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 January 31, 1997
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 14<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 31, October 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,834,466 $ 2,954,592
Real estate:
Land 10,367,200 10,367,200
Buildings and improvements 42,722,448 42,683,414
53,089,648 53,050,614
Accumulated depreciation 22,920,450 22,598,452
30,169,198 30,452,162
Investment in joint venture 8,378,496 8,423,845
Deferred leasing commissions, net 241,345 252,819
Other assets 853,995 985,596
$ 41,477,500 $ 43,069,014
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 683,861 $ 748,320
Security deposits 167,767 149,389
Deferred distributions - 1,233,837
851,628 2,131,546
Partners' capital (deficiency):
General partners (4,259,329) (4,228,169)
Limited partners ($1,000 per Unit,
92,780 Units issued) 44,885,201 45,165,637
Total partners' capital 40,625,872 40,937,468
$ 41,477,500 $ 43,069,014
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended January 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Revenues:
Rental $ 1,589,557 $ 1,858,302
Equity in earnings of joint venture 143,620 158,422
Interest and other 20,196 53,248
1,753,373 2,069,972
Expenses:
Property operating 665,137 780,329
Depreciation 321,998 620,866
Amortization 26,737 53,043
General and administrative 128,451 90,267
Interest - 88,814
Loss on impairment of real estate - 8,510,000
1,142,323 10,143,319
Net income (loss) $ 611,050 $(8,073,347)
Net income (loss) allocated to:
Limited partners $ 549,945 $(7,266,012)
General partners 61,105 (807,335)
$ 611,050 $(8,073,347)
Net income (loss) per Unit of
limited partnership interest $5.93 $(78.31)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended January 31, 1997
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at November 1, 1996 $45,165,637 $(4,228,169)$40,937,468
Net income 549,945 61,105 611,050
Cash distributions (830,381) (92,265) (922,646)
Partners' capital (deficiency)
at January 31, 1997 $44,885,201 $(4,259,329)$40,625,872
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 611,050 $(8,073,347)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 321,998 620,866
Amortization 26,737 53,043
Loss on impairment of real estate - 8,510,000
Equity in earnings of joint venture (143,620) (158,422)
(Increase) decrease in operating assets:
Deferred expenses (15,263) (58,460)
Other assets 131,601 (220,246)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (64,459) (82,854)
Security deposits 18,378 9,887
Net cash provided by operating activities 886,422 600,467
Cash flows from investing activities:
Additions to real estate (39,034) (70,324)
Investment in joint venture - (96,319)
Distributions from joint venture 188,969 193,625
Net cash provided by investing activities 149,935 26,982
Cash flows from financing activities:
Decrease in deferred distributions (1,233,837) -
Distributions (922,646) (515,444)
Net cash used in financing activities (2,156,483) (515,444)
(Decrease) increase in cash and cash equivalents (1,120,126) 112,005
Cash and cash equivalents at beginning of period 2,954,592 3,572,041
Cash and cash equivalents at end of period $ 1,834,466 $ 3,684,046
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ 88,814
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 in fiscal 1996, 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, 1996. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
2. Investment in Joint Venture
In February 1997, the partnership which owns the Century Square office
building (which is owned 25% by the Partnership and 75% by Dean Witter
Realty Income Partnership II, L.P., an affiliated partnership) agreed to
sell the building for $41,500,000. Closing of the sale is expected to
occur in the third quarter of fiscal 1997.
3. Related Party Transactions
An affiliate of the Managing General Partner provided property management
services for five and six properties for the three months ended January
31, 1997 and 1996, respectively. The Partnership paid the affiliate
management fees of $44,652 and $49,709 for the three months ended January
31, 1997 and 1996. These amounts are included in property operating
expenses.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
Another affiliate of the Managing General Partner performs administrative
functions, processes certain investor transactions and prepares tax
information for the Partnership. For the three months ended January 31,
1997 and 1996, the Partnership incurred $66,194 and $69,049,
respectively, for these services. These amounts are included in general
and administrative expenses.
As of January 31, 1997, the affiliates were owed a total of approximately
$35,000 for these services.
Through January 31, 1995, the General Partners deferred receipt of
distributions aggregating $2,467,674 to which they were entitled; amounts
deferred were charged against partners' capital and recorded as
liabilities to the General Partner. The Partnership made two payments
of the deferred distributions of $1,233,837 to the General Partners in
September and November 1996.
Prior to 1990, the Partnership borrowed funds under a line of credit from
an affiliate of the Managing General Partner. The loan, which had a
principal balance of $4,032,527 and bore interest at the prime rate, was
repaid in full in June 1996.
4. Litigation
Various public partnerships sponsored by Dean Witter Realty Inc.
(including the Partnership and its Managing General Partner) are
defendants in purported class action lawsuits pending in state and
federal courts. The complaints allege a number of claims, including
breach of fiduciary duty, fraud and misrepresentation, and seek an
accounting of profits, compensatory and other damages in an unspecified
amount, possible liquidation of the Partnership under a receiver's
supervision and other equitable relief. The defendants are vigorously
defending these 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 February 27, 1997, the Partnership paid a cash distribution of $8.95
per Unit. The distribution totalled $922,646, with $830,381 distributed
to the Limited Partners and $92,265 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 (one of which was sold in fiscal
1996) and made one investment in a partnership (the sole property in
which is under contract to be sold) on an all-cash basis. The
Partnership's acquisition program has been completed. No additional
investments are planned.
In many regions of the country, continued restraint of new office
construction and steady leasing have reduced office supply in office
markets, and, in certain areas, rental rates are rising. Some office
markets are faring better than others. For example, Charlotte, NC, the
location of the Carmel Park property, is approximately 4% vacant. 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) continue to be negatively
impacted by corporate mergers and consolidations. Vacancies at many
office/research and development properties are declining as
communications, computer and software companies demand additional space.
In the Boston area, the location of the Westwood 10 property, market
vacancy is currently 18% but the Partnership believes that growth in the
software, health care and telecommunications industries will reduce
vacancy levels in this market. Also, the vacancy rate in Arlington
Heights, IL, the location of Arlington Business Center, has recently
decreased to 10%, and the Partnership expects the vacancy rate to decline
further in 1997. In the retail sector, a changing tenant base caused by
the domination of certain power center tenants coupled with bankruptcies
and major restructuring of other tenants and reduced consumer spending
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 quarter ended January 31, 1997, all of the
Partnership's properties and its joint venture interest generated
positive cash flow from operations, and it is anticipated that they will
continue to do so in 1997.
In addition, the Partnership's liquidity has been and will continue to
be affected by sales of the Partnership's properties; when properties are
sold, the Partnership's cash from operations available for distribution
decreases. In fiscal 1997, Partnership cash flow from operations
decreased compared to 1996 by approximately $183,000 as result of the
sale of the 1718 Connecticut Avenue property in 1996. Because of the
reduced cash flow, the Partnership decreased its quarterly cash
distribution from $10.00 per Unit to $8.95 per Unit (a 4% rate on the
gross offering proceeds attributable to the Partnership's remaining
investments), beginning with the fourth quarter distribution paid
November 27, 1996.
The Managing General Partner believes that, barring a change in
circumstances, it will market the Partnership's remaining properties for
sale in 1997. However, there can be no assurance that all properties
will be sold.
In the fourth quarter of 1996, the Managing General Partner engaged real
estate brokers to market Century Square and Arlington Business Center.
In February, 1997, the partnership which owns the Century Square property
agreed to sell the property for $41,500,000. The Partnership's share of
the proceeds is expected to approximately $9.9 million. The
Partnership's cash flow from this property was approximately $977,000 in
1996 and $228,000 during the first quarter of 1997.
During the quarter ended January 31, 1997, the Partnership's cash flow
from operations and distributions received from the joint venture
exceeded distributions to partners and capital expenditures. The
Partnership repaid the remaining deferred distribution to the General
Partners from cash reserves.
As of January 31, 1997, the Partnership has commitments to fund
approximately $320,000 of capital expenditures, primarily relating to the
Harborgate ($240,000) and Westwood 10 ($70,000) buildings.
During the remainder of 1997, the Partnership expects that its cash flow
from operations and distributions received from its joint ventures will
exceed distributions to its investors (other than distributions of net
proceeds from property sales); the Partnership expects to fund a portion
of future capital expenditures from cash reserves.
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 may have a material impact on
liquidity.
On February 27, 1997, the Partnership paid the first quarter cash
distribution of $8.95 per Unit. The total distribution aggregated
$922,646 with $830,381 distributed to the Limited Partners and $92,265
distributed to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the three-month
period ended January 31, 1997 compared to 1996 were primarily
attributable to the following:
No individual factor accounted for a significant change in equity in
earnings of joint venture, interest and other revenues and general and
administrative expenses from 1996 to 1997.
Rental revenues decreased in 1997 by approximately $263,000 because of
the absence of revenues from the 1718 Connecticut Avenue property, which
was sold in June 1996.
Property operating expenses decreased in 1997 by approximately $80,000
because of the absence of costs from the 1718 Connecticut Avenue
property.
Depreciation and amortization decreased in 1997 by approximately $171,000
because the Westwood 10, Northlake Plaza and Carmel Park properties were
written down at the end of the first quarter of 1996 and by approximately
$73,000 due to the sale of the 1718 Connecticut Avenue property. No
other significant individual factors account for the remaining decrease
in depreciation and amortization in 1997.
In 1997, there was no interest expense because the Partnership prepaid
its loan from affiliate in June 1996.
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.
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:
In Pasadena, California, the location of the Century Square office
building, the overall office market vacancy rate is approximately 15%.
However, Century Square remained 100% leased during the first quarter.
The leases of the property's largest tenant, Countrywide Credit
Industries Inc. (which occupies 84% of the property's space) expire in
2010. Countrywide is negotiating to sublease an additional 9% of the
property's space from an existing tenant. No other tenants occupy more
than 10% of the property. In February 1997, the partnership which owns
the property agreed to sell this property.
The office market in the SouthBay area of Los Angeles, California, the
location of Harborgate, has not recovered from the severe cutbacks by the
defense industries in this area. In addition, the depressed conditions
in the nearby downtown Los Angeles office market continue to negatively
impact the SouthBay market, the vacancy rate (including sublet space) in
which is currently 25%. There is a limited number of tenants seeking to
lease space in this market. During the first quarter of 1997, occupancy
at the property decreased to 59% because U.S. Sprint, which occupied
approximately 52% of the property's space, exercised a termination option
on approximately 33% of the property's space effective December 31, 1996.
The lease on U.S. Sprint's remaining space expires in 2000; however, it
has another option to terminate its lease on this space in 1998. No
other significant leases are scheduled to expire before 2000.
Arlington Business Center, a research and development building, is
located in Arlington Heights, Illinois. The vacancy in this market has
recently decreased to 10%. This decrease has caused rental rates to
increase. During the first quarter of 1997, occupancy at the property
remained at 100%. A lease for approximately 16% of the property's space
is scheduled to expire in March 1997. The Partnership has begun
marketing this space to prospective tenants.
The vacancy in the research and development building market in Westwood,
Massachusettes, the location of the Westwood 10 building, recently
increased from 15% to 18%. The Partnership believes that this increase
is temporary and that increasing demand from high tech and office tenants
should reduce the vacancy rate in this market and result in further
increases in rental rates. During the first quarter of 1997, occupancy
at the property remained at 100%. A lease for 18% of the property's
space is scheduled to expire in April 1997. The Partnership believes
that it can either renew this lease or lease the vacant space to an
existing tenant.
The vacancy rate in the Charlotte, North Carolina office market, in which
Carmel Park is located, is approximately 4% and rental rates have
increased. This has led to construction in this market which will
increase available space later in 1997. During the first quarter of
1997, occupancy at the property remained at 100%. The Partnership is
currently negotiating a renewal of its lease with Cigna for approximately
32% of the property's space and is scheduled to expire in May 1997. No
other significant leases are scheduled to expire before 2000.
Altamonte Springs, Florida, the location of the North Lake Plaza Shopping
Center, is an improving retail market, and has a vacancy rate of
approximately 8%. During the first quarter of 1997, occupancy at the
property remained at 80%. Development of nearby office projects and the
scheduled expansion of North Lake Boulevard (which borders the shopping
center) are anticipated to increase traffic at the property. The lease
for Home Depot (for approximately 50% of the property's space) expires
in 1998. Home Depot has subleased its space to Burlington Coat Factory
for the remainder of its lease term. Home Depot will remain obligated
to pay rent under the lease until it expires. No other significant
leases are scheduled to expire before 2000.
A mall located across the street from North Lake Plaza is undergoing a
renovation. When the renovation is completed, this mall may compete with
North Lake Plaza for bigger tenants.
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 6. Exhibits & Reports on Form 8-K
(a) Exhibits -
An exhibit index has been filed as part of this Report on
Page E1
<PAGE>
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: March 17, 1997 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: March 17, 1997 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
Dean Witter Realty Income Partnership I, L.P.
Quarter Ended January 31, 1997
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.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 1,834,466
<SECURITIES> 0
<RECEIVABLES> 853,995
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,477,500<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 40,625,872<F2>
<TOTAL-LIABILITY-AND-EQUITY> 41,477,500<F3>
<SALES> 0
<TOTAL-REVENUES> 1,753,373<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,142,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 611,050
<INCOME-TAX> 0
<INCOME-CONTINUING> 611,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 611,050
<EPS-PRIMARY> 5.93<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $30,169,198, investments in joint venture of $8,378,496 and
net deferred leasing commissions of $241,345.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $683,861,
and other liabilities of $167,767.
<F4>Total revenue includes rent of $1,589,557, equity in earnings of joint
venture of $143,620, and interest and other revenue of $20,196.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
