SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995 Commission File Number 2-94797
WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
Maryland 04-2846721
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
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
Part I. Financial Information:
Consolidated Statements of Operations
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(Amounts in thousands)(Unaudited) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Investment services................................................... $ 553 $ 411 $ 553 $ 411
Leasing commissions................................................... 404 236 685 541
Tenant service revenue................................................ 917 1,089 1,956 2,036
Management fees....................................................... 3,677 3,723 6,978 7,491
Interest.............................................................. 1,061 524 1,711 1,267
Rent.................................................................. 11,548 10,428 22,748 19,983
Other................................................................. 539 2,092 701 2,630
--- ----- --- -----
Total Revenues.................................................. 18,699 18,503 35,332 34,359
------ ------ ------ ------
Expenses:
Management, general and administrative................................ 4,526 5,031 8,733 9,982
Depreciation and amortization......................................... 1,988 1,722 3,864 3,261
Tenant service expense................................................ 943 1,137 2,121 2,016
Interest. . . . ...................................................... 4,115 3,638 7,756 6,879
Rental properties expense............................................. 5,907 5,123 11,077 9,790
----- ------- ------ ------
Total Expenses.................................................. 17,479 16,651 33,551 31,928
------ ------ ------ ------
Operating Income ............................................... 1,220 1,852 1,781 2,431
Equity in loss of investment programs................................. 71 36 (4) (117)
---- -- -- ------
Income before minority interest and
provision for income taxes..................................... 1,291 1,888 1,777 2,314
Minority Interest..................................................... - (56) - 92
- --- -- -----
Income before provision for income taxes........................ 1,291 1,944 1,777 2,222
----- ------ - ----- -------
Provision for income taxes............................................ 509 1,000 949 1,000
--- ----- ---- ------
Net income ..................................................... 782 944 828 1,222
Net Income allocated to:
General Partner................................................. - - - -
= = = = ==
Unitholders:
General Partner ............................................... $ - $ - $ - $ -
Public Unitholders.............................................. $ 782 $ 944 $ 828 $ 1,222
Public Unitholders Net Income Per Unit/based upon the weighted
average number of Units outstanding - 2,712,814
for the three and six months ended June 30, 1995 and 1994 ............ $ .29 $ .35 $ .31 $ .45
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Balance Sheets
<TABLE>
June 30, 1995 Dec. 31, 1994
(Amounts in thousands)(Unaudited) (Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents (of which $5,053 and $7,726 is unrestricted at June
30, 1995 and December 31, 1994,
respectively).......................................................... $ 16,171 $ 18,898
Current portion of receivables:
Fees, commissions and reimbursements, including accrued interest 3,466 4,406
Loans................................................................... 320 310
Earnest money deposit.................................................... 100 2,300
Other current assets..................................................... 874 1,448
--- -----
Total current assets................................................ 20,931 27,362
------ ------
Long-term Receivables:
Fees, net of reserves of $16,639 at June 30, 1995
and December 31, 1994.................................................. 9,625 8,921
Loans, net of reserves of $16,908 at June 30, 1995 and
December 31, 1994....................................................... 3,380 3,050
----- ------
Total long-term receivables......................................... 13,005 11,971
------ -------
Real Estate Assets:
Land..................................................................... 30,612 27,814
Buildings (net of accumulated depreciation of $9,558 and $6,930
at June 30, 1995 and December 31, 1994, respectively).................. 149,344 141,661
Furniture, fixtures, equipment (net of accumulated depreciation
of $3,304 and $2,961 at June 30, 1995 and December 31, 1994,
respectively)........................................................... 3,510 3,559
---------- -----
Total real estate assets............................................ 183,466 173,034
------- -------
Other Assets:
Equity interests in and advances to investment programs.................. 5,593 5,933
Deferred costs (net of accumulated amortization of $3,338 and
$2,837 at June 30, 1995 and December 31, 1994, respectively)........... 10,922 11,343
Other assets............................................................. 1,377 1,561
----- -----
Total other assets.................................................. 17,892 18,837
------ --------
$ 235,294 $ 231,204
= ======= === =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Notes payable............................................................ $ 43,600 $ 32,708
Accounts payable......................................................... 2,090 2,989
Accrued expenses and other............................................... 11,949 28,702
------ ------
Total current liabilities........................................... 57,639 64,399
------ ------
Long-term Liabilities:
Notes payable............................................................ 140,566 130,615
Deferred taxes........................................................... 12,791 11,926
Other long-term liabilities. . . ........................................ 5,655 6,449
----- -------
Total long-term liabilities......................................... 159,012 148,990
------- -------
Commitments and Contingencies
Partners' Capital:
Limited Partners, $25 stated value per Unit; authorized - 21,249,942 Units;
issued and outstanding - 15,284,243 Units:
Public Unitholders, 2,712,814 Units with preferential rights......... 43,110 42,282
General Partner, 12,571,429 Units without preferential rights........ (20,262) (20,262)
General Partner........................................................ (4,205) (4,205)
------ ----------
Total partners' capital............................................. 18,643 17,815
------ ------
$ 235,294 $ 231,204
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Cash Flows
<TABLE>
(Amounts in thousands)(Unaudited) 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 828 $ 1,222
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Increase in minority interest......................................... - 92
Depreciation and amortization......................................... 3,864 3,261
Equity in loss of investment programs................................. 4 117
Increases (decreases) in cash as a result of changes in operating assets and
liabilities:
Fees receivable..................................................... 236 3,789
Other assets........................................................ 758 730
Accounts payable.................................................... (899) (1,791)
Accrued expenses.................................................... (16,753) (385)
Accrued and deferred taxes.......................................... 865 -
Other liabilities................................................... (794) -
----- ------
Net cash (used in) provided by operating activities............... (11,891) 7,035
-------- -----
Cash flows from investing activities:
Capital expenditures.................................................... (2,550) (38,914)
Cash related to Southwestern Properties................................. - 7,888
Contributions to investment programs.................................... (14) (106)
Distributions from investment programs.................................. 350 270
Decrease in advances to investment programs............................. - 2,153
Decrease in earned money deposit........................................ 2,200 -
Increase in deferred costs.............................................. (379) (791)
(Increase) decrease in loans receivable................................. (340) 93
---- --
Net cash (used in) provided by investing activities............... (733) 29,593
---- -------
Cash flows from financing activities:
Net borrowings under credit facilities.................................. - 19,930
Borrowings of notes payable............................................. 17,621 -
Repayments of notes payable............................................. (7,724) -
------ -
Net cash provided by financing activities......................... 9,897 19,930
----- -------
Net (decrease) in cash and cash equivalents............................... (2,727) (2,628)
------ -------
Cash and cash equivalents at beginning of period.......................... 18,898 26,006
------ ------
Cash and cash equivalents at end of period................................ $ 16,171 $ 23,378
= ====== = ======
</TABLE>
Supplemental disclosure of Non Cash Investing and Financing Activities:
In April 1995, the Company purchased, from an unaffiliated party, an apartment
complex in Austin, Texas. In conjunction therewith, the Company obtained
$1,000,000 in seller financing and assumed a mortgage from a related party of
$9,945,974.
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to Consolidated Financial Statements June 30, 1995
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements reflect the
accounts of Winthrop Financial Associates ("WFA") and its subsidiaries including
First Winthrop (collectively referred to as the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements were prepared on the accrual basis of
accounting and reflect the Company's results of operations for an interim period
which may not necessarily be indicative of the results of operations for the
year ending December 31, 1995. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations for an
interim period have been made in the accompanying consolidated financial
statements. These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Partnership's latest annual report on Form 10-K.
Public Unitholders are entitled to a 6% per annum cumulative priority
distribution from all operating cash flow. At June 30, 1995, this unpaid
accumulated preference amounted to $18,311,495 or $6.75 per unit.
The net income of the Company is first allocated to Public Unitholders up to the
amount of the 6% per annum cumulative priority distribution and then any
remaining income is allocated to all partners in accordance with their
percentage interests. Net loss for financial statement purposes is allocated to
all partners in accordance with their percentage interests as outlined in the
partnership agreement.
2. STATEMENTS OF CASH FLOWS
The Company made interest and income tax payments during the six months ended
June 30, 1995 and 1994 as follows:
<TABLE>
(Amounts in thousands) 1995 1994
---------------------- ---- ----
<S> <C> <C>
Interest...................... $ 6,941 $ 6,729
Income Taxes.................. 84 -
</TABLE>
3. SUBSEQUENT EVENTS
As further discussed under "Financial Condition" and in the Company's July 18,
1995, 8-K filing, certain transactions occurred on July 18, 1995, whereby there
was a change in the control of the Company. In connection therewith, certain
agreements were entered into or settled with certain executives of the Company.
The effects of these transactions will be recorded in the period ending
September 30, 1995. The Company expects to record expenses related to the
settlement of certain employment agreements, incur other transaction related
costs, and is evaluating other possible effects of the transactions.
The Company obtained a loan in July 1995, in the approximate amount of
$41,000,000, the proceeds of which were used primarily to fund the transactions
discussed above, and to pay off a $9,400,000 note due August 15, 1995, a
$3,400,000 loan payable due October 31, 1996, and a loan payable in the
approximate amount of $15,000,000 which was classified as current at June 30,
1995, due to a breach of certain financial covenants.
In addition, subsequent to June 30, 1995, a $17,700,000 note payable to a
related party classified as a current liability at June 30, 1995, was converted
to preferred equity, as further described in "Financial Condition".
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995
The Company's total operating income for the three and six months ended June 30,
1995, decreased by $632,000 and $650,000 as compared to the corresponding
periods in 1994. The decrease is primarily attributable to decreases of
$1,553,000 and $1,929,000 in Other Income, for the three and six month periods,
offset by increases in Interest Income and decreases in Management, General, and
Administrative Expenses for these periods. In addition, the sources of Operating
Income have shifted as a result of the July 1994 sale of Winthrop's hotel
management division, Winthrop Hotels and Resorts and the acquisition of
additional real estate assets during 1994 and 1995.
The Company's Other Income for the six month period ended June 30, 1994,
included recovery of approximately $1,200,000 of reserved receivables and an
increase of approximately $400,000 in cash distributions received from
investment programs.
Both of these items were non-recurring.
The sale of Winthrop Hotels and Resorts resulted in a decrease of revenues of
approximately $400,000 and $968,000 for the three and six months ended June 30,
1995. Correspondingly, Management, General and Administrative Expenses decreased
by approximately $430,000 and $793,000 for such periods as a direct result of
the sale. The remainder of the decrease in Management, General and
Administrative Expenses relates to management's continuing efforts to control
costs.
Rental Revenue increased from $10,428,000 and $19,983,000 for the three and six
months ended June 30, 1994 to $11,548,000 and $22,748,000 for the three and six
months ended June 30, 1995 as a result of the acquisition of five apartment
properties containing 953 apartment units, as well as improved operations at
previously acquired properties. Rental Expense, Depreciation and Amortization
Expense, and Interest Expense related to real estate owned increased by $784,000
and $1,287,000, $352,000 and $771,000 and $371,000 and $647,000, respectively
from the corresponding periods. Total Operating Income derived from real estate
owned was $1,308,000 and $1,556,000 for the three and six months ended June 30,
1995 and $867,000 and $1,311,000 for the three and six months ended June 30,
1994. Rental Operating Income was lower in the second quarter of 1995 than the
first due to increased Maintenance Costs and increased Professional Fees.
The Company's tenant service revenues for the first half of 1995 decreased by
$80,000 from the first half of 1994. The Company incurred additional tenant
service expense of $105,000 which includes approximately $72,000 of nonrecurring
severance costs recognized during the first half of 1995.
Cash flow used in operations was ($11,891,000) for the six months ended June 30,
1995. The $18,926,000 decrease from the corresponding period in the prior year
is due principally to payment of $17,000,000 related to a legal settlement, as
well as payment of bonuses in 1995 of approximately $840,000 and payment of
severance costs in 1995 of approximately $500,000.
FINANCIAL CONDITION
As of June 30, 1995, the Company's current liabilities exceeded its current
assets by $36,708,000. This is primarily attributable to: (i) a short term note
payable to a related party in the amount of $17,700,000, the proceeds of which
were used primarily to fund an agreed upon settlement and the associated legal
fees incurred relating to a suit brought against WFA and First Winthrop (see WFA
1994 Form 10-K filed with the SEC on May 15, 1995); (ii) $9,400,000 of mortgage
indebtedness due August 15, 1995 which is secured by a WFA owned apartment
property; and (iii) a loan payable in the approximate amount of $15,000,000
which is secured by certain WFA owned apartment properties and is classified as
a current liability due to a breach of certain financial covenants provided for
in the loan documents.
In July 1995, the Company entered into a financing arrangement, whereby, the
Company borrowed approximately $41,000,000. The loan accrues interest at LIBOR +
3% and matures in 1998. The proceeds of this borrowing were used to pay off the
$9,400,000 and $15,000,000 loans described above, as well as to fund certain
transactions related to the change in ownership described below.
Subsequent to June 30, 1995, the Company contributed certain assets and
liabilities to a newly formed partnership controlled by the Company. The related
party lender contributed its $17,700,000 note payable to this newly formed
partnership in exchange for preferred equity which provides the related party
partner with certain preferences of cash flow from the newly formed partnership.
As a result of certain acquisitions, which are discussed further in the
Company's July 18, 1995 8-K filing, Londonderry Acquisition II Limited
Partnership, a Delaware Limited partnership and affiliate of Apollo Real Estate
Advisors, L.P. ("Apollo"), acquired control of the Company from Nomura Asset
Capital Corporation.
In addition, the Company, affiliates of Apollo and certain executives (the
"Management Group") executed an agreement whereby the Management Group sold to
the Company their respective equity interests in the entity which owned the
general partnership interest of the Company, and certain executives resigned.
The effect of these transactions will be recorded in the period ending September
30, 1995. The Company expects to record expenses related to the settlement of
certain employment agreements, incur other transaction related costs, and is
evaluating other possible effects of the transactions.
PART II - OTHER INFORMATION
All items are inapplicable.
SIGNATURE
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.
WINTHROP FINANCIAL ASSOCIATES,
A LIMITED PARTNERSHIP
(Registrant)
By: /s/ Richard J. McCready
Richard J. McCready
Chief Operating Officer
By: /s/ Steven H. Schneider
Steven H. Schneider
Chief Accounting Officer
DATED: August 14, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
six month period ending June 30, 1995 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000759253
<NAME> Winthrop Financial Associates
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1.00000
<CASH> 16,171,000
<SECURITIES> 0
<RECEIVABLES> 50,338,000
<ALLOWANCES> 33,547,000
<INVENTORY> 0
<CURRENT-ASSETS> 20,931,000
<PP&E> 196,328,000
<DEPRECIATION> 12,862,000
<TOTAL-ASSETS> 235,294,000
<CURRENT-LIABILITIES> 57,639,000
<BONDS> 184,166,000
<COMMON> 0
43,110,000
0
<OTHER-SE> (24,467,000)
<TOTAL-LIABILITY-AND-EQUITY> 235,294,000
<SALES> 0
<TOTAL-REVENUES> 35,332,000
<CGS> 0
<TOTAL-COSTS> 21,935,000
<OTHER-EXPENSES> 3,864,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,756,000
<INCOME-PRETAX> 1,777,000
<INCOME-TAX> 949,000
<INCOME-CONTINUING> 828,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 828,000
<EPS-PRIMARY> 0.310
<EPS-DILUTED> 0.000
</TABLE>
