<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Commission File
For the year ended December 31, 1998 Number 0-12210
----------------- -------
PRESIDENTIAL ASSOCIATES I LIMITED PARTNERSHIP
-----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 36-3110117
- ----------------------- ---------------------------------
(State of organization) (IRS Employer Identification No.)
5 Cambridge Center, Cambridge, Massachusetts 02142
- -------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Partnership's telephone number including area code: (617) 234-3000
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark whether the Partnership (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
Partnership was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Partnership's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Partnership's revenues for its most recent fiscal year were $334,690.
No market exists for the limited partnership interests of the Partnership, and,
therefore, no aggregate market value can be computed.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business.
Organization
Presidential Associates I Limited Partnership (the "Partnership") was
organized as a Maryland limited partnership under the Maryland Revised Uniform
Limited Partnership Act on July 20, 1983, for the purpose of investing in
Presidential Towers Ltd. (the "Operating Partnership"), an Illinois limited
partnership organized for the purpose of building, owning and operating a
residential apartment complex in downtown Chicago, Illinois (the "Project").
The general partners of the Partnership are Winthrop Financial Co.,
Inc., a Massachusetts corporation ("Winthrop Financial"), and Linnaeus-Phoenix
Associates Limited Partnership ("Linnaeus-Phoenix"). Winthrop Financial is the
Partnership's managing general partner. Collectively, Winthrop Financial and
Linnaeus-Phoenix are referred to herein as the "General Partners." Winthrop
Financial is a wholly-owned subsidiary of First Winthrop Corporation which is
wholly owned by Winthrop Financial Associates, A Limited Partnership ("WFA").
See "Employees" below.
The only business of the Partnership is investing as a limited partner
in the Operating Partnership. As of the date hereof, the general partners of the
Operating Partnership are (i) McHugh Levin Associates Venture ("McHugh Levin"),
an Illinois limited partnership whose general partners are James P. McHugh and
Daniel E. Levin, (ii) Madison-Canal Company, an Illinois limited partnership
whose general partner is Daniel J. Shannon and (iii) TKI Presidential Partners.
As of the date hereof, the Partnership holds a 19.998% limited
partnership interest in the Operating Partnership. In exchange for this interest
the Partnership made a capital contribution of $33,172,524 to the Operating
Partnership. See "Restructuring of Operating Partnership."
Development
The Partnership was initially capitalized with contributions totaling
$300 from the General Partners. In September 1983, the Partnership completed a
private offering of 590 units of limited partnership interest (the "Units")
pursuant to Regulation D under the Securities Act of 1933. The Partnership
raised $59,000,000 in capital contributions from 545 investor limited partners
(the "Limited Partners"). Of the $59,000,000 raised, $697,380 was received upon
the Limited Partners' admission to the Partnership, and the balance was paid in
installments pursuant to the terms of promissory notes (the "Investor Notes")
delivered to the Partnership by the Limited Partners. The last installment was
due on January 15, 1990. As of April 5, 1999, $64,023 of this installment
remains uncollected.
The General Partners and the general partners of the Operating
Partnership projected that reserves and deficit loans would be sufficient to
fund operations until the Project could achieve
2
<PAGE>
break-even operations. However, due to lower than projected revenues and higher
than projected real estate taxes, the Project's cash flow deficit was
significantly higher than anticipated, and thus the reserves were depleted
sooner than anticipated.
Restructuring of Operating Partnership
After failing to meet its mortgage obligations, the mortgage loan on
the Project was assigned by the lender to the Department of Housing and Urban
Development ("HUD") which had insured the mortgage. The Operating Partnership
and HUD entered into a written tentative Restructuring Agreement (the
"Restructuring Agreement") in December 1991. The Restructuring Agreement, which
was implemented on April 18, 1995 and was approved by a majority in interest of
the limited partners of the Partnership, provided for the split of the then
existing mortgage note into two new mortgage notes. This was designed to afford
the Project achievable debt service obligations under the Restructuring
Agreement. Both new mortgage notes mature on the same date as the original
mortgage loan, September 1, 2028. HUD will, however, have the right to
accelerate the obligations evidenced by the notes at any time after June 1,
2015.
Each of the notes is prepayable in whole or in part at any time without
penalty. The first mortgage note, in the original principal amount of
$127,000,000, bears interest at an annual rate of 8.1%. All accrued and unpaid
interest will be compounded annually at the rate of 8.1%. The first mortgage
note consists of two tiers. The first tier, in the principal amount of
$71,000,000, is to be repaid through level monthly payments which amortizes the
debt over the remaining loan term. A service charge payable to HUD in the amount
of 0.5% per annum of the then outstanding principal mortgage balance will be
payable monthly. The secondary tier note is in the amount of $56,000,000. The
secondary tier requires semi-annual payments of principal and interest in an
amount equal to 80% of the Project's net cash flow; provided, however, that
commencing on the tenth anniversary of the closing (June 1, 2005), the
semi-annual payments will be in an amount equal to the greater of (i) 80% of the
Project's net cash flow or (ii) a fixed minimum payment of $164,025 that shall
increase each year between the eleventh year and twentieth year after closing.
The Operating Partnership made payments aggregating $1,300,000 on account of the
secondary tier during 1998. The annual HUD 0.5% service charge accrues on the
then outstanding principal amount of the second tier and will be due only upon
prepayment in full of the first mortgage note or maturity of the first mortgage
note. In addition, the Operating Partnership is obligated to reduce the
secondary tier's principal by a total of $10,000,000 over a six year period
expiring June 1, 2001. This $10,000,000 obligation has been funded as described
below.
The original principal amount of the second mortgage note was
$63,001,421. The second mortgage note bears no interest and is payable from
available proceeds from a sale or refinancing of the Project. While the new
second mortgage note bears no interest, after payment in full of the principal
amount of the second mortgage note from the proceeds of a sale or refinancing of
the Project, 40% of all additional sale or refinancing proceeds shall be paid to
HUD until HUD shall have received $20,000,000 in excess of the principal amount
of the second mortgage note. HUD has the right to call this second note at any
time on or after June 1, 2015. The Restructuring Agreement also required the
Operating Partnership to establish a deficit escrow account of
3
<PAGE>
$3,000,000 over a six year period from sources other than the operating revenues
of the Project to provide additional collateral security for the mortgages. The
two capital requirements described above (the $10,000,000 reduction to the first
mortgage note's second tier and the $3,000,000 deficit escrow account)
necessitated raising $13,000,000 of new equity (available over six years, as
required).
In order to implement the Restructuring Agreement and raise the
$13,000,000 of new equity, a third party investor, TKI Presidential Partners
("TKI"), was admitted to the Operating Partnership as a general partner. TKI
agreed to contribute $14,000,000 over a six year period (as required by the
Restructuring Agreement with HUD) in exchange for a 79% general partnership
interest in the Operating Partnership, 79% of all future distributions by the
Operating Partnership of operating cash flow, a preferential return of its
capital contribution from the proceeds of a sale or refinancing, 79% of all
additional proceeds of a sale or refinancing, 100% of all future tax losses of
the Operating Partnership and effective control, through rights to approve or
initiate certain actions, over all major business decisions affecting the
Operating Partnership. As a result of TKI's investment, the Partnership's
interest in the Operating Partnership was reduced from a 94.99% limited
partnership interest to a 19.998% limited partnership interest and certain
control rights over major business decisions of the Operating Partnership were
transferred to TKI. As of December 31, 1998, TKI had funded $6,720,000 of its
$14,000,000 obligation. Pursuant to the terms of the Partnership Agreement of
the Operating Partnership, the Partnership is entitled to receive a distribution
from the Operating Partnership to reimburse it for its administrative expenses
and professional fees up to an annual maximum of $30,000. In addition, the
Operating Partnership made distributions to the Partnership during 1996, 1997
and 1998 of approximately $229,049, $255,839 and $327,592, respectively.
However, due to TKI being entitled to a priority return, there can be no
assurance that the Operating Partnership will be able to make additional
distributions to the Partnership, if at all, until the property is sold.
However, due to the preferred return to TKI and HUD, it is possible that a sale
will not generate sufficient funds to permit a distribution to the Partnership.
Accordingly, it is anticipated that limited partners will not receive a return
of their original investment in the Partnership.
Employees
The Partnership has no employees. On December 16, 1997, Winthrop
Financial and certain of its affiliates entered into a Services Agreement with
Coordinated Services of Valdosta, LLC ("Coordinated Services") pursuant to which
Coordinated Services was retained to provide asset management and investor
services to the Partnership and certain affiliated partnerships. As a result of
this agreement, Coordinated Services has the right to direct the day to day
affairs of the Partnership, including, without limitation, reviewing and
analyzing potential sale, refinancing or restructuring proposals by the
Operating Partnership, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the Partnership.
Coordinated Services is not permitted, however, without the consent of Winthrop
Financial, or as otherwise required under the terms of the Partnership's
Agreement of Limited Partnership (the "Partnership Agreement") to, among other
things, cause the Partnership to consent to a sale of an asset or cause the
Partnership to file for bankruptcy. As compensation for providing these
services, Winthrop Financial and its affiliates assigned to Coordinated Services
4
<PAGE>
all of their right to receive fees from the Partnership as provided in the
Partnership Agreement. See "Item 12, Certain Relationships and Related
Transactions."
Item 2. Description of Properties.
The Partnership has no properties other than its interest in the
Operating Partnership. For a description of the properties of the Operating
Partnership, see Item 1, Description of Business.
Item 3. Legal Proceedings.
To the best of the Partnership's knowledge, there is no material
pending legal proceedings to which it is a party.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period
covered by this report.
5
<PAGE>
PART II
Item 5. Market for the Partnership's Common Stock and Related
Security Holder Matters.
The Partnership is a limited partnership and thus has no common stock.
There is no established public trading market for the Units of limited
partnership interest in the Partnership. Trading in Units is sporadic and occurs
solely through private transactions.
As of March 1, 1999, there were approximately 579 holders of 590
outstanding Units.
The Partnership Agreement requires that Cash Flow (as defined therein)
be distributed to the partners in specified proportions at reasonable intervals
during the fiscal year and in any event no later than 60 days after the close of
each fiscal year. There are no restrictions on the Partnership's present or
future ability to make distributions of cash flow. For the years ended December
31, 1997 and 1998, the Partnership made distributions to its limited partners of
$301,755 ($511.48 per Unit) and $247,500 ($419.49 per Unit), respectively, and
$3,048 and $2,500 to the General Partners. See Item 6 "Management's Discussion
and Analysis or Plan of Operation" for the Partnership's ability to make
distributions in the future.
6
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
The matters discussed in this Form 10-KSB contain certain
forward-looking statements and involve risks and uncertainties (including
changing market conditions, competitive and regulatory matters, etc.) detailed
in the disclosure contained in this Form 10-KSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is distributions from the
Operating Partnership. As a result of the restructuring, the Partnership is
entitled to receive a distribution from the Operating Partnership to reimburse
it for its administrative expenses and professional fees up to an annual maximum
of $30,000 to cover these costs. During 1998, the Partnership received
distributions totaling $327,592 from the Operating Partnership as compared to
$255,840 in 1996. Due to TKI being entitled to a priority return from the
Operating Partnership, there can be no assurance that the Operating Partnership
will be able to continue to make distributions to the Partnership until the
property is sold. Furthermore, due to the preferred return to TKI and HUD, it is
possible that a sale will not generate sufficient funds to permit a distribution
to the Partnership. Accordingly, it is anticipated that limited partners will
not receive a return of their original investment in the Partnership. See "Item
1, Business-Restructuring of Operating Partnership."
The Partnership's liquidity, based on its cash and cash equivalents,
was $186,610 at December 31, 1998 as compared to $249,420 at December 31, 1999.
This decrease was due to $247,064 of cash used in financing activities which
more than offset $184,254 of cash provided by operating activities. Cash used in
financing activities consisted primarily of distributions to partners.
Results of Operations
The Partnership's net income for the year ended December 31, 1998 was
$313,638 as compared to $261,203 for the year ended December 31, 1997. The
increase in net income is a result of an increase in distributions from the
Operating Partnership which more than offset an increase in operating expenses
and a decrease in interest income. Distributions from the Operating Partnership
increased from $255,840 in 1997 to $327,592 in 1998. Interest income decreased
slightly due to lower cash balances. Operating expenses increased from $3,148 in
1997 to $21,052 in 1998 due to an increase in professional fees.
7
<PAGE>
As discussed above, future operation of the Partnership are subject to
the Operating Partnership's ability to make distributions to the Partnership.
Expenses are expected to remain relatively constant for future periods.
The General Partners believe that the inflation rate did not materially
affect the business or operating results of the Partnership during the last
three years; however, as discussed in Item 1 above, general economic conditions
have had a substantial effect on the operations of the Operating Partnership
since 1988. The residential market in Chicago is expected to continue to be
competitive for the foreseeable future.
Year 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates and Coordinated
Services for management and administrative services. Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
During the first half of 1998, Coordinated Services, the General
Partner and its affiliates completed their assessment of the various computer
software and hardware used in connection with the management of the Partnership.
This review indicated that significantly all of the computer programs used by
Coordinated Services, the General Partner and its affiliates are off-the-shelf
"packaged" computer programs which are easily upgraded to be Year 2000
compliant. In addition, to the extent that custom programs are utilized by
Coordinated Services, the General Partner and its affiliates, such custom
programs are Year 2000 compliant.
Following the completion of its assessment of the computer software and
hardware, Coordinated Services, the General Partner and its affiliates began
upgrading those systems which required upgrading. To date, significantly all of
these systems have been upgraded. The Partnership has to date not borne, nor is
it expected that the Partnership will bear any significant cost, in connection
with the upgrade of those systems to requiring remediation. It is expected that
all systems will be remediated, tested and implemented during the first half of
1999.
To date, neither Coordinated Services nor the General Partner are aware
of any external agent, including local general partners, with a Year 2000 issue
that would materially impact the Partnership's results of operations, liquidity
or capital resources. However, Coordinated Services and the General Partner have
no means of ensuring that external agents will be Year 2000 compliant. The
General Partner does not believe that the inability of external agents to
complete their Year 2000 resolution process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
8
<PAGE>
Item 7. Financial Statements
Presidential Associates I Limited Partnership
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 10
FINANCIAL STATEMENTS
BALANCE SHEETS 11
STATEMENTS OF INCOME 12
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 13
STATEMENTS OF CASH FLOWS 14
NOTES TO FINANCIAL STATEMENTS 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Presidential Associates I Limited Partnership
We have audited the accompanying balance sheets of Presidential
Associates I Limited Partnership as of December 31, 1998 and 1997, and the
related statements of income, partners' equity (deficit) and cash flows for the
two years in the period ended December 31, 1998. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Presidential
Associates I Limited Partnership as of December 31, 1998 and 1997, and the
results of its operations, changes in partners' equity (deficit) and its cash
flows for the two years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ Reznick, Fedder & Silverman
Bethesda, Maryland
March 29, 1999
-10-
<PAGE>
Presidential Associates I Limited Partnership
BALANCE SHEETS
December 31,
ASSETS
1998 1997
---------- ----------
Cash and cash equivalents $ 186,610 $ 249,420
Due from operating partnership 173,404 44,020
---------- ----------
$ 360,014 $ 293,440
========== ==========
LIABILITIES AND PARTNERS' EQUITY
PARTNERS' EQUITY $ 360,014 $ 293,440
---------- ----------
$ 360,014 $ 293,440
========== ==========
See notes to financial statements
-11-
<PAGE>
Presidential Associates I Limited Partnership
STATEMENTS OF INCOME
Years ended December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Expenses
Other $ 21,052 $ 3,148
---------- -----------
Loss before other income (21,052) (3,148)
Other income
Distribution from operating partnership 327,592 255,840
Interest income 7,098 8,511
---------- -----------
NET INCOME $ 313,638 $ 261,203
========== ===========
Units of investor limited partnership interest outstanding 590 590
========== ===========
Net income allocated to general partner $ 1,567 $ 1,306
========== ===========
Net income allocated to special limited partner $ 1,567 $ 1,306
========== ===========
Net income allocated to investor limited partners $ 310,504 $ 258,591
========== ===========
Net income per unit of investor limited partnership interest outstanding $ 526 $ 438
========== ===========
</TABLE>
See notes to financial statements
-12-
<PAGE>
Presidential Associates I Limited Partnership
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Special limited
General partner partner
--------------- ---------------
Linnaeus
Phoenix
Winthrop Associates Investor
Financial Limited limited
Company, Inc. Partnership partners Total
--------------- --------------- -------- -----
<S> <C> <C> <C> <C>
Partners' equity (deficit), $ (270,361) $ (572,270) $ 1,176,091 $ 333,460
December 31, 1996
Capital contributions 100 - 70,539 70,639
Less capital contributions not yet received (100) - (66,959) (67,059)
Distributions (1,524) (1,524) (301,755) (304,803)
Net income 1,306 1,306 258,591 261,203
------------- -------------- ------------- ---------------
Partners' equity (deficit), (270,579) (572,488) 1,136,507 293,440
December 31, 1997
Capital contributions 100 - 66,959 67,059
Less capital contributions not yet received (100) - (64,023) (64,123)
Distributions (1,250) (1,250) (247,500) (250,000)
Net income 1,567 1,567 310,504 313,638
-------------- ------------- ------------- ---------------
Partners' equity (deficit),
December 31, 1998 $ (270,262) $ (572,171) $ 1,202,447 $ 360,014
-------------- ------------- ------------- ---------------
</TABLE>
See notes to financial statements
-13-
<PAGE>
Presidential Associates I Limited Partnership
STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net income $ 313,638 $ 261,203
Adjustments to reconcile net income to net cash provided
by operating activities
Increase in due from operating partnership (129,384) (30,000)
Net cash provided by operating activities 184,254 231,203
Cash flows from financing activities
Distributions to partners (250,000) (304,803)
Contributions from investor limited partners 2,936 3,580
Repayment of general partner loans - -
Net cash used in financing activities (247,064) (301,223)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (62,810) (70,020)
Cash and cash equivalents, beginning 249,420 319,440
Cash and cash equivalents, end $ 186,610 $ 249,420
</TABLE>
See notes to financial statements
-14-
<PAGE>
Presidential Associates I Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The partnership was organized under laws of the State of Maryland on July 1,
1983 to acquire a limited partnership interest in Presidential Towers, Ltd.
(the "operating partnership").
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Investment in the Operating Partnership
The investment in the operating partnership is reported using the equity
method of accounting, under which the initial investment is recorded at
cost, increased or decreased by the partnership's share of income or losses,
and decreased by distributions. The investment cannot be reduced below zero.
Federal and State Income Taxes
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
Cash Equivalents
For the purposes of the statement of cash flows, the partnership considers
all highly liquid financial instruments, which consist of a money market
account, purchased with a maturity of three months or less, to be cash
equivalents. The carrying amount approximates fair value because of the
short maturity of this instrument.
NOTE B - INVESTMENT IN OPERATING PARTNERSHIP
The partnership held a 94.99% interest in the operating partnership which
constructed, owns and operates four 49-story residential and commercial
towers in Chicago, Illinois. During 1995, the partnership agreed to the
restructuring of the operating partnership which included the admission of
an additional general partner and an amendment to the operating
partnership's partnership agreement. The amendment resulted in the
partnership's interest in the operating partnership being reduced to
19.998%. Further, all losses from the operating partnership are allocated to
the new general partner.
-15-
<PAGE>
Presidential Associates I Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - INVESTMENT IN OPERATING PARTNERSHIP (Continued)
The following is a summary of the financial position of the operating
partnership at December 31, 1998 and 1997, and a summary of its results of
operations for each of the two years in the period ended December 31, 1998,
prepared in conformity with generally accepted accounting principles.
BALANCE SHEETS
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Assets
Buildings, improvements and personal property, net of accumulated $ 71,947,446 $ 77,151,766
depreciation of $79,721,797 and $74,364,103
Land 7,798,111 7,798,111
Other assets 10,224,575 9,263,793
------------------ ------------------
$ 89,970,132 $ 94,213,670
================== ==================
Liabilities
Mortgages payable, including deferred interest of $5,447,739 and $ 190,047,617 $ 190,737,067
$4,389,495, respectively
Other liabilities 9,299,506 9,544,219
------------------ ------------------
199,347,123 200,281,286
Partners' deficit (109,376,991) (106,067,616)
------------------ ------------------
$ 89,970,132 $ 94,213,670
================== ==================
STATEMENTS OF OPERATIONS
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenue
Rental $ 28,464,740 $ 27,544,404
Other 1,325,199 1,309,338
Interest 247,677 273,769
------------------ ------------------
30,037,616 29,127,511
Expenses
Operating expenses 26,772,522 29,072,610
Amortization 64,150 62,477
Depreciation 6,552,194 5,870,231
------------------ ------------------
33,388,866 35,005,318
------------------ ------------------
NET LOSS $ (3,351,250) $ (5,877,807)
================== ==================
</TABLE>
-16-
<PAGE>
Presidential Associates I Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - INVESTMENT IN OPERATING PARTNERSHIP (Continued)
The unrecognized portion of cumulative losses will be offset against the
partnership's share of future income from Presidential Towers, Ltd. The
cumulative unrecognized loss at December 31, 1998 and 1997 is $87,999,502.
NOTE C - CAPITAL CONTRIBUTIONS
Capital contributions receivable are recorded when received, and at December
31, 1998 and 1997 are as follows:
1998 1997
Investor limited partners $ 67,604 $ 66,959
General partner 100 100
$ 67,704 $ 67,059
During 1997, the partnership wrote off investor notes receivable in the
amount of $18,293 due to three investors filing bankruptcy.
NOTE D - RELATED PARTY TRANSACTIONS
As of December 31, 1998 and 1997, $7,518 and $44,020, respectively, is due
from the operating partnership for operating expenses the partnership paid
on its behalf. The balance is due on demand.
As of December 31, 1998 and 1997, $165,886 and $0, respectively, is due from
the operating partnership for distributions made during 1998 and included in
due from operating partnership.
-17-
<PAGE>
Presidential Associates I Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE E - RECONCILIATION OF NET INCOME
The Partnership's income for income tax purposes for 1998 and 1997 is the
same as income for financial statement purposes.
In addition, the net difference between buildings and improvements for tax
purposes and financial statement purposes of the operating partnership for
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Buildings and improvements as reported $ 71,947,446 $ 77,151,766
Buildings and improvements for tax purposes - -
--------------- ---------------
$ 71,947,446 $ 77,151,766
</TABLE>
NOTE F - OTHER INFORMATION
On October 28, 1997, Insignia Financial Group acquired 100% of the Class B
stock of First Winthrop Corporation, an affiliate of Winthrop Financial
Company, Inc.
-18-
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
19
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The Partnership has no officers or directors. Winthrop Financial
manages and controls substantially all of the Partnership affairs and has
general responsibility and ultimate authority in all matters affecting its
business. As of March 1, 1999, names of the directors and executive officers of
Winthrop Financial and the position held by each of them are as follows:
Has Served as
Position Held with the a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President 1-96
and Director
Patrick J. Foye Vice President - Residential 10-98
and Director
Carolyn Tiffany Chief Operating Officer 10-95
and Clerk
Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property Investors,
Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director
and executive officer of NPI Property Management Corporation ("NPI Management")
from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been
President of Exeter Capital Corporation, a firm which has organized and
administered real estate limited partnerships.
Thomas C. Staples, age 43, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 47, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of NPI and NPI Management. From June 1991
until March 1994, Mr. Braverman was President of the Braverman Group, a firm
specializing in management consulting for the real estate and construction
industries. From 1988 to 1991, Mr. Braverman was a Vice President and
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Assistant Secretary of Fischbach Corporation, a publicly traded, international
real estate and construction firm.
Patrick J. Foye, age 41, has been Vice President-Residential and
Director of the Managing General Partner since October 1, 1998. Mr. Foye has
served as Executive Vice President of Apartment Investment and Management
Company ("AIMCO") since May 1998. Prior to joining AIMCO, Mr. Foye was a partner
in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998
and was Managing Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island
Power Authority and serves as a member of the New York State Privatization
Council. He received a B.A. from Fordham College and a J.D. from Fordham
University Law School.
Carolyn Tiffany, age 32, has been employed with WFA since January
1993. From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and
Associate in WFA's accounting and asset management departments. Ms. Tiffany was
a Vice President in the asset management and investor relations departments of
WFA from October 1995 to December 1997, at which time she became the Chief
Operating Officer of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners
81 Limited Partnership; Winthrop Residential Associates I, A Limited
Partnership; Winthrop Residential Associates II, A Limited Partnership; Winthrop
Residential Associates III, A Limited Partnership; 1626 New York Associates
Limited Partnership; 1999 Broadway Associates Limited Partnership; Nantucket
Island Associates Limited Partnership; One Financial Place Limited Partnership;
Riverside Park Associates Limited Partnership; Springhill Lake Investors Limited
Partnership; Twelve AMH Associates Limited Partnership; Winthrop California
Investors Limited Partnership; Winthrop Growth Investors I Limited Partnership;
Winthrop Interim Partners I, A Limited Partnership; Southeastern Income
Properties Limited Partnership; and Southeastern Income Properties II Limited
Partnership.
Except as indicated above, neither the Partnership nor Winthrop
Financial has any significant employees within the meaning of Item 401(b) of
Regulation S-B. There are no family relationships among the officers and
directors of Winthrop Financial.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer, beneficial owner of more than ten percent of the
units of limited partnership interest in the Partnership that failed to file on
a timely basis, as
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disclosed in the above Forms, reports required by section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years.
Effective December 16, 1997, Winthrop Financial and certain of its
affiliates entered into an agreement with Coordinated Services of Valdosta, LLC
("Coordinated Services") to provide for the daily asset and property management
services and investor services for the Partnership. See "Item 11, Security
Ownership of Certain Beneficial Owners and Management." Coordinated Services of
Valdosta LLC is a Georgia limited liability corporation with headquarters in
Valdosta, Georgia. Founded in 1997, its managing member is Investor Service
Group, Inc., a Georgia Corporation. The principals of Investor Service Group are
Mary T. Johnson and James L. Dewar, Jr.
Mary T. Johnson is the Manager of Coordinated Services. Ms. Johnson is
also Executive Vice President of Dewar Realty, Inc. and Dewar Properties, Inc.
Ms. Johnson is a graduate of Valdosta State University and is a licensed Georgia
Real Estate Broker. Ms. Johnson has 21 years of experience in property
management, asset management, investor services, and development of apartment
and assisted living properties. Ms. Johnson is currently responsible for the
asset management of over 150 investor partnerships and property management of
over 50 apartment communities.
James L. Dewar, Jr. is the founder of Dewar Realty, Inc. and Dewar
Properties, Inc. Mr. Dewar is a graduate of the University of Georgia and is a
licensed Georgia Real Estate Broker. Mr. Dewar has 32 years experience in real
estate construction, property management and development of apartment and
assisted living properties. Mr. Dewar has produced over $100 million in
conventional and government funded family and elderly apartment communities.
Item 10. Executive Compensation.
The Partnership is not required to and did not pay any compensation to
the officers or directors of the General Partner. The General Partners do not
presently pay any compensation to any of its officers or directors.
(See Item 12, "Certain Relationships and Related Transactions.")
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security ownership of certain beneficial owners.
The Partnership is a limited partnership and has issued Units of
limited partnership interest. The Units are not voting securities, except that
the consent of the Limited Partners is required to approve or disapprove certain
transactions including the removal of a General Partner, certain amendments to
the Partnership Agreement, the dissolution of the Partnership or the sale of all
or substantially all of the assets of the Partnership. No Limited Partner owns
beneficially more than 5% of the Units in the Partnership.
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No other person or group is known by the Partnership to be the
beneficial owner of more than 5% of the outstanding partnership interest as of
the date of this Annual Report.
(b) Security Ownership of Management.
One Unit of limited partnership interest is owned by a limited partner
of Linnaeus who is also a limited partner of the general partner of WFA and a
former employee and officer of WFA, Winthrop Financial and First Winthrop
Corporation. In addition, WFA owns two units of limited partnership interest. No
other officer, director or partner of Winthrop Financial or Linnaeus-Phoenix
owns any Units as of the date hereof in his individual capacity.
(c) Changes in Control.
As a result of the implementation of the Restructuring Agreement in
1995, TKI Presidential Partners, in exchange for a commitment to make a capital
contribution of $14,000,000 to the Operating Partnership over 6 years, acquired
certain control rights over major business decisions of the Operating
Partnership previously held by the Partnership, or WFC Realty Co., Inc. In
addition, as a result of the Restructuring Agreement the Partnership's interest
in the Operating Partnership was reduced from 94.99% to 19.998%.
On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services Agreement with Coordinated Services pursuant
to which Coordinated Services was retained to provide asset management and
investor services to the Partnership and certain affiliated partnerships. As a
result of this agreement, Coordinated Services has the right to direct the day
to day affairs of the Partnership, including, without limitation, reviewing and
analyzing potential sale, refinancing or restructuring proposals by the
Operating Partnership, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the Partnership.
Coordinated Services is not permitted, however, without the consent of Winthrop
Financial, or as otherwise required under the terms of the Partnership Agreement
to, among other things cause the Partnership to consent to a sale of an asset or
cause the Partnership to file for bankruptcy. As compensation for providing
these services, Winthrop Financial and its affiliates assigned to Coordinated
Services all of their right to receive fees from the Partnership as provided in
the Partnership Agreement
Item 12. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others.
None
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Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Exhibits:
The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report and incorporated in this
Annual Report as set forth in said Index.
(b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PRESIDENTIAL ASSOCIATES I LIMITED
PARTNERSHIP
By: Winthrop Financial Co., Inc.,
Managing General Partner
By: /s/ Michael L. Ashner
-----------------------------
Michael Ashner
Chief Executive Officer
Date: May 10, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Partnership and in the capacities and on the dates indicated.
Signature/Name Title Date
/s/ Michael L. Ashner Chief Executive Officer May 10 1999
- --------------------- and Director
Michael L. Ashner
/s/ Thomas Staples Chief Financial Officer May 10, 1999
- ------------------
Thomas Staples
/s/ Peter Braverman Executive Vice President May 10, 1999
- ------------------- and Director
Peter Braverman
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page
<S> <C> <C>
3,4 Amended and Restate Limited Partnership Agreement and Certificate of (1)
Amendment of Presidential Associates I Limited Partnership
(b) Amendment to Amended and Restated Limited Partnership Agreement (3)
and Certificate of Limited Partnership of Presidential Associates
I Limited Partnership dated April 19, 1995
10(a) Form of Investor Bond issued to the Partnership by Continental (1)
Casualty Company
(b) Trust Agreement dated as of September 15, 1980 between the Operating (1)
Partnership and LaSalle National Bank
(c) Letter of Credit and Reimbursement Agreement dated as of July 21, 1983 (1)
between the Operating Partnership and Citibank, N.A.
(d) Revolving Credit and Term Loan Agreement dated as of September 30, (1)
1983 between the Partnership and Citibank, N.A.
(e) Regulatory Agreement for Multi-Family Housing project dated as of (1)
July 1, 1983 between LaSalle National Bank, as Trustee, the Operating
Partnership, the General Partners and the Secretary of Housing and Urban
Development
(f) Building Loan Agreement dated as of July 1, 1983 between LaSalle (1)
National Bank, as Trustee, and American National Bank & Trust
Company of Chicago, as Trustee for the City of Chicago
(g) Mortgage Note dated as of July 1, 1983 in the amount of $158,900,000 (1)
from LaSalle National Bank, as Trustee, to American National Bank &
Trust Company of Chicago, as Trustee
(h) Mortgage dated as of July 1, 1983 between LaSalle National Bank and (1)
Trust Company of Chicago, as Trustee
(i) Architectural Services Agreement dated as of July 1, 1983 between (1)
LaSalle National Bank, as Trustee, and Solomon Cordwell Buenz &
Associates, Inc.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
(j) Construction Contract dated as of July 21, 1983 between (1)
LaSalle (1) National Bank, as Trustee, and James McHugh
Development Co.
(k) Management Agreement dated as of July 14, 1983 between the (1)
Operating Partnership and The Habitat Company
(l) Financing Agreement dated as of July 1, 1983 among the City of (1)
Chicago, the Operating Partnership, LaSalle National Bank,
as Trustee, Madison-Canal Company, McHugh Levin Associates
Venture and American National Bank & Trust Company
of Chicago, as Trustee
(m) Security Agreement - (Chattel Mortgage) dated July 1, 1983 (1)
between LaSalle National Bank, as Trustee, and American
National Bank & Trust Company of Chicago, as Trustee
(n) Commitment Letter dated March 22, 1983 of GNMA with (1)
respect to the Project
(o) Loan Agreement dated September 20, 1988 between Presidential (2)
Towers, Ltd. and American National Bank and Trust Company
of Chicago
(p) Third Amended and Restated Limited Partnership Agreement of (3)
Presidential Towers, Ltd., dated April 19, 1995
(q) Amended and Restated Substitute Mortgage Note, dated April 18, 1995 (3)
made by LaSalle National Trust, N.A., as trustee, in favor of the
Secretary of Housing and Urban Development
(r) Third Modification to Mortgage, dated April 18, 1995, between (3)
LaSalle National Trust, N.A., as Trustee the Secretary of Housing
and Urban Development
(s) Amendment to Regulatory Agreement for Multifamily Housing (3)
Projects, dated as of April 18, 1995, between LaSalle National Bank,
as Trustee, and Presidential Towers, Ltd. and the Secretary of
Housing and Urban Development
(t) Restructuring Agreement, dated April 18, 1995, among LaSalle (3)
National Trust, as Trustee, Presidential Towers, Ltd. and the
Secretary of Housing and Urban Development.
</TABLE>
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(u) Services Agreement, dated December 16, 1997, by and
between First Winthrop Corporation, Winthrop Financial Co.,
Inc., WFC Realty Co., Inc., WFC Realty Saugus, Inc., Winthrop
Properties, Inc., Winthrop Metro Equities Corporation,
Winthrop Libson Realty, Inc. and Northwood Realty Co., Inc.
and Coordinated Services of Valdosta, LLC.
27. Financial Data Schedule
- ------------------
(1) Incorporated herein by reference to the Partnership's Registration
Statement on Form 10 (Commission Partnership file number 0-12210).
(2) Incorporated herein by reference to Exhibit 10(p) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1985.
(3) Incorporated herein by reference to Partnership's Annual Report on Form
10-K for the year ended December 31, 1995.
(4) Incorporated by reference to the Partnership's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1998.
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