and Urban Development, which account for
approximately 20% of the units in the apartment complex. One
contract expired in July 1999 and was not renewed. The other
contract expired in September 1999 but was extended through
December 1999. Based upon current market conditions of apartment
rentals, the non-renewal of these contracts is not expected to have
a significant impact on rental operations.
Year 2000
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. The Registrant is dependent upon the General Partner and its
affiliates and Coordinated Services for management and
administrative services. Any computer programs or hardware that
have date-sensitive software or embedded chips may recognize a date
using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal
business activities.
8 of 13
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
(Continued)
Year 2000 (Continued)
During the first half of 1998, Coordinated Services, the General
Partner and its affiliates completed their assessment of the
various computer software and hardware used in connection with the
management of the Registrant. This review indicated that
significantly all of the computer programs used by the Managing
General Partner and its affiliates are off-the-shelf "packaged"
computer programs which are easily upgraded to be Year 2000
compliant. In addition, to the extent that custom programs are
utilized by the Managing General Partner and its affiliates, such
custom programs are Year 2000 compliant.
Following the completion of its assessment of the computer software
and hardware, Coordinated Services, the General Partner and its
affiliates began upgrading those systems which required upgrading.
To date, significantly all of these systems have been upgraded. The
Registrant has to date not borne, nor is it expected that the
Registrant will bear, any significant costs in connection with the
upgrade of those systems requiring remediation.
To date, neither Coordinated Services or the General Partner are
aware of any external agent with a Year 2000 issue that would
materially impact the Registrant's results of operations, liquidity
or capital resources. However, the Managing General Partner has no
means of ensuring that external agents will be Year 2000 compliant.
The General Partner does not believe that the inability of external
agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or
results of operations of the Registrant. However, the effect of
non-compliance by external agents is not readily determinable.
Results of Operations
Net income increased by $1,246,000 for the nine months ended
September 30, 1999, as compared to the nine months ended September
30, 1998. The increase is due to an increase in income of
$1,207,000 and a decrease in expenses of $39,000. The increase in
income is primarily due to an increase of $1,192,000 of cash
received from Local Limited Partnerships, an increase in rental
income of $25,000, and an increase in other income of $14,000,
which was partially offset by an increase of $31,000 of equity in
loss of Local Limited Partnership. Rental income increased
primarily due to higher occupancy in 1999 as compared to 1998.
During the nine months ended September 30, 1999, the Local Limited
Partnerships owning Village Square Apartments and the Groves
Apartments distributed $1,308,000 and $13,000, respectively. During
the nine months ended September 30, 1998, the Local Limited
Partnerships owning Village Square Apartments and Dunhaven
Apartments, Section II - Phase I distributed $115,000 and $14,000,
respectively. The decrease in expenses is primarily due to a
decrease in operating expenses of $26,000 and a decrease in general
and administrative expenses of $9,000, which are due to the
reduction and timing of certain expenditures. All other items of
income and expense remained relatively constant.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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 period ended
September 30, 1999.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
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: TWO WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
--------------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas Staples
--------------------------------
Thomas Staples
Chief Financial Officer
Dated: November 10, 1999
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Exhibit Index
Exhibit Page No.
------- --------
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 13
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1999
Supplementary information required pursuant to section 9.4 of the partnership
agreement:
1. Statement of Cash Available for Distribution for the three months ended
September 30, 1999:
<TABLE>
<S> <C>
Net Income $ 1,007,000
Add: Depreciation and amortization 45,000
Equity in loss of Local Limited Partnerships 15,000
Distribution received from Local Limited Partnership 27,000
Less: Cash to reserves (1,067,000)
-----------
Cash Available for Distribution $ 27,000
===========
Distributions allocated to General Partners $ 2,000
===========
Distributions allocated to Limited Partners $ 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
September 30, 1999:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
---------------- ------------ ------
<S> <C> <C>
General Partners Interest in Cash Available for Distribution $ 2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available for Distribution $ 5
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Residential Associates III, A Limited Partnership and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,783,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (3,018,000)
<TOTAL-ASSETS> 4,890,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,490,000
0
0
<COMMON> 0
<OTHER-SE> 2,084,000
<TOTAL-LIABILITY-AND-EQUITY> 4,890,000
<SALES> 0
<TOTAL-REVENUES> 2,154,000
<CGS> 0
<TOTAL-COSTS> 703,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,000
<INCOME-PRETAX> 1,289,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,289,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,289,000
<EPS-BASIC> 47.67
<EPS-DILUTED> 47.67
</TABLE>
