<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, 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 JUNE 30, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
(In Thousands, Except Unit Data) 1999 1998
--------------------- ---------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,752 $ 1,723
Investment in Local Limited Partnership 15 76
Other assets 155 98
Real estate (net of accumulated depreciation
of $2,973 in 1999 and $2,884 in 1998) 2,001 2,090
--------------------- ---------------------
Total Assets $ 3,923 $ 3,987
===================== =====================
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 89 $ 108
Distribution payable 27 277
Mortgage payable 2,504 2,533
Accrued interest - Subordinated Loan Payable 66 60
Subordinated Loan Payable 133 133
--------------------- ---------------------
Total Liabilities 2,819 3,111
--------------------- ---------------------
Partners' Capital:
Limited Partners -
Units of Limited Partnership Interest,
$1,000 stated value per unit; 25,005 units
authorized, issued and outstanding 2,400 2,189
General Partners' deficit (1,296) (1,313)
--------------------- ---------------------
Total Partners' Capital 1,104 876
--------------------- ---------------------
Total Liabilities and Partners' Capital $ 3,923 $ 3,987
===================== =====================
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
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,
1999 1998 1999 1998
------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Income:
Rental income $ 284 $ 267 $ 565 $ 534
Income from Local Limited Partnership
cash distributions 304 115 304 129
Equity in (loss) income of Local
Limited Partnership (33) - (32) 19
Interest 17 17 32 28
Other 14 6 27 14
------------------- ------------------- ----------------- -----------------
Total Income 586 405 896 724
------------------- ------------------- ----------------- -----------------
Expenses:
Operating 202 188 385 382
Interest 50 51 101 103
Depreciation and amortization 46 45 91 91
General and administrative 22 24 37 48
------------------- ------------------- ----------------- -----------------
Total Expenses 320 308 614 624
------------------- ------------------- ----------------- -----------------
Net income $ 266 $ 97 $ 282 $ 100
=================== =================== ================= =================
Net income allocated to General Partners $ 20 $ 7 $ 21 $ 7
=================== =================== ================= =================
Net income allocated to Limited Partners $ 246 $ 90 $ 261 $ 93
=================== =================== ================= =================
Net income per Unit of Limited Partnership
Interest $ 9.84 $ 3.60 $ 10.44 $ 3.72
=================== =================== ================= =================
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, 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 21 261 282
Distributions (4) (50) (54)
------------------ ------------------- ------------------ -------------------
Balance - June 30, 1999 25,005 $ (1,296) $ 2,400 $ 1,104
================== =================== ================== ===================
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1999
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, June 30,
(In Thousands) 1999 1998
--------------------- ---------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 282 $ 100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 89 89
Amortization 2 2
Equity in loss (income) of Local Limited Partnership 32 (19)
Changes in assets and liabilities:
Increase in other assets (57) (23)
Decrease in accounts payable
and accrued expenses (19) -
Increase in accrued interest payable on subordinated loan 6 7
--------------------- ---------------------
Net cash provided by operating activities 335 156
--------------------- ---------------------
Cash Flows From Investing Activities:
Distribution received from Local Limited Partnership 27 -
--------------------- ---------------------
Cash provided by investing activities 27 -
--------------------- ---------------------
Cash Flows From Financing Activities:
Mortgage principal payments (29) (26)
Distributions to partners (304) (54)
--------------------- ---------------------
Cash used in financing activities (333) (80)
--------------------- ---------------------
Net increase in cash and cash equivalents 29 76
Cash and cash equivalents, beginning of period 1,723 1,484
--------------------- ---------------------
Cash and cash equivalents, end of period $ 1,752 $ 1,560
===================== =====================
Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 95 $ 96
===================== =====================
Supplemental Disclosure of Non-Cash
Investing Activities
Accrued Distributions to Partners $ 27 $ 27
===================== =====================
</TABLE>
See notes to consolidated financial statements.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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 June 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 six months ended June 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.
6 of 13
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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 June 30, 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 June 30, 1999, the
Partnership had cash and cash equivalents of $1,752,000, 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 $29,000 increase at June 30, 1999, as compared to December 31,
1998. The Partnership's $335,000 of net cash provided by operating
activities and $27,000 distribution received from Local Limited
Partnership (investing activities) was partially offset by $29,000 of
mortgage principal payments and $304,000 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 June 30, 1999,
Partnership distributions (paid or accrued) aggregated $50,000 ($2.00
per Unit) to its limited partners and $4,000 to the general partners.
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 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") 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 expires in September of
1999 and is not expected to be renewed. 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 JUNE 30, 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.
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 $182,000 for the six months ended June 30,
1999, as compared to the six months ended June 30, 1998. The increase
is due to an increase in income of $172,000 and a decrease in
expenses of $10,000. The increase in income is primarily due to an
increase of $175,000 of cash received from Local Limited
Partnerships, an increase in rental income of $31,000, and an
increase in other income of $13,000, which was partially offset by a
decrease of $51,000 of equity in income of Local Limited Partnership.
Rental income increased primarily due to higher occupancy in 1999 as
compared to 1998. During the six months ended June 30, 1999, the
Local Limited Partnerships owning Village Square Apartments and the
Groves Apartments distributed $291,000 and $13,000, respectively.
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. The decrease in expenses is primarily due to a decrease
in general and administrative expenses of $11,000, which is due to
the timing of certain expenditures. All other items of income and
expense remained relatively constant.
9 of 13
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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 six months ended
June 30, 1999.
10 of 13
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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: August 12, 1999
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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
12 of 13
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB JUNE 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 June
30, 1999:
Net Income $ 266,000
Add: Depreciation and amortization 46,000
Equity in loss of Local Limited
Partnerships 33,000
Distribution received from Local
Limited Partnership 27,000
Less: Cash to reserves (345,000)
--------------
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 June 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>
13 of 13
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,752,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,000
<DEPRECIATION> (2,973,000)
<TOTAL-ASSETS> 3,923,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,504,000
<COMMON> 0
0
0
<OTHER-SE> 1,104,000
<TOTAL-LIABILITY-AND-EQUITY> 3,923,000
<SALES> 0
<TOTAL-REVENUES> 864,000
<CGS> 0
<TOTAL-COSTS> 476,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,000
<INCOME-PRETAX> 282,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 282,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 282,000
<EPS-BASIC> 10.44
<EPS-DILUTED> 10.44
</TABLE>
