1
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, 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 17
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED BALANCE SHEETS
July 31, October
31,
1997 1996
ASSETS
<S> <C>
<C>
Cash and cash equivalents $ 1,699,576 $
2,954,592
Real estate:
Land
8,087,200 10,367,200
Buildings and improvements 37,774,747
42,683,414
45,861,947
53,050,614
Accumulated depreciation 19,275,023
22,598,452
26,586,924
30,452,162
Real estate held for sale 2,982,030
- -
Investment in joint venture -
8,423,845
Deferred leasing commissions, net 349,133
252,819
Other assets 1,184,887
985,596
$32,802,550
$43,069,014
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 821,178 $
748,320
Security deposits 165,074
149,389
Deferred distributions -
1,233,837
986,252
2,131,546
Partners' capital (deficiency):
General partners (4,325,558)
(4,228,169)
Limited partners ($1,000 per Unit. 92,780 Units issued)
36,141,856 45,165,637
Total partners' capital 31,816,298
40,937,468
$32,802,550
$43,069,014
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended July 31, 1997 and 1996
Three months ended Nine
months ended
July 31, July 31,
1997 1996 1997 1996
<S> <C> <C> <C>
<C>
Revenues:
Rental $1,556,681 $1,809,531
$4,798,148 $ 5,449,472
Gain on sale of real estate - 683,471
- - 683,471
Equity in earnings of joint venture - 144,169
2,425,949 449,274
Interest and other 126,674 53,659
191,176 162,420
1,683,355 2,690,830
7,415,273 6,744,637
Expenses:
Property operating 766,249 809,070
2,171,988 2,383,063
Depreciation 313,500 364,902
940,389 1,372,992
Amortization 32,998 20,976
94,172 105,382
General and administrative 110,676 126,777
352,067 316,310
Interest - 46,303 -
218,159
Loss on impairment of real estate - - -
8,510,000
1,223,423 1,368,028
3,558,616 12,905,906
Net income (loss) $ 459,932 $1,322,802
$3,856,657 $(6,161,269)
Net income (loss) allocated to:
Limited partners $ 413,939 $1,258,869
$3,677,251 $(5,476,795)
General partners 45,993 63,933
179,406 (684,474)
$ 459,932 $1,322,802
$3,856,657 $(6,161,269)
Net income (loss) per Unit of
limited partnership interest $ 4.46 $13.57
$39.63 $(59.03)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 1997
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 3,677,251
179,406 3,856,657
Cash distributions (12,701,032)
(276,795) (12,977,827)
Partners' capital (deficiency)
at July 31, 1997 $36,141,856
$(4,325,558) $31,816,298
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1997 and 1996
1997 1996
<S> <C>
<C>
Cash flows from operating activities:
Net income (loss) $ 3,856,657
$(6,161,269)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 940,389
1,372,992
Amortization 94,172
105,382
Loss on impairment of real estate -
8,510,000
Equity in earnings of joint venture (2,425,949)
(449,274)
Gain on sale of real estate -
(683,471)
Increase in operating assets:
Deferred expenses (190,486)
(129,918)
Other assets (199,291)
(92,343)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 72,858
(12,508)
Security deposits 15,685
(21,372)
Net cash provided by operating activities
2,164,035 2,438,219
Cash flows from investing activities:
Additions to real estate (57,181)
(325,998)
Investment in joint venture (5,559)
(130,575)
Distributions from joint venture 10,855,353
656,899
Proceeds from disposition of real estate held for sale
- - 5,092,559
Net cash provided by
investing activities 10,792,613
5,292,885
Cash flows from financing activities:
Decrease in deferred distributions (1,233,837)
- -
Cash distributions (12,977,827)
(2,061,776)
Repayment of loan from affiliate -
(4,032,527)
Net cash used in financing activities (14,211,664)
(6,094,303)
(Decrease) increase in cash and cash equivalents
(1,255,016) 1,636,801
Cash and cash equivalents at beginning of year
2,954,592 3,572,041
Cash and cash equivalents at end of period $1,699,576 $
5,208,842
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $
218,159
See accompanying notes to consolidated financial statements.
(continued)
</TABLE>
<TABLE>
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1997 and 1996
(continued)
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 $ 2,280,000 $
- -
Building and improvements 4,965,848
- -
Accumulated depreciation (4,263,818)
- -
Increase in real estate held for sale $
2,982,030 $
</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 (which was sold in the second quarter of
fiscal 1997) 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, the gain on sale of the 1718
Connecticut Avenue property in the third quarter of
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.
The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No 128,
"Earnings per Share" in February 1997. This
pronouncement establishes standards for computing and
presenting earnings per share, and is effective for the
Partnership's 1997 year-end financial statements. The
Partnership's management has determined that this
standard will have no impact on the Partnership's
computation or presentation of net income per unit of
limited partnership interest.
2. Real Estate
In September 1997, the Partnership entered into an
agreement with an unaffiliated party to sell the
Arlington Business Center property for a negotiated
sales price of approximately $5.2 million. The closing
of the sale is expected to occur during the fourth
quarter of fiscal 1997. The net carrying value of the
property (approximately $3.0 million) has been
reclassified to real estate held for sale.
3. Investment in Joint Venture
On April 10, 1997, the partnership which owned 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.
4. Related Party Transactions
An affiliate of the Managing General Partner provided
property management services for five and six
properties for the nine months ended July 31, 1997 and
1996, respectively. The Partnership paid the affiliate
management fees of approximately $141,000 and $172,000
for the nine months ended July 31, 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 the nine-month periods ended July
31, 1997 and 1996, the Partnership incurred
approximately $181,000 and $209,000 for these services,
respectively. These amounts are included in general
and administrative expenses.
As of July 31, 1997, the affiliates were owed a total
of approximately $34,000 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 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.
5. 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.
6. Subsequent Event
On August 27, 1997, the Partnership paid a cash
distribution of $7.72 per Unit. The distribution
totaled $795,847 with $716,262 distributed to the
Limited Partners and $79,585 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 one of which is under
contract to be sold) 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 3 to the consolidated financial
statements.
The economic expansion continues and has provided for
a rebound in the commercial property markets.
Employment growth, especially in the business services
and technology industries, has increased demand for
office space. Such increasing 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, and, in certain areas,
improved market conditions have led to new
construction. Currently, the completion of new office
construction in Charlotte, NC, the location of the
Carmel Park property, has increased the market vacancy
level to 9%. Vacancy in the SouthBay area of the Los
Angeles office market, the location of Harborgate, has
stabilized at 24% due to tenant influx caused by
limited leasing options in surrounding markets.
Vacancies at many office/research and development
properties are declining as communications, computer
and software companies demand additional space. The
vacancy rate in Arlington Heights, IL, the location of
Arlington Business Center, is currently 11%, and the
vacancy rate for office/research and development
properties in the Boston market, the location of the
Westwood 10 property, improved slightly during the
third quarter of 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 past
overbuilding 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), the property's vacancy rate remains at 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 nine-month periods
ended July 31, 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 nine-
month periods ended July 31, 1997, Partnership cash
flow from operations decreased compared to 1996 by
approximately $80,000 and $430,000, respectively, due
to the absence of cash flows from the 1718 Connecticut
Avenue property subsequent to its sale in June 1996.
Also, Partnership cash flow will be reduced during the
remainder of 1997 and thereafter as a result of the
sale of the Century Square building; the Partnership's
operating cash flow from the Century Square joint
venture was approximately $977,000 in fiscal year 1996
and $440,000 from November 1, 1996 until April 10,
1997, the date of the sale. Because of decreased
operating cash flow, the Partnership decreased 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 paid in August 1997.
The Managing General Partner has engaged real estate
brokers to market for sale the Arlington Business
Center, Carmel Park and Westwood 10 properties, and
believes that, barring a change in circumstances, it
will market the Harborgate and North Lake Plaza
properties for sale in fiscal year 1998. However,
there can be no assurance that all properties will be
sold.
In September, 1997 the Partnership entered into an
agreement to sell the Arlington Business Center for
$5.2 million. The Partnership's cash flow from this
property was approximately $528,000 in 1996, and
$132,000 and $424,000 for the three- and nine-month
periods ended July 31, 1997, respectively.
During the nine months ended July 31, 1997, the
Partnership incurred capital expenditures of $248,000,
primarily in connection with the leasing of space at
the Carmel Park buildings ($161,000).
During the nine months ended July 31, 1997, the
Partnership's cash flow from operations and
distributions received from operations of its joint
venture approximated capital expenditures and
distributions to partners (excluding distribution of
sales proceeds from the joint venture). In November
1996, the Partnership paid the deferred distribution
to the General Partners from cash reserves.
As of July 31, 1997, the Partnership has commitments
to fund approximately $221,000 of capital
expenditures, primarily relating to the Westwood 10
building ($121,000).
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 August 27, 1997, the Partnership paid the third
quarter cash distribution of $7.72 per Unit. The
total distribution aggregated $795,847 with $716,262
distributed to the Limited Partners and $79,585
distributed to the General Partners.
Operations
Fluctuations in the Partnership's operating results
for the three- and nine-month periods ended July 31,
1997 compared to 1996 were primarily attributable to
the following:
Rental revenues and property operating expenses
decreased in the three- and nine-month periods in 1997
primarily because of the absence of revenues and costs
from the 1718 Connecticut Avenue property, which was
sold in June 1996.
The gain on sale of real estate resulted from the sale
of the 1718 Connecticut Avenue property.
Equity in earnings of joint venture increased in the
nine-month period ended July 31, 1997 as a result of
the Partnership's share of the gain from the sale of
the Century Square office building. Because the
property was sold in April 1997, there were no third
quarter 1997 earnings from the joint venture. See
Note 3 to the consolidated financial statements.
Depreciation and amortization decreased during the
nine months ended July 31, 1997 by approximately
$215,000 because of the impairment writedown for the
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 $154,000 in the nine-month period ended
July 31, 1997, due to the sale of the 1718 Connecticut
Avenue property. No other individually significant
factors account for the remaining decrease.
In 1997, the Partnership incurred 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, North Lake Plaza and Carmel Park
properties totaling $8,510,000.
No individual factor accounted for a significant
change in interest and other revenues.
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 1997, the vacancy rate in the office market in the
SouthBay area of Los Angeles, California, the location
of Harborgate, has stabilized at approximately 24%.
Market rental rates have also stabilized. There is a
limited number of tenants seeking space in this
market. During the third quarter of 1997, occupancy at
the property decreased from 63% to 59%. 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 slightly in 1997.
During the third quarter of 1997, occupancy at the
property remained at 100%. Leases for approximately
16% and 35% of the property's space are scheduled to
expire in 1998 and 1999, respectively. In September
1997, the Partnership agreed to sell this property.
See note 2 to the consolidated financial statements.
In 1997, the vacancy in the research and development
building market in Westwood, Massachusetts, the
location of the Westwood 10 building, has improved
slightly, and rental rates in this market have
increased. During the third quarter of 1997,
occupancy at the property remained at 100%. The
Partnership renewed for five years a lease for
approximately 18% of the property's space which was to
expire in April 1997. No other significant leases are
scheduled to expire before 2000. The Partnership is
marketing this property to prospective buyers.
During the third quarter of 1997, the vacancy rate in
the Charlotte, North Carolina office market, the
location of the Carmel Park property, increased from
2% to 9% due to the completion of new construction in
this market. However, market rental rates continue to
increase. The Partnership expects construction to
continue in this market. During the third quarter of
1997, occupancy at the property decreased from 100% to
97%. 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 is marketing
this property to prospective buyers.
Altamonte Springs, Florida, the location of the North
Lake Plaza Shopping Center, is a strong retail market.
However, during the third quarter of 1997, vacancy in
this market increased slightly to 7% because of the
bankrupticies of certain tenants. Market rental rates
continue to be stable. During the third quarter of
1997, occupancy at the property remained at 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 2002. Marshalls
Inc., another anchor tenant, has completed remodeling
its store at the 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.
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.
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, 1997 By: /s/E. Davisson
Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: September 12, 1997 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P.
Quarter Ended July 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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 1,699,576
<SECURITIES> 0
<RECEIVABLES> 1,184,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,802,550<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 31,816,298<F2>
<TOTAL-LIABILITY-AND-EQUITY> 32,802,550<F3>
<SALES> 0
<TOTAL-REVENUES> 7,415,273<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,558,616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,856,657
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,856,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,856,657
<EPS-PRIMARY> 39.63<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $26,586,924, real estate hold for sale of $2,982,030 and
net deferred leasing commissions of $349,133.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $821,178,
and other liabilities of $165,074.
<F4>Total revenue includes rent of $4,798,148, equity in earnings of joint
venture of $2,425,949, and interest and other revenue of $191,176.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
