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, 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
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30,
October 31,
1997 1996
ASSETS
<S> <C>
<C>
Cash and cash equivalents $11,772,823 $
2,954,592
Real estate:
Land
10,367,200 10,367,200
Buildings and improvements 42,725,727
42,683,414
53,092,927
53,050,614
Accumulated depreciation 23,225,341
22,598,452
29,867,586
30,452,162
Investment in joint venture -
8,423,845
Deferred leasing commissions, net 365,976
252,819
Other assets 1,294,472
985,596
$43,300,857
$43,069,014
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 642,351 $
748,320
Security deposits 169,605
149,389
Deferred distributions -
1,233,837
811,956
2,131,546
Partners' capital (deficiency):
General partners (4,279,286)
(4,228,169)
Limited partners ($1,000 per Unit, 92,780 Units issued)
46,768,187 45,165,637
Total partners' capital 42,488,901
40,937,468
$43,300,857
$43,069,014
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended April 30, 1997 and 1996
<CAPTION>
Three months ended Six
months ended
April 30, April 30,
1997 1996 1997 1996
<S> <C> <C> <C>
<C>
Revenues:
Rental $1,651,910 $1,781,639
$3,241,467 $ 3,639,941
Equity in earnings of joint venture 2,282,329
146,683 2,425,949 305,105
Interest and other 44,306 55,513
64,502 108,761
3,978,545 1,983,835
5,731,918 4,053,807
Expenses:
Property operating 740,602 793,664
1,405,739 1,573,993
Depreciation 304,891 387,224
626,889 1,008,090
Amortization 34,437 31,363
61,174 84,406
General and administrative 112,940 99,266
241,391 189,533
Interest - 83,042
- - 171,856
Loss on impairment of real estate - - -
8,510,000
1,192,870 1,394,559
2,335,193 11,537,878
Net income (loss) $2,785,675 $ 589,276
$3,396,725 $(7,484,071)
Net income (loss) allocated to:
Limited partners $2,713,367 $ 530,348
$3,263,312 $(6,735,664)
General partners 72,308 58,928
133,413 (748,407)
$2,785,675 $ 589,276
$3,396,725 $(7,484,071)
Net income (loss) per Unit of
limited partnership interest $29.24 $5.72
$35.17 $(72.60)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended April 30, 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 3,263,312
133,413 3,396,725
Cash distributions (1,660,762)
(184,530) (1,845,292)
Partners' capital (deficiency)
at April 30, 1997 $46,768,187
$(4,279,286) $42,488,901
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1997 and 1996
<CAPTION>
1997 1996
<S> <C>
<C>
Cash flows from operating activities:
Net income (loss) $ 3,396,725
$(7,484,071)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 626,889
1,008,090
Amortization 61,174
84,406
Loss on impairment of real estate -
8,510,000
Equity in earning of joint venture (2,425,949)
(305,105)
Increase in operating assets:
Deferred expenses (174,331)
(127,756)
Other assets (308,876)
(69,786)
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (105,969)
(274,907)
Security deposits 20,216
8,979
Net cash provided by operating activities
1,089,879 1,349,850
Cash flows from investing activities:
Additions to real estate (42,313)
(147,831)
Investment in joint venture (5,559)
(107,480)
Distributions from joint venture 10,855,353
363,526
Net cash provided by investing activities
10,807,481 108,215
Cash flows from financing activities:
Decrease in deferred distributions (1,233,837)
- -
Distributions (1,845,292)
(1,030,888)
Net cash used in financing activities (3,079,129)
(1,030,888)
Increase in cash and cash equivalents 8,818,231
427,177
Cash and cash equivalents at beginning of period
2,954,592 3,572,041
Cash and cash equivalents at end of period $11,772,823 $
3,999,218
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $
171,856
(Continued)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1997 and 1996
(Continued)
<CAPTION>
1997 1996
<S> <C>
<C>
Supplemental disclosure of non-cash investing activities:
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>
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 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 the
first quarter of fiscal 1996 and the gain on the
sale of the Century Square property included in
equity in earnings of joint venture in the second
quarter of 1997, 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.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
2. Investment in Joint Venture
On April 10, 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) sold the building to an unaffiliated
party for $40,800,000, net of closing costs. The
Partnership's share of the net sales proceeds was
approximately $10.2 million; these proceeds were
distributed 100% to Limited Partners on May 29,
1997. The Partnership's share of the gain on sale
was approximately $2.1 million, which was allocated
100% to the Limited Partners in accordance with the
Partnership Agreement.
3. Related Party Transactions
An affiliate of the Managing General Partner
provided property management services for five and
six properties for the six months ended April 30,
1997 and 1996, respectively. The Partnership paid
the affiliate management fees of approximately
$100,000 and $116,000 for the six months ended
April 30, 1997 and 1996, respectively. 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
six-month periods ended April 30, 1997 and 1996,
the Partnership incurred approximately $121,000 for
these services. These amounts are included in
general and administrative expenses.
As of April 30, 1997, the affiliates were owed a
total of approximately $36,000 for these services.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Notes to Consolidated Financial Statements
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
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 at April 30, 1996 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 May 29, 1997, the Partnership paid a cash
distribution of $8.95 per Unit. The distribution
totaled $922,646, with $830,381 distributed to the
Limited Partners and $92,265 distributed to the
General Partners.
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 property of which
was sold in April 1997) on an all-cash basis. The
Partnership's acquisition program has been
completed. No additional investments are planned.
The Century Square office building was sold on
April 10, 1997. See Note 2 to the consolidated
financial statements.
The economic expansion continues and has provided
for a rebound in the commercial property markets.
Employment growth has increased demand for office
space. The steady demand and the limited amount of
speculative office construction has resulted in
falling vacancies, rising rents and increasing
property values in many markets. Some office
markets are fairing better than others. For
example, the office market in Charlotte, NC, the
location of the Carmel Park property, is
approximately 2% 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) continues 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. The vacancy rate in
Arlington Heights, IL, the location of Arlington
Business Center, is currently 11%, and the
Partnership expects this 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.
Although North Lake Plaza is located in a strong
retail market (Altamonte Springs, Florida which is
near Orlando, Florida), it currently has a vacancy
rate of 22%.
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 six-month periods ended April 30, 1997, all of
the Partnership's properties generated positive
cash flow from operations, and it is anticipated
that they will continue to do so during the
remainder of 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. During the three- and
six-month periods ended April 30, 1997, Partnership
cash flow from operations decreased compared to
1996 by approximately $167,000 and $350,000,
respectively, as a result of the sale of the 1718
Connecticut Avenue property in 1996. Also, during
the remainder of 1997, the Partnership will no
longer receive its share of cash flow from
operations of its joint venture; the Partnership's
operating cash flow from this joint venture was
approximately $977,000 in 1996 and $250,000 and
$440,000 during the three- and six-month periods
ended April 30, 1997, respectively. As a result of
the absence of operating cash flow from the joint
venture interest, the Partnership will decrease its
quarterly cash distribution from $8.95 per Unit to
$7.72 per Unit (a 4% rate on the gross offering
proceeds attributable to the Partnership's
remaining investments) beginning with the third
quarter distribution payable in August 1997.
The Managing General Partner believes that, barring
a change in circumstances, it will market the
Partnership's remaining properties for sale during
the remainder of 1997, except for the North Lake
Plaza shopping center which is not expected to be
marketed until 1998. However, there can be no
assurance that all properties will be sold.
The Managing General Partner has engaged real
estate brokers to market the Arlington Business
Center, Carmel Park and Westwood 10 properties.
During the six months ended April 30, 1997, the
Partnership incurred capital expenditures of
$217,000, primarily in connection with the leasing
of space at the Carmel Park ($147,000) and
Harborgate ($50,000) buildings.
During the six months ended April 30, 1997, the
Partnership's cash flow from operations and
distributions received from the joint venture
(excluding receipt of sales proceeds of
approximately $10.2 million) slightly exceeded
distributions to partners. The Partnership paid
the remaining deferred distribution to the General
Partners and a portion of capital expenditures from
cash reserves.
As of April 30, 1997, the Partnership has
commitments to fund approximately $377,000 of
capital expenditures, primarily relating to the
Harborgate ($240,000), Carmel Park ($70,000) and
Westwood 10 ($67,000) buildings.
During the remainder of 1997, the Partnership
expects that its cash flow from operations 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 May 29, 1997, the Partnership paid the second
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.
Also, on May 29, 1997, the Partnership distributed
$10,210,439 ($110.05 per Unit) to the Limited
Partners from the Partnership's share of the net
proceeds from the sale of the Century Square
property, representing a return of capital.
Operations
Fluctuations in the Partnership's operating results
for the three- and six-month periods ended April
30, 1997 compared to 1996 were primarily
attributable to the following:
Rental revenues decreased in the three-month and
six-month periods in 1997 primarily because of the
absence of revenues from the 1718 Connecticut
Avenue property, which was sold in June 1996.
Equity in earnings of joint venture increased in
1997 as a result of the Partnership's share of the
gain from the sale of the Century Square office
building in April 1997. See Note 2 to the
consolidated financial statements.
Property operating expenses decreased in the three-
month and six-month periods in 1997 primarily
because of the absence of costs from the 1718
Connecticut Avenue property.
Depreciation and amortization decreased during the
six months ended April 30, 1997 by approximately
$171,000 because of the impairment writedown for
Westwood 10, Northlake Plaza and Carmel Park
properties recorded at the end of the first quarter
of 1996. Depreciation and amortization also
decreased by approximately $81,000 and $154,000 in
the three-month and six-month periods ended April
30, 1997, respectively, due to the sale of the 1718
Connecticut Avenue property. No other individually
significant factors account for the remaining
decrease.
In 1997, the Partnership inccured no interest
expense because it repaid 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 totaling $8,510,000.
No individual factor accounted for a significant
change in interest and other revenues and general
and administrative expenses from 1996 to 1997.
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 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
rents and occupancy in the SouthBay market, the
vacancy rate (including sublet space) of which is
currently 24%. There is a limited number of
tenants seeking space in this market. However,
market rental rates have recently stablized. During
the second quarter of 1997, occupancy at the
property increased from 59% to 63%. The lease for
U.S. Sprint (for approximately 19% of the
property's space) expires in 2000; however, U.S.
Sprint has an 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 is
approximately 11% and market rental rates have
increased. During the second quarter of 1997,
occupancy at the property remained at 100%. A
lease for approximately 16% of the property's space
which was scheduled to expire in March 1997 has
been renewed for one year. No other significant
leases are scheduled to expire before 1999. The
Partnership has begun marketing this property to
prospective buyers.
The vacancy in the research and development
building market in Westwood, Massachusetts, the
location of the Westwood 10 building, is currently
18%. However, the Partnership believes that
increasing demand from high tech and office tenants
should reduce the vacancy rate in this market and
result in increases in market rental rates. During
the second quarter of 1997, occupancy at the
property remained at 100%. A lease for 18% of the
property's space expired in April 1997; the
Partnership is currently negotiating a renewal of
the lease with the existing tenant. No other
significant leases are scheduled to expire before
2000. The Partnership has begun marketing this
property to prospective buyers.
The vacancy rate in the Charlotte, North Carolina
office market, the location of the Carmel Park
property, has recently decreased from 4% to 2%, and
market rental rates continue to increase. The low
vacancy rate has led to construction in this market
which will increase available space later in 1997.
During the second quarter of 1997, occupancy at the
property remained at 100%. The Partnership has
renewed its lease with Cigna for approximately 33%
of the property's space through May 2002. No other
significant leases are scheduled to expire before
2000. The Partnership has begun marketing this
property to prospective buyers.
Altamonte Springs, Florida, the location of the
North Lake Plaza Shopping Center, is a strong
retail market. Vacancy in this market has recently
decreased from 8% to 5%, and market rental rates
are increasing. During the second quarter of 1997,
occupancy at the property decreased slightly to
78%. 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) which was scheduled to expire in 1998 has
been renewed for a five-year period. Home Depot
will continue to sub-lease its space to Burlington
Coat Factory during the new lease term. Home Depot
will remain obligated to pay rent under the new
lease. No other significant leases are scheduled
to expire before 2001. Marshall's Inc., another
anchor tenant, is remodeling its store at the
property. The Partnership believes the new store
design will be more attractive to consumers, and
will draw more traffic to the property.
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 new 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.
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.
(b) Reports on Form 8-K.
1. Report dated April 4, 1997 of the
Valuation per Unit of the Limited
Partnership Interest at October 31,
1996.
2. Report dated April 10, 1997 regarding
the sale of the Century Square office
building.
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 13, 1997 By: /s/E. Davisson Hardman,
Jr.
E. Davisson Hardman, Jr.
President
Date: June 13, 1997 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Quarter Ended April 30, 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 11,772,823
<SECURITIES> 0
<RECEIVABLES> 1,294,472
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,300,857<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 42,488,901<F2>
<TOTAL-LIABILITY-AND-EQUITY> 43,300,857<F3>
<SALES> 0
<TOTAL-REVENUES> 5,731,918<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,335,193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,396,725
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,396,725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,396,725
<EPS-PRIMARY> 35.17<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $29,867,586, and net deferred leasing commissions of $365,976.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $642,351,
and other liabilities of $169,605.
<F4>Total revenue includes rent of $3,241,467, equity in earnings of joint
venture of $2,425,949, and interest and other revenue of $64,502.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
