<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 2-84760
Winthrop Growth Investors 1 Limited Partnership
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2839837
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One International Place, Boston, MA 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
Indicate by check mark whether the 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 GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
September 30, December 31,
Assets 1996 1995
-------- --------
Investment in Real Estate
Land $ 4,015 $ 4,015
Buildings and improvements 38,112 37,759
-------- --------
42,127 41,774
Less: accumulated depreciation 19,533 18,355
-------- --------
22,594 23,419
-------- --------
Cash and cash equivalents 1,519 908
Deferred costs, net of accumulated amortization
of $1,094 (1996) and $1,026 (1995) 1,296 1,018
Replacement reserves and escrow accounts 1,657 629
Other assets 524 509
-------- --------
4,996 3,064
-------- --------
Total assets $ 27,590 $ 26,483
======== ========
Liabilities and Partners' Equity
Mortgages payable $ 21,781 $ 20,081
Accounts payable 101 102
Tenant security deposits 171 162
Accrued expenses and other liabilities 625 382
-------- --------
Total Liabilities 22,678 20,727
-------- --------
Partners' equity (deficit):
Limited partners' equity; 50,005 units authorized,
23,139 issued and outstanding 6,125 6,900
General partners' deficit (1,213) (1,144)
-------- --------
Total partners' equity 4,912 5,756
-------- --------
Total liabilities and partners' equity $ 27,590 $ 26,483
======== ========
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended
(In Thousands, Except Unit Data) September 30, September 30,
1996 1995
------- -------
Income:
Rental $ 4,837 $ 4,784
Interest on short-term investments 56 34
Other 221 204
------- -------
Total Income 5,114 5,022
------- -------
Expenses:
Leasing 173 163
General and administrative 494 323
Management fees 249 246
Utilities 511 456
Repairs and maintenance 1,031 928
Insurance 202 196
Taxes 481 398
Depreciation 1,178 1,238
Amortization 68 76
Interest expense 1,421 1,431
------- -------
Total expenses 5,808 5,455
------- -------
Net loss $ (694) $ (433)
======= =======
Net loss allocated:
General Partners $ (69) $ (43)
Limited Partners (625) (390)
------- -------
(694) $ (433)
======= =======
Net loss per Limited Partnership Unit $(27.01) $(16.85)
======= =======
Distributions per Limited Partnership Unit $ 6.48 $ 4.32
======= =======
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
(In Thousands, Except Unit Data) September 30, September 30,
1996 1995
------- -------
Income:
Rental $ 1,662 $ 1,621
Interest on short-term investments 20 11
Other 74 74
------- -------
Total Income 1,756 1,706
------- -------
Expenses:
Leasing 68 59
General and administrative 157 83
Management fees 85 82
Utilities 166 152
Repairs and maintenance 388 313
Insurance 69 65
Taxes 151 134
Depreciation 393 414
Amortization 23 25
Interest expense 463 475
------- -------
Total expenses 1,963 1,802
------- -------
Net loss $ (207) $ (96)
======= =======
Net loss allocated:
General Partners $ (21) $ (9)
Limited Partners (186) (87)
------- -------
$ (207) $ (96)
======= =======
Net loss per Limited Partnership Unit $ (8.04) $ (3.76)
======= =======
Distributions per Limited Partnership Unit $ 2.16 $ --
======= =======
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Consolidated Statement of Partners' Equity (Deficit)(Unaudited)
(In Thousands, Except Unit Data)
Units of
Limited Limited General
Partnership Partners' Partners' Total
Interest Equity Deficit Equity
-------- ------ ------- ------
Balance - January 1, 1996 23,139 $ 6,900 $ (1,144) $ 5,756
Net loss - (625) (69) (694)
Distribution - (150) - (150)
-------- ------- -------- --------
Balance - September 30, 1996 23,139 $ 6,125 $ (1,213) $ 4,912
======== ======= ======== ========
See notes to consolidated financial statements.
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<PAGE>
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB SEPTEMBER 30, 1996
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
September 30, September 30,
(In Thousands) 1996 1995
-------- --------
Cash Flows from Operating Activities:
Net loss $ (694) $ (433)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,246 1,314
Changes in assets and liabilities:
Increase in other assets (15) (23)
Increase in escrow accounts (353) (132)
Decrease in accounts payable (1) (19)
Increase in tenant security deposits 9 30
Increase in accrued expenses and other liabilities 243 135
-------- --------
Net cash provided by operating activities 435 872
-------- --------
Cash Flows from Investing Activities:
Additions to buildings and improvements (353) (355)
Increase in replacement reserve accounts (675) 40
-------- --------
Cash used in investing activities (1,028) (315)
-------- --------
Cash Flows from Financing Activities:
Satisfaction of mortgages payable (10,198) --
Notes payable proceeds 12,200 --
Principal payments on mortgage notes (302) (466)
Cash distributions paid to partners (150) (100)
Deferred financing costs paid (346) --
-------- --------
Net cash provided by (used in) financing activities 1,204 (566)
-------- --------
Net increase (decrease) in cash and cash equivalents 611 (9)
Cash and cash equivalents, beginning of period 908 923
-------- --------
Cash and cash equivalents, end of period $ 1,519 $ 914
======== ========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 1,427 $ 1,431
======== ========
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated
financial statements, related footnotes and discussions contained in
the Partnership's annual report for the year ended December 31, 1995.
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, 1996 presentation.
The balance sheet at December 31, 1995 was derived from audited
financial statements at such date.
The results of operations for the nine and three months ended
September 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the full year.
2. Accounting Change
On January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which requires impairment losses to be recognized for long-lived
assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the
asset's carrying amount. The impairment loss is measured by comparing
the fair value of the asset to its carrying amount. The adoption of
the SFAS had no effect on the Partnership's financial statements.
3. Mortgages Payable
In January 1996, the loan encumbering the Partnership's Sunflower
Apartments property was refinanced. The new loan in the principal
amount of $2,700,000 bears interest at 7.46% per annum, requires
monthly principal and interest payments of approximately $19,000 and
is fully amortized on February 11, 2026. In addition, net refinancing
proceeds of $900,000 were used to pay off the second mortgage on the
Stratford Place Apartments, whose mortgage was due to mature on May 1,
1996. The lender required that $327,000 of the loan be set aside for
certain capital improvements. The Partnership is required to make
monthly payments of $4,500 to a replacement reserve. A premium
(prepayment penalty) is to be calculated under the terms of the loan
if the loan is prepaid before the "Optional Prepayment Date", which is
February 11, 2006.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Mortgages Payable (continued)
In May 1996, the first mortgage encumbering the Partnership's
Stratford Place Apartments matured. The loan was extended and
refinanced in June 1996. The new loan in the principal amount of
$9,500,000 bears interest at 8.23% per annum, requires monthly
principal and interest payments of approximately $75,000 and matures
in July 2006 with a balloon payment of approximately $8,000,000. The
lender required that $270,000 of the loan proceeds be set aside for
certain capital improvements. In addition, the Partnership is required
to make monthly payments of $7,000 to a replacement reserve. A premium
(prepayment penalty) is to be calculated under the terms of the loan
if the loan is prepaid.
4. Related Party Transactions
Winthrop Management, an affiliate of the Managing General Partner, is
entitled to receive 5% of gross receipts from all Partnership
properties they manage. Winthrop Management earned $249,000 and
$246,000 for the nine months ended September 30, 1996 and 1995,
respectively.
Winthrop Management received reimbursement of accountable
administrative expenses amounting to approximately $149,000 during the
nine months ended September 30, 1996 which included general and
administrative expenses.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation
This item should be read in conjunction with the financial statements and other
items contained elsewhere in the report.
Liquidity and Capital Resources
All of the Registrant's real estate properties are residential properties with
apartments leased to tenants pursuant to leases with original terms ranging
from three to fourteen months. The Registrant receives rental income from its
apartments and is responsible for operating expenses, administrative expenses,
capital improvements and debt service payments. The Registrant uses working
capital reserves provided from any undistributed cash flow from operations and
proceeds from mortgage refinancings as its primary sources of liquidity. For
the long term, cash from operations is expected to remain the Registrant's
primary source of liquidity, (i.e., until additional debt is refinanced or
properties sold). The Registrant distributed $150,000 of loan proceeds to the
holders of limited partnership units ($6.48 per unit) during the nine months
ended September 30, 1996.
The level of liquidity based on cash and cash equivalents experienced a
$611,000 increase at September 30, 1996, as compared to December 31, 1995. The
Registrant's $1,204,000 of cash provided by financing activities and $435,000
of cash provided by operating activities were partially offset by $1,028,000 of
cash used in investing activities. Financing activities consisted of
$12,200,000 of proceeds from mortgage refinancings which were partially offset
by $10,198,000 of cash used for the satisfaction of notes payable, $346,000 of
deferred financing costs paid, $302,000 of notes payable principal payments and
$150,000 of cash distributions paid to limited partners. Investing activities
consisted of a $675,000 increase in replacement reserve accounts in connection
with the refinancings and $353,000 of improvements to real estate. All other
increases (decreases) in certain assets and liabilities are the result of the
timing of receipt and payment of various operating activities.
The Registrant continues to make capital improvements to the properties to
enhance their competitiveness within their markets. The $353,000 Registrant
spent on capital improvements during the nine months ended September 30, 1996,
was funded from operating cash and replacement reserves held by mortgage
lenders. Registrant has no plans for material capital improvements during the
fourth quarter of 1996.
The Registrant invests its working capital reserves in a money market account.
The Managing General Partner believes that, if market conditions remain
relatively stable, cash flow from operations, when combined with working
capital reserves, will be sufficient to fund required capital improvements,
regular debt service payments and maintain quarterly distribution levels until
the mortgages mature. The Registrant has a balloon payment of approximately
$4,000,000 in 2000 and a balloon payment of approximately $8,000,000 in 2006.
Registrant will either have to extend or refinance these mortgages, or sell a
property, prior to the due date of these balloon payments.
As discussed in Item 1, Note 3, in January 1996, the loan encumbering the
Registrant's Sunflower Apartments property was refinanced. The new loan is in
the principal amount of $2,700,000, bears interest at 7.46% per annum and
requires a monthly payment of principal and interest of approximately $19,000.
9 of 14
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (continued)
In June 1996, the loan encumbering the Registrant's Stratford Place Apartments
property was refinanced. The new loan is in the principal amount of $9,500,000,
bears interest at 8.23% per annum and matures July 2006. The loan requires
monthly payments of principal and interest of approximately $75,000.
Results of Operations
The Registrant's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 1996 and 1995:
Average Occupancy
Property 1996 1995
- ---------------------------- ---- ----
Meadow Wood Apartments 87% 89%
Stratford Place Apartments 94% 97%
Stratford Village Apartments 89% 88%
Sunflower Apartments 92% 89%
Registrant's net loss for the nine months ended September 30, 1996, was
approximately $694,000, as compared to a net loss of approximately $433,000 for
the nine months ended September 30, 1995. The net loss for the three months
ended September 30, 1996, was approximately $207,000, as compared to a net loss
of approximately $96,000 for the three months ended September 30, 1995.
Revenues for the nine months ended September 30, 1996 increased by $92,000 due
to increases in rental, interest and other income. Rental revenue increased
slightly as increases in rental rates at all Registrant's properties were
offset by a decrease in occupancy at Meadow Wood and Stratford Place
Apartments. In addition, occupancy improved at Registrant's Stratford Village
and Sunflower Apartments.
Expenses increased by $353,000 for the nine months ended September 30, 1996, as
compared to 1995, primarily due to increases in taxes of $83,000, utilities of
$55,000, general and administrative expenses of $171,000 and repairs and
maintenance of $103,000, which were partially offset by decreases in
depreciation expense of $60,000 and amortization expense of $8,000. General and
administrative expenses increased primarily due to increases in reimbursed
expenses and professional costs. Taxes increased primarily due to increases in
real estate taxes at the Registrant's Meadow Wood, Sunflower and Stratford
Place properties. These taxes are under appeal. Utilities increased primarily
due to increases in water and sewer expenses at Registrant's Meadow Wood and
Stratford Place properties. Depreciation expense decreased due to assets
becoming fully depreciated. Mortgage interest expense remained relatively
constant as the decreases in interest rates on the refinancing of Sunflower
Apartments and Stratford Place Apartments were offset by an increase in the
mortgage principal balance encumbering Registrant's Sunflower Apartments.
10 of 14
<PAGE>
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
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
On September 23, 1996 a current report on Form 8-K was filed
with respect to the Registrant's change of independent
auditors.
11 of 14
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB SEPTEMBER 30, 1996
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.
BY: WINTHROP GROWTH INVESTORS 1 LIMITED
PARTNERSHIP
Managing General Partner
BY: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer and Director
BY: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
Dated: November 8, 1996
12 of 14
<PAGE>
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
SEPTEMBER 30, 1996
Exhibit Index
Exhibit Page No.
27. Financial Data Schedule -
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 14
13 of 14
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Exhibit 99
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
September 30, 1996
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, 1996:
Net Loss $ (207,000)
Add: Amortization expense 23,000
Depreciation expense 393,000
Less: Cash to reserves (159,000)
-------------
Cash Available for Distribution $ 50,000
=============
Distributions allocated to Limited Partners $ 50,000
=============
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, 1996:
Entity Receiving Form of
Compensation Compensation Amount
General Partners Interest in Cash
Available for Distribution $ -
Winthrop Management Property Management Fee $ 85,000
14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Winthrop
Growth Investors 1 Limited Partnership and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,519,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 42,127,000
<DEPRECIATION> (19,533,000)
<TOTAL-ASSETS> 27,590,000
<CURRENT-LIABILITIES> 0
<BONDS> 21,781,000
<COMMON> 0
0
0
<OTHER-SE> 4,912,000
<TOTAL-LIABILITY-AND-EQUITY> 27,590,000
<SALES> 0
<TOTAL-REVENUES> 5,058,000
<CGS> 0
<TOTAL-COSTS> 4,387,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,421,000
<INCOME-PRETAX> (694,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (694,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (694,000)
<EPS-PRIMARY> (27.01)
<EPS-DILUTED> (27.01)
</TABLE>
