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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, 2000
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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)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code (617) 234-3000
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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, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In Thousands, Except Unit Data) 2000 1999
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<S> <C> <C>
Assets
Cash and cash equivalents $ 2,341 $ 2,683
Other assets 107 91
Real estate (net of accumulated depreciation
of $3,120 in 2000 and $3,073 in 1999) 2,008 2,055
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Total Assets $ 4,456 $ 4,829
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Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 90 $ 82
Distribution payable 27 502
Mortgage payable 2,460 2,475
Accrued interest - subordinated loan payable 77 73
Subordinated loan payable 133 133
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Total Liabilities 2,787 3,265
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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 2,887 2,790
General Partners' deficit (1,218) (1,226)
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Total Partners' Capital 1,669 1,564
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Total Liabilities and Partners' Capital $ 4,456 $ 4,829
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</TABLE>
See notes to consolidated financial statements.
2 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
2000 1999
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<S> <C> <C>
Income:
Rental income $ 289 $ 281
Income from Local Limited Partnership cash distributions 87 -
Equity in income of Local Limited Partnerships - 1
Interest 28 15
Other 9 13
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Total Income 413 310
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Expenses:
Operating 164 183
Interest 50 51
Depreciation and amortization 47 45
General and administrative 20 15
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Total Expenses 281 294
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Net income $ 132 $ 16
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Net income allocated to General Partners $ 10 $ 1
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Net income allocated to Limited Partners $ 122 $ 15
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Net Income per Unit of Limited Partnership Interest $ 4.88 $ .60
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Distributions per Unit of Limited Partnership Interest $ 1.00 $ 1.00
======= =======
</TABLE>
See notes to consolidated financial statements.
3 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
Consolidated Statement of Changes in Partners' Capital (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except Unit Data) Units of
Limited Limited General Total
Partnership Partners' Partners' Partners'
Interest Capital Deficit Capital
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance - January 1, 2000 25,005 $ 2,790 $ (1,226) $ 1,564
Net income 122 10 132
Distributions (25) (2) (27)
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Balance - March 31, 2000 25,005 $ 2,887 $ (1,218) $ 1,669
============= ============= ============= ==============
</TABLE>
See notes to consolidated financial statements.
4 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
(In Thousands) 2000 1999
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 132 $ 16
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 47 44
Amortization - 1
Equity in income of Local Limited Partnership - (1)
Changes in assets and liabilities:
Increase in other assets (16) (12)
Increase (decrease) in accounts payable
and accrued expenses 8 (14)
Increase in accrued interest payable on subordinated loan 4 3
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Net cash provided by operating activities 175 37
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Cash Flows From Financing Activities:
Mortgage principal payments (15) (14)
Distributions to partners (502) (277)
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Net cash used in financing activities (517) (291)
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Net decrease in cash and cash equivalents (342) (254)
Cash and cash equivalents, beginning of period 2,683 1,723
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Cash and cash equivalents, end of period $ 2,341 $ 1,469
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Supplemental Disclosure of Cash Flow Information
Interest paid in cash $ 46 $ 48
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Supplemental Disclosure of Non-Cash
Investing Activities
Accrued distributions to partners $ 27 $ 27
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</TABLE>
See notes to consolidated financial statements.
5 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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, 1999.
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, 2000 presentation.
The balance sheet at December 31, 1999, was derived from audited
financial statements at such date.
The results of operations for the three months ended March 31, 2000
and 1999, 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 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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 consolidated
financial statements and other items contained elsewhere in the
report.
Liquidity and Capital Resources
As of March 31, 2000, 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, 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, 2000,
the Partnership had cash and cash equivalents of $2,341,000, as
compared to $2,683,000 at December 31, 1999. 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 2000 and
1999.
The level of liquidity based on cash and cash equivalents experienced
a $342,000 decrease at March 31, 2000 as compared to December 31,
1999. The Partnership's $15,000 of mortgage principal payments and
$502,000 of cash distributed to partners (financing activities) was
partially offset by $175,000 of net cash provided by operating
activities. Village Square Associates, a Local Limited Partnership
("Village Square"), refinanced its mortgage and distributed $942,000
of the proceeds to the Partnership in September 1999. At December 31,
1999, the Partnership recorded an accrued distribution of $475,000
related to the refinancing proceeds which was distributed in the
quarter ended March 31, 2000.
7 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
In addition, as of March 31, 2000, the Partnership accrued
distributions aggregating $25,000 ($1.00 per Unit) to its limited
partners and $2,000 to the general partners.
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.
In 1999, the Department of Housing and Urban Development foreclosed
on the mortgage for Dunhaven Apartments Phase II, ("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 in 2000 due to the recapture of tax benefits taken in prior
years in proportion to its ownership interest in the Local Limited
Partnership.
Clear Creek had two housing assistance contracts with the Department
of Housing and Urban Development which accounted for approximately
20% of the units in the apartment complex. These contracts expired in
1999 and were not renewed. Management replaced the housing assistance
contracts with subsidized payments from a local subsidy contract.
Results of Operations
Net income increased by $116,000 for the three months ended March 31,
2000, as compared to the three months ended March 31, 1999. The
increase is due to an increase in income of $103,000 and a decrease
in expenses of $13,000. The increase in income is primarily due to an
increase of cash received from Local Limited Partnerships of $87,000
and an increase in interest income of $13,000. During the three
months ended March 31, 2000, the Local Limited Partnerships owning
Fayetteville Apartments and the Groves Apartments distributed $48,000
and $39,000, respectively, to the Partnership. The decrease in
expenses is primarily due to a decrease in operating expenses of
$19,000 which was partially offset by an increase in general and
administrative expenses of $5,000. All other items of income and
expense remained relatively constant.
8 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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
March 31, 2000.
9 of 12
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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
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Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas Staples
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Thomas Staples
Chief Financial Officer
Dated: May 11, 2000
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WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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
11 of 12
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Exhibit 99
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2000
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, 2000:
Net Income $ 132,000
Add: Depreciation and amortization 47,000
Less: Cash to reserves (152,000)
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, 2000:
<TABLE>
<CAPTION>
Entity Receiving Form of
Compensation Compensation Amount
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<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>
12 of 12
<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>
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 2,341,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,128,000
<DEPRECIATION> (3,120,000)
<TOTAL-ASSETS> 4,456,000
<CURRENT-LIABILITIES> 0
<BONDS> 2,460,000
0
0
<COMMON> 0
<OTHER-SE> 1,669,000
<TOTAL-LIABILITY-AND-EQUITY> 4,456,000
<SALES> 0
<TOTAL-REVENUES> 385,000
<CGS> 0
<TOTAL-COSTS> 211,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,000
<INCOME-PRETAX> 132,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 132,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,000
<EPS-BASIC> 4.88
<EPS-DILUTED> 4.88
</TABLE>
