UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended April 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: 0-13260
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3174553
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since
last report: not applicable
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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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED BALANCE SHEETS
April 30, October 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,999,218 $ 3,572,041
Real estate:
Land 10,367,200 12,230,400
Buildings and improvements 42,495,649 56,550,871
52,862,849 68,781,271
Accumulated depreciation 21,860,876 24,089,561
31,001,973 44,691,710
Real estate held for sale 4,319,478 -
Investment in joint venture 8,390,596 8,341,537
Deferred leasing commissions, net 304,262 260,912
Other assets 1,499,321 1,429,535
$ 49,514,848 $ 58,295,735
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 533,096 $ 808,003
Security deposits 219,392 210,413
Loan from affiliate 4,032,527 4,032,527
Deferred distributions 2,467,674 2,467,674
7,252,689 7,518,617
Partners' capital (deficiency):
General partners (4,141,295) (3,289,800)
Limited partners ($1,000 per Unit,
92,780 Units issued) 46,403,454 54,066,918
Total partners' capital 42,262,159 50,777,118
$ 49,514,848 $ 58,295,735
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended April 30, 1996 and 1995
Three months ended Six months ended
April 30, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental $1,781,639 $1,863,668 $3,639,941 $3,619,059
Equity in earnings of joint
venture 146,683 116,273 305,105 285,217
Interest and other 55,513 35,263 108,761 58,233
1,983,835 2,015,204 4,053,807 3,962,509
Expenses:
Property operating 793,664 769,247 1,573,993 1,557,550
Depreciation 387,224 654,539 1,008,090 1,287,832
Amortization 31,363 52,031 84,406 103,895
Interest 83,042 86,658 171,856 170,571
General and administrative 99,266 100,410 189,533 208,365
Loss on impairment of real estate - - 8,510,000 -
1,394,559 1,662,885 11,537,878 3,328,213
Net income (loss) $ 589,276 $ 352,319 $(7,484,071) $ 634,296
Net income (loss) allocated to:
Limited partners $ 530,348 $ 317,087 $(6,735,664) $ 570,866
General partners 58,928 35,232 (748,407) 63,430
$ 589,276 $ 352,319 $(7,484,071) $ 634,296
Net income (loss) per Unit of limited
partnership interest $5.72 $3.41 $(72.60) $6.15
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended April 30, 1996
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at November 1, 1995 $ 54,066,918 $(3,289,800) $ 50,777,118
Net loss (6,735,664) (748,407) (7,484,071)
Distributions (927,800) (103,088) (1,030,888)
Partners' capital (deficiency)
at April 30, 1996 $ 46,403,454 $(4,141,295) $ 42,262,159
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (7,484,071) $ 634,296
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 1,008,090 1,287,832
Amortization 84,406 103,895
Loss on impairment of real estate 8,510,000 -
Equity in earnings of joint venture (305,105) (285,217)
Increase in operating assets:
Deferred expenses (127,756) (36,789)
Other assets (69,786) (277,422)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (274,907) (212,487)
Security deposits 8,979 16,713
Net cash provided by operating
activities 1,349,850 1,230,821
Cash flows from investing activities:
Additions to real estate (147,831) (630,708)
Investment in joint venture (107,480) (240,608)
Distributions from joint venture 363,526 546,160
Net cash provided by (used in) investing
activities 108,215 (325,156)
Cash flows from financing activities:
Distributions (1,030,888) (863,369)
Increase in cash and cash equivalents 427,177 42,296
Cash and cash equivalents at
beginning of period 3,572,041 2,230,923
Cash and cash equivalents at end
of period $ 3,999,218 $ 2,273,219
Supplemental disclosure of cash flow information:
Cash paid for interest $ 171,856 $ 170,571
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1996 and 1995
1996 1995
Supplemental disclosure of non-cash investing activities:
<S> <C> <C>
Reclassification of real estate held for sale:
Decrease in real estate, at cost
Land $ 1,012,200 $ -
Buildings and improvements 6,544,053 -
Accumulated depreciation (3,236,775) -
Increase in real estate held for sale $ 4,319,478 $ -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
1. The Partnership
Dean Witter Realty Income Partnership I, L.P. (the "Partnership") is a
limited partnership organized under the laws of the State of Delaware in
1983. The Partnership's fiscal year ends on October 31.
The financial statements include the accounts of the Partnership and 1718
Connecticut, Ltd. on a consolidated basis. The Partnership's interest
in the Century Square property is accounted for on the equity method.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes.
Net income (loss) per Unit of limited partnership interest amounts are
calculated by dividing net income (loss) allocated to the Limited
Partners, in accordance with the Partnership Agreement, by the weighted
average number of Units outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments necessary to present
fairly the results for the interim period. Except for the losses on
impairment of certain real estate and the reclassification of other real
estate held for sale, such adjustments consist only of normal recurring
accruals.
These financial statements should be read in conjunction with the annual
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended October 31, 1995. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
2. Real Estate
In the first quarter of fiscal 1996, in accordance with its policies, the
Partnership evaluated the recoverability of its investments in real
estate and concluded that, based on revised expectations as to the
holding periods of the properties, the Partnership will be unable to
recover its investments in certain properties. Accordingly, the
Partnership has written down to fair value (based on independent
appraisal) its Westwood 10, 1718 Connecticut, Northlake Plaza and Carmel
Park properties and recorded losses on impairment of $2,634,000,
$1,742,000, $1,377,000 and $2,757,000, respectively.
In May 1996, the Partnership entered into an agreement with an
unaffiliated party, to sell the 1718 Connecticut property for a
negotiated sales price of approximately $5.4 million. Completion of the
sale is contingent upon the purchaser obtaining mortgage financing within
30 days of the date of the sale agreement. The closing of the sale is
expected to occur during the third quarter of fiscal 1996. The net
carrying value of the property (approximately $4.3 million) has been
reclassified to real estate held for sale.
3. Related Party Transactions
An affiliate of the Managing General Partner provided property management
services for six properties for the six months ended April 30, 1996 and
1995. The Partnership paid the affiliate management fees of
approximately $116,000 and $105,000 for the six months ended April 30,
1996 and 1995. These amounts are included in property operating expenses.
Another affiliate of the Managing General Partner performs administrative
functions, processes certain investor transactions and prepares tax
information for the Partnership. For the six months ended April 30, 1996
and 1995, the Partnership incurred approximately $121,000 and $139,000,
respectively, for these services. These amounts are included in general
and administrative expense.
As of April 30, 1996 the affiliates were owed a total of approximately
$23,000 for these services.
Prior to 1990, the Partnership borrowed funds under a line of credit from
an affiliate of the Managing General Partner. The loan bears interest
at the prime rate (8.25% as of April 30, 1996). During the first quarter
of fiscal year 1996, the affiliate and the Partnership agreed to amend
and restate the Partnership's borrowing relationship. The Partnership
agreed to repay all outstanding amounts borrowed from the affiliate no
later than October 31, 1997. In addition, advances to the Partnership
under the Partnership's line of credit are capped at $4,500,000.
Through January 31, 1995, the General Partners deferred receipt of
distributions aggregating $2,467,674 to which they are entitled; amounts
deferred were charged against partners' capital and recorded as
liabilities to the General Partner. Beginning with the February 28, 1995
distribution, the General Partners began to receive their distributions
currently.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in some cases, its Managing General Partner) are
defendants in five class action lawsuits pending in state and federal
courts. The complaints allege a variety of claims, including breach of
fiduciary duty, fraud, misrepresentation and related claims, and seek
compensatory and other damages and equitable relief. The defendants have
not yet responded to the complaints and intend to vigorously defend the
actions. It is impossible to predict the effect, if any, the outcome of
these actions might have on the Partnership's financial statements.
5. Subsequent Event
On May 29, 1996, the Partnership paid a cash distribution of $10.00 per
Unit to the Limited Partners. The distribution totalled $1,030,888, with
$927,800 distributed to the Limited Partners and $103,088 distributed to
the General Partners.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Partnership raised $92,780,000 in a public offering which was
terminated in 1984. The Partnership has no plans to raise additional
capital.
The Partnership purchased six properties and has made one investment in
a partnership on an all-cash basis. The Partnership's acquisition
program has been completed. No additional investments are planned.
The economy continues to expand which, in turn, results in absorption of
vacant space. Population and employment growth are improving the
economies in the Southeastern region and steady growth in business
service firms has benefitted several of the Midwestern and West coast
cities (except Los Angeles). Certain southern California cities and
areas of the Northeast are still negatively affected by corporate
downsizings and consolidations. For many office properties, vacancy
rates are slowly declining, values are stabilizing and rents are
beginning to increase. A rebound in the high technology industries is
increasing the demand for office/research and development space.
However, recent downturns in values and performance results of many high
technology companies may reduce the demand for space at research and
development properties. In the retail real estate sector, disappointing
retail sales during 1995 resulted in stagnant rents and increasing
vacancy levels at many retail properties. These events translate into
declining demand for retail space.
The Partnership's liquidity depends on the cash flow from operations of
its properties and expenditures for tenant improvements and leasing
commissions in connection with the leasing of vacant space. During the
six months ended April 30, 1996, all of the Partnership's properties
generated positive cash flow from operations before capital expenditures,
and it is anticipated that they will continue to do so.
In addition, the Partnership's liquidity will be affected by the sale of
the Partnership's properties. The Managing General Partner believes
that, barring a change in circumstances, it will offer the Partnership's
properties for sale over the next two years. Accordingly, the Managing
General Partner currently (1) has entered into an agreement to sell 1718
Connecticut Avenue, (2) plans to engage real estate brokers to offer
Century Square and Arlington Business Center for sale and (3) plans to
offer Carmel Park for sale during the second half of 1996. The Managing
General Partner currently plans to offer the Partnership's remaining
three properties, Harborgate, Westwood 10 and Northlake Plaza, for sale
at the earlier of the completion of additional leasing at the properties
for the first half of 1997. Therefore, the Partnership currently plans
to offer all of its properties for sale by 1997. However, there can be
no assurance that all properties will be sold by 1997.
During the six months ended April 30, 1996, Partnership cash flow from
operations and distributions received from the joint venture exceeded
distributions to partners and capital expenditures. The Partnership
expects that such cash flows for the remainder of 1996 will be sufficient
to fund capital expenditures and distributions to partners. Beginning
with the second quarter distribution, the Partnership increased its cash
distribution rate from an annual rate of $20 per Unit to an annual rate
of $40 per Unit.
During the six months ended April 30, 1996, the Partnership incurred
approximately $148,000 of capital expenditures, primarily in connection
with the leasing of space at the Westwood 10, 1718 Connecticut and Carmel
Park office buildings. The Partnership also contributed approximately
$107,000 to the Century Square joint venture, primarily for its share of
leasing commissions in connection with the extended Countrywide lease.
As of April 30, 1996, the Partnership has commitments to fund
approximately $351,000 of capital expenditures, primarily relating to the
Harborgate and Westwood 10 properties.
Except as discussed above and in the consolidated financial statements,
the Managing General Partner is not aware of any trends or events,
commitments or uncertainties that will have a material impact on
liquidity.
On May 29, 1996, the Partnership paid the second quarter cash
distribution of $10.00 per Unit to Limited Partners. The total
distribution aggregated $1,030,088 with $927,800 distributed to the
Limited Partners and $103,088 distributed to the General Partners.
Operations
Fluctuations in the Partnership's operations for the three and six-month
periods ended April 30, 1996 compared to 1995 are primarily attributable
to the following:
Interest and other income increased primarily due to larger investment
balances in the first quarter of 1996 than in 1995.
Depreciation decreased at the Westwood 10, 1718 Connecticut, Northlake
Plaza and Carmel Park properties because their depreciable bases were
reduced by the write-down of these properties in the first quarter of
1996. Depreciation and amortization also decreased because certain
assets at the Arlington and Carmel Park properties are fully depreciated.
In the first quarter of fiscal 1996, the Partnership recorded losses on
impairment of the Westwood 10, 1718 Connecticut, Northlake Plaza and
Carmel Park properties totalling $8,510,000. See Note 2 to the
consolidated financial statements.
A summary of the office, retail and research and development building
markets where the Partnership's properties are located and the
performance of each property is as follows:
The Century Square office building remained 100% leased during the year.
The vacancy level in the Pasadena, California market remained at 15% and
it is not expected to improve in the near term. The property's largest
tenant, Countrywide Credit, occupies 84% of the property's rentable
space. No leases are due to expire in fiscal 1996.
The Los Angeles, California office market, the location of Harborgate,
remains weak primarily as a result of retrenchment in the defense and
aerospace industries. The vacancy rate (including sublet space) in this
market remains at approximately 29%. There is a limited number of
tenants seeking to lease space in this market. At April 30, 1996,
occupancy at the property was 89%. U.S. Sprint, which occupies
approximately 52% of the property's space, exercised a termination option
on approximately 60% of its space effective October 31, 1996. No
significant leases expire in fiscal 1996.
Arlington Business Center, a research and development building is located
in Arlington Heights, Illinois. Leasing activity in this market has
slowed in 1996 from 1995 levels, the vacancy rate is approximately 16%.
As of April 30, 1996, occupancy at the property was 100%. The lease of
Digital Equipment Corp., which occupies approximately 16% of the
property, was renewed for five years. No other leases expire in fiscal
1996.
Westwood 10, located in Westwood, Massachusetts, has recently experienced
continued strong demand from high tech and office tenants, which should
lead to a decline in the vacancy rate in this market, currently 16%. As
of April 30, 1996, the property was 100% leased. No significant leases
expire in fiscal 1996.
The Washington D.C., office market in which 1718 Connecticut is located
has a vacancy rate of approximately 12%. As of April 30, 1996, occupancy
at the property was 85%. The Door Store which occupied approximately 13%
of the property's space, defaulted on its lease and vacated the property;
the Partnership retained the Door Store's security deposit approximating
one month's rent. No leases expire in fiscal 1996. Subsequent to April
30, 1996 the Partnership entered into a contract for the sale of this
property. See Note 2 to the consolidated financial statements.
The Charlotte, North Carolina office market, in which Carmel Park is
located, has a vacancy rate of approximately 3%. In this market, there
is little new construction and rental rates have increased slightly.
Carmel Park's occupancy was 99% as of April 30, 1996. No significant
leases expire in fiscal 1996.
Altamonte Springs, Florida, the location of the North Lake Plaza Shopping
Center, is a difficult retail market where overbuilding has exerted
downward pressure on rents and the market vacancy rate is approximately
20%. Occupancy at the property as of April 30, 1996 was 85%. The lease
of Marshalls, which occupies approximately 21% of the property space,
expires in January 1997. No leases expire in fiscal 1996 at this
property.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect
on the operations of the Partnership or its properties.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The following developments have occurred since the filing of the
Partnership's most recent quarterly report on Form 10-Q with respect to
the purported class actions filed against the Partnership.
On March 13, 1996, a class action lawsuit (the "Young Action") naming
Dean Witter Realty Income Partnership III, L.P., other unidentified
limited partnerships, Dean Witter, Discover & Co., Dean Witter Reynolds
Inc., and others as defendants was filed in the Circuit Court for
Baltimore City in Baltimore, Maryland. The defendants have removed the
case to the United States District Court for the District of Maryland.
The complaint alleges fraud, negligent misrepresentation, breach of
fiduciary duty, unjust enrichment and related claims and seeks an
accounting of records, compensatory and punitive damages in unspecified
amounts and other equitable relief. The defendants have not yet
responded to the complaint and intend to vigorously defend the action.
Pursuant to an order of the U.S. District Court for the Southern District
of California entered May 24, 1996, the Grigsby Action was transferred
to the U.S. District Court for the Southern District of New York.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits -
An exhibit index has been filed as part of this Report
on Page E1
(b) Reports on Form 8-K - Report dated April 15, 1996 of the
valuation per Unit of Limited Partnership Interest at
October 31, 1995.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEAN WITTER REALTY INCOME
PARTNERSHIP I, L.P.
By: Dean Witter Realty Income
Properties I Inc.
Managing General Partner
Date: June 14, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: June 14, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
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<CAPTION>
Exhibit Index
Dean Witter Realty Income Partnership I, L.P.
Quarter Ended April 30, 1996
Exhibit Sequentially
No. Description Numbered Page
<C> <S>
27 Financial Data Schedule
E1
</TABLE>
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<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
unaudited financial statements.
</LEGEND>
<CIK> 0000726315
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 3,999,218
<SECURITIES> 0
<RECEIVABLES> 1,499,321
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,514,848<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 42,262,159<F2>
<TOTAL-LIABILITY-AND-EQUITY> 49,514,848<F3>
<SALES> 0
<TOTAL-REVENUES> 4,053,807<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,856,022
<LOSS-PROVISION> 8,510,000
<INTEREST-EXPENSE> 171,856
<INCOME-PRETAX> (7,484,071)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,484,071)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,484,071)
<EPS-PRIMARY> (72.60)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $31,001,973, real estate held for sale of $4,319,478,
investment in joint venture of $8,390,596 and net deferred leasing
commissions of $304,262.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$533,096, and other liabilities of $6,719,593.
<F4>Total revenue includes rent of $3,639,941, equity in earnings of joint
venture of $305,105, and interest and other revenue of $108,761.
<F5>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
