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 July 31, 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
Page 1 of 15<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31, October 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,208,842 $ 3,572,041
Real estate:
Land 10,367,200 12,230,400
Buildings and improvements 42,673,816 56,550,871
53,041,016 68,781,271
Accumulated depreciation 22,225,778 24,089,561
30,815,238 44,691,710
Investment in joint venture 8,264,487 8,341,537
Deferred leasing commissions, net 285,448 260,912
Other assets 1,382,576 1,429,535
$ 45,956,591 $ 58,295,735
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 787,283 $ 808,003
Security deposits 147,561 210,413
Loan from affiliate 0 4,032,527
Deferred distributions 2,467,674 2,467,674
3,402,518 7,518,617
Partners' capital (deficiency):
General partners (4,180,450) (3,289,800)
Limited partners ($1,000 per Unit,
92,780 Units issued) 46,734,523 54,066,918
Total partners' capital 42,554,073 50,777,118
$ 45,956,591 $ 58,295,735
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended July 31, 1996 and 1995
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
1996 1995 1996 1995
Revenues:
<S> <C> <C> <C> <C>
Rental $1,809,531 $1,657,631 $ 5,449,472 $5,276,690
Gain on sale of real estate 683,471 - 683,471 -
Equity in earnings of joint
venture 144,169 124,717 449,274 409,934
Interest and other 53,659 58,659 162,420 116,892
2,690,830 1,841,007 6,744,637 5,803,516
Expenses:
Property operating 809,070 653,144 2,383,063 2,210,694
Depreciation 364,902 619,385 1,372,992 1,907,217
Amortization 20,976 52,071 105,382 155,966
Interest 46,303 76,268 218,159 246,839
General and administrative 126,777 106,362 316,310 314,727
Loss on impairment of real estate - - 8,510,000 -
1,368,028 1,507,230 12,905,906 4,835,443
Net income (loss) $1,322,802 $ 333,777 $(6,161,269) $ 968,073
Net Income (loss) allocated to:
Limited Partners $1,258,869 $ 300,399 $(5,476,795) $ 871,266
General Partners 63,933 33,378 (684,474) 96,807
$1,322,802 $ 333,777 $(6,161,269) $ 968,073
Net income (loss) per Unit of limited
partnership interest $13.57 $3.24 $(59.03) $9.39
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 1996
<CAPTION>
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 (5,476,795) (684,474) (6,161,269)
Distributions (1,855,600) (206,176) (2,061,776)
Partners' capital (deficiency)
at July 31, 1996 $ 46,734,523 $(4,180,450) $ 42,554,073
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(6,161,269) $ 968,073
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 1,372,992 1,907,217
Amortization 105,382 155,966
Loss on impairment of real estate 8,510,000 -
Equity in earnings of joint venture (449,274) (409,934)
Gain on sale of real estate (683,471) -
Increase in operating assets:
Deferred expenses (129,918) (39,226)
Other assets (92,343) (216,452)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (12,508) 75,722
Security deposits (21,372) 34,146
Net cash provided by operating activities 2,438,219 2,475,512
Cash flows from investing activities:
Proceeds from disposition of real estate held for
sale 5,092,559 -
Additions to real estate (325,998) (685,511)
Investment in joint venture (130,575) (302,982)
Distributions from joint venture 656,899 741,196
Net cash provided by (used in) investing
activities 5,292,885 (247,297)
Cash flows from financing activities:
Cash distributions (2,061,776) (1,378,813)
Repayment of loan from affiliate (4,032,527) (15,780)
Net cash used in financing activities (6,094,303) (1,394,593)
Increase in cash and cash equivalents 1,636,801 833,622
Cash and cash equivalents at beginning of year 3,572,041 2,230,923
Cash and cash equivalents at end of period $ 5,208,842 $ 3,064,545
Supplemental disclosure of cash flow information:
Cash paid for interest $ 218,159 $ 246,839
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, 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 wrote down to fair value (based on independent appraisals)
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. The closing
of the sale, for a sales price of approximately $5.1 million (net of
closing costs) took place on June 24, 1996. The Partnership
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
recognized a gain on this sale of approximately $683,000, which was
allocated 100% to the Limited Partners in accordance with the Partnership
Agreement. The Partnership used $4,032,527 of the proceeds from the sale
to repay its loan from affiliate in June 1996, and distributed
approximately $1,140,000 to Limited Partners in August 1996.
3. Related Party Transactions
An affiliate of the Managing General Partner provided property management
services for six properties (including the 1718 Connecticut property) for
the nine months ended July 31, 1996 and 1995. The Partnership paid the
affiliate management fees of approximately $172,000 and $161,000 for the
nine months ended July 31, 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 each of the nine-month periods
ended July 31, 1996 and 1995, the Partnership incurred approximately
$209,000 for these services. These amounts are included in general and
administrative expense.
As of July 31, 1996, the affiliates were owed a total of approximately
$42,000 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 bore interest at
the prime rate (8.25% as of July 31, 1996). During the first quarter of
fiscal year 1996, the affiliate and the Partnership amended and restated
the Partnership's borrowing relationship. The Partnership agreed to
repay all outstanding amounts borrowed from the affiliate no later than
October 31, 1997. Advances to the Partnership under the Partnership's
line of credit were capped at $4,500,000. As discussed in Note 2 above,
the loan was repaid in June 1996.
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. On September 5, 1996, the Partnership paid $1,233,837 of
deferred distributions to the General Partner. The Partnership expects
to pay the remaining deferred distributions in November 1996.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
defendants in a number of 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 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 August 29, 1996, the Partnership paid a cash distribution from
operations 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. Also on this date, the
Partnership paid a cash distribution of $1,139,405 (approximately $12.28
per Unit) to the Limited Partners from the proceeds from the sale of the
1718 Connecticut Avenue property.
<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 sale of the 1718 Connecticut Avenue office building closed on June
24, 1996. See Note 2 to the consolidated financial statements. During
the three-and nine-month periods ended July 31, 1996, the Partnership's
cash flow from operations was reduced by approximately $75,000 as a
result of the sale of the building.
In most regions of the country, the growth in demand for office space
exceeds the growth in supply. Office construction remains primarily on
a build-to-suit basis as current rental rates do not justify speculative
development. Some office markets are faring better than others.
Increasing demand for office space by smaller to medium sized firms is
improving the Southeast and suburban Northeast office markets. Office
properties located in the West are benefiting from expansion by the
entertainment, high-technology and telecommunications industries;
however, the SouthBay area of Los Angeles (the location of Harborgate)
and Pasadena (the location of Century Square) continues to be negatively
impacted by corporate mergers and consolidations. Vacancies at many
office/research and development properties are declining as
communications, computers and software companies demand additional space.
In the Boston area, absorption of research and development space rose
substantially during 1995. In the retail sector, a changing tenant base
caused by the domination of certain power center tenants coupled with
bankruptcies and major restructurings of other tenants have resulted in
higher vacancies and stagnant rents at many retail properties.
The Partnership's liquidity depends on the cash flow from operations of
its properties and expenditures for building improvements and tenant
improvements and leasing commissions in connection with the leasing of
vacant space. During the three- and nine-month periods ended July 31,
1996, all of the Partnership's properties and its joint venture interest
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 has been and will continue to
be affected by the sales of Partnership properties; when properties are
sold, the Partnership's cash from operations available for distribution
decreases. The Partnership will decrease its quarterly cash distribution
to Limited Partners from $10.00 per Unit to $8.95 per Unit, beginning
with the fourth quarter distribution to be paid in November 1996.
The Managing General Partner believes that, barring a change in
circumstances, it will offer the Partnership's remaining properties for
sale by October 31, 1997. Accordingly, the Managing General Partner
currently (1) plans to engage real estate brokers to offer Century Square
and Arlington Business Center for sale in 1996 and (2) plans to offer
Carmel Park, Harborgate, Westwood 10 and Northlake Plaza for sale in
1997. However, there can be no assurance that all properties will be
sold by the end of 1997.
During the nine months July 31, 1996, Partnership cash flow from
operations, net proceeds from the sale of the office building and
distributions received from the joint venture exceeded distributions to
partners, capital expenditures and contributions to the joint venture.
The Partnership expects that such cash flows for the remainder of 1996
and existing cash reserves will be sufficient to fund capital
expenditures and distributions to partners.
During the nine months ended July 31, 1996, the Partnership incurred
approximately $455,000 of capital expenditures, primarily in connection
with the leasing of space at the Westwood 10 and Harborgate office
buildings. The Partnership also contributed approximately $131,000 to
the Century Square joint venture, primarily for its share of building
improvements.
As of July 31, 1996, the Partnership has commitments to fund
approximately $300,000 of capital expenditures, primarily relating to the
Harborgate building.
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 August 29, 1996, the Partnership paid the third quarter cash
distribution of $10.00 per Unit to Limited Partners. The total
distribution aggregated $1,030,888 with $927,800 distributed to the
Limited Partners and $103,088 distributed to the General Partners. Also
on this date, the Partnership distributed $1,139,405 ($12.28 per Unit)
to the Limited Partners from the net proceeds from the sale of the 1718
Connecticut Avenue building, representing a return of capital.
On September 5, 1996, the Partnership paid $1,233,837 of deferred
distributions to the General Partner. The Partnership expects to pay the
remaining deferred distributions in November 1996.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Operations
Fluctuations in the Partnership's operations for the three- and nine-
month periods ended July 31, 1996 compared to 1995 were primarily
attributable to the following:
Rental income increased primarily due to higher rents recognized at the
Westwood 10 and Arlington Business Center properties, partially offset
by the absence of rents from the 1718 Connecticut Avenue property.
The gain on the sale of the 1718 Connecticut property is described in
Note 2 to the consolidated financial statements.
Interest and other income increased primarily due to larger investment
balances in 1996; offset in the third quarter by lower other income.
Property operating expenses increased primarily due to higher operating
costs incurred for repairs and maintenance at the Harborgate property.
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. Also, depreciation and amortization decreased because certain
assets at the Arlington and Carmel Park properties are fully depreciated.
No depreciation and amortization was taken on the 1718 Connecticut Avenue
property during the three months ended July 31, 1996 while it was being
held for sale.
Interest expense decreased because the loan from affiliate was repaid by
the Partnership in June 1996. See Note 2 to the consolidated financial
statements.
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
period. The vacancy level in the Pasadena, California market remained
at 15% and it is not expected to improve in the near term. The leases
of the property's largest tenant, Countrywide Credit which occupies 84%
of the property's rentable space, expire in 2010.
The office market in the South Bay area of Los Angeles, California, the
location of Harborgate, remains weak primarily as a result of
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
retrenchment in the defense and aerospace industries. The vacancy rate
(including sublet space) in this market is currently approximately 26%.
There is a limited number of tenants seeking to lease space in this
market. During the third quarter of 1996, occupancy at the property
remained at 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 other significant leases expire
before 2000.
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, and the vacancy rate is approximately
14%. During the third quarter of 1996, occupancy at the property
remained at 100%. The lease of Digital Equipment Corp., for
approximately 16% of the property's space, was renewed for five years.
Leases for approximately 23% of the property's space expire in 1997.
Westwood 10, located in Westwood, Massachusetts, is experiencing
increasing demand from high tech and office tenants, which should lead
to a decline in the vacancy rate in this market, currently 15%. As of
July 31, 1996, the property was 100% leased.
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 100% at July 31, 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%. During the third quarter of 1996, occupancy at the property
decreased slightly to 83%. The lease of Marshalls for approximately 21%
of the property's space which was to expire in January 1997, was renewed
for five years at a slightly higher rental rate. No other significant
leases expire at this property before 1998.
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.
The parties in the Schechtman Action, the Dosky Action and the Segal
Action intend to ask the Delaware Court of Chancery that such Actions be
consolidated in a single matter. The Grigsby Action has been stayed
indefinitely subject to being reopened for good cause. The Young Action
has been dismissed without prejudice. The defendants in the Young Action
understand that the plaintiffs in the Young Action intend to join the
Schechtman Action, the Dosky Action and the Segal Action if such Actions
are consolidated.
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 June 24, 1996 as to
the sale of the 1718 Connecticut Avenue office building.
<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: September 12, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: September 12, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
Dean Witter Realty Income Partnership I, L.P.
Quarter Ended July 31, 1996
Exhibit Index
Exhibit
No. Description
27 Financial Data Schedule
E1
<TABLE> <S> <C>
<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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 5,208,842
<SECURITIES> 0
<RECEIVABLES> 1,382,576
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,956,591<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 42,554,073<F2>
<TOTAL-LIABILITY-AND-EQUITY> 45,956,591<F3>
<SALES> 0
<TOTAL-REVENUES> 6,744,637<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,177,747
<LOSS-PROVISION> 8,510,000
<INTEREST-EXPENSE> 218,159
<INCOME-PRETAX> (6,161,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,161,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,161,269)
<EPS-PRIMARY> (59.03)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
real estate of $30,815,238, investment in joint venture of $8,264,487 and
net deferred leasing commissions of $285,448.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $787,283,
and other liabilities of $2,615,235.
<F4>Total revenue includes rent of $5,449,472, gain on sale of real estate
of $683,471, equity in earnings of joint venture of $449,274, and interest
and other revenue of $162,420.
<F5>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
