<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 March 31, 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 (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 MARCH 31, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
(In Thousands, Except Unit Data) 1999 1998
----------- -----------
Assets
Cash and cash equivalents $ 1,469 $ 1,723
Investments in Local Limited Partnerships 76 76
Other assets 110 98
Real estate (net of accumulated depreciation
of $2,928 in 1999 and $2,884 in 1998) 2,046 2,090
----------- -----------
Total Assets $ 3,701 $ 3,987
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 94 $ 108
Distribution payable 27 277
Mortgage payable 2,519 2,533
Accrued Interest - Subordinated Loan Payable 63 60
Subordinated loan payable 133 133
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Total Liabilities 2,836 3,111
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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 2,179 2,189
General Partners' deficit (1,314) (1,313)
----------- -----------
Total Partners' Capital 865 876
----------- -----------
Total Liabilities and Partners' Capital $ 3,701 $ 3,987
=========== ===========
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Three Months Ended
March 31, December 31,
1999 1998
----------- -----------
Income:
Rental income $ 281 $ 267
Income from Local Limited Partnership
cash distributions - 14
Equity in income of Local Limited Partnerships 1 19
Interest 15 11
Other 13 8
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Total Income 310 319
----------- -----------
Expenses:
Operating 183 194
Interest 51 52
Depreciation and amortization 45 46
General and administrative 15 24
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Total Expenses 294 316
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Net income $ 16 $ 3
=========== ===========
Net income allocated to General Partners $ 1 $ -
=========== ===========
Net income allocated to Limited Partners $ 15 $ 3
=========== ===========
Net Income per Unit of Limited Partnership
Interest $ .60 $ .12
=========== ===========
Distributions per Unit of Limited
Partnership Interest $ 1.00 $ 1.00
=========== ===========
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statement of Changes in Partners' Capital (Unaudited)
(In Thousands, Except Unit Data) Units of
Limited General Limited Total
Partnership Partners' Partners' Partners'
Interest Deficit Capital Capital
----------- --------- --------- ----------
Balance - January 1, 1999 25,005 $(1,313) $ 2,189 $ 876
Net income 1 15 16
Distributions (2) (25) (27)
----------- --------- --------- ----------
Balance - March 31, 1999 25,005 $(1,314) $ 2,179 $ 865
=========== ========== ========= ==========
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
March 31, March 31,
1999 1998
(In thousands) ----------- -----------
Cash Flows from Operating Activities:
Net income $ 16 $ 3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 44 45
Amortization 1 1
Equity in income of Local Limited Partnership (1) (19)
Changes in assets and liabilities:
Increase in other assets (12) (14)
(Decrease) increase in accounts payable
and accrued expenses (14) 4
Increase in accrued interest payable on
subordinated loan 3 6
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Net cash provided by operating activities 37 26
----------- -----------
Cash Flows From Financing Activities:
Mortgage principal payments (14) (13)
Distributions to partners (277) (25)
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Net cash used in financing activities (291) (38)
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Net decrease in cash and cash equivalents (254) (12)
Cash and cash equivalents, beginning of period 1,723 1,484
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Cash and cash equivalents, end of period $ 1,469 $ 1,472
=========== ===========
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 48 $ 48
=========== ===========
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 MARCH 31, 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
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 March 31, 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 months ended March 31, 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 MARCH 31, 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 March 31, 1999, 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 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 March 31, 1999,
the Partnership had cash and cash equivalents of $1,469,000, 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 $254,000 decrease at March 31, 1999, as compared to December 31,
1998. The Partnership's $37,000 of net cash provided by operating
activities was more than offset by $14,000 of mortgage principal
payments and $277,000 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 Fayetteville during the
first quarter of 1999. In addition, as of March 31, 1999, the
Partnership accrued distributions aggregating $25,000 ($1.00 per
Unit) to its limited partners and $2,000 to the general partners.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources (Continued)
The Partnership is not obligated to provide any additional funds to
the Local Limited Partnerships to fund operating deficits. The
Partnership determines on a case by case basis whether to fund any
operating deficits. If a Local Limited Partnership sustains
continuing operating deficits and has no other sources of funding, it
is likely that it will eventually default on its mortgage obligations
and risk a foreclosure on its property by the lender. If a
foreclosure were to occur, the Local Limited Partnership would lose
its investment in the property and would incur a tax liability due to
the recapture of tax benefits taken in prior years. The Partnership,
as an owner of the Local Limited Partnership, would share these
consequences in proportion to its ownership interest in the Local
Limited Partnership.
The loan encumbering Dunhaven Apartments Phase II, ("Dunhaven") is in
default and is held by the U.S. Department of Housing and Urban
Development. The Partnership was unable to reach an agreement with
the general partner of the Local Limited Partnership which holds
title to Dunhaven pursuant to which the Partnership, or an affiliate
of the Partnership, would have been appointed as general partner of
the Dunhaven Local Limited Partnership and the Partnership, or its
affiliate, would satisfy the default on the loan. The Partnership has
received notice from the Department of Housing and Urban Development
of their intent to proceed with foreclosure action on the mortgage
for Dunhaven. The Partnership's investment in this Local Limited
Partnership had previously been written down to zero.
Clear Creek currently 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. These
contracts expire in July and September of 1999. There is an
uncertainty as to whether these contracts will be renewed, however,
if they are not renewed alternative programs could be available.
Based upon current market conditions of apartment rentals, if the
contracts are not renewed and alternative programs are not available,
the Partnership does not expect that this will 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.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 1999
Item 2. Management's Discussion and Analysis or Plan of Operation
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. It is expected that
all systems will be remediated, tested and implemented during the
first half of 1999.
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 $13,000 for the three months ended March 31,
1999, as compared to the three months ended March 31, 1998. The
increase is due to a decrease in expenses of $22,000 which was
partially offset by a decrease in income of $9,000. The decrease in
income is primarily due to a decrease of $14,000 of cash received
from Local Limited Partnerships and a decrease of equity in income of
Local Limited partnerships of $18,000 which was partially offset by
an increase in rental income of $14,000. Rental income increased
primarily due to higher occupancy in 1999 as compared to 1998. In
1998, $14,000 was received from the local limited partnership owning
Dunhaven Apartments, Section II - Phase I. The decrease in expenses
is primarily due to a decrease in operating expenses of $11,000, and
a decrease in general and administrative expenses of $9,000. The
decrease in operating expenses and general and administrative
expenses are due to the 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 MARCH 31, 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 three
months ended March 31, 1999.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 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: ONE 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: May 14, 1999
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 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 MARCH 31, 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 March 31, 1999:
Net Income $ 16,000
Add: Depreciation and amortization 45,000
Less: Equity in income of Local Limited Partnerships (1,000)
Cash to reserves (33,000)
-----------
Cash Available for Distribution $ 27,000
===========
Distributions allocated to General Partners $ 2,000
===========
Distributions allocated to Limited Partners $ 25,000
===========
2. Fees and other compensation paid or accrued by the Partnership to the
General Partners, or their affiliates, during the three months ended
March 31, 1999:
Entity Receiving Form of
Compensation Compensation Amount
- ------------------------ ------------------------------------------ ------
General Partners Interest in Cash Available for Distribution $2,000
WFC Realty Co., Inc.
(Initial Limited Partner) Interest in Cash Available 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,469,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,928,000)
<TOTAL-ASSETS> 3,701,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,519,000
<COMMON> 0
0
0
<OTHER-SE> 865,000
<TOTAL-LIABILITY-AND-EQUITY> 3,701,000
<SALES> 0
<TOTAL-REVENUES> 295,000
<CGS> 0
<TOTAL-COSTS> 228,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,000
<INCOME-PRETAX> 16,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,000
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
