SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 Commission File Number 2-94797
WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maaryland 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
<PAGE>
<TABLE>
Consolidated Statements of Operations
- -------------------------------------------------------------------------------------------------------------------
For the Three Months
Ended March 31,
(Amounts in thousands) (Unaudited) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Rent.................................................................. $ 12,478 $ 11,200
Management fees ...................................................... 3,604 3,301
Leasing commissions .................................................. 132 281
Tenant service revenue................................................ - 1,039
Interest.............................................................. 1,108 650
Other................................................................. 1,134 162
----------- ----------
Total Revenues............................................ 18,456 16,633
----------- ----------
Expenses:
Rental................................................................ 5,627 5,170
Depreciation and amortization......................................... 2,044 1,876
Interest.............................................................. 3,946 3,641
Management, general and administrative................................ 4,261 4,207
Tenant service expense................................................ - 1,178
----------- ---------
Total Expenses............................................ 15,878 16,072
----------- ----------
Operating income.......................................... 2,578 561
Equity in income (loss) of investment programs 39 (75)
---------- ---------------
Income from operations before
Minority interest and provision for income taxes 2,617 486
Minority Interest..................................................... (501) -
----------- ---------
Income from operations before
provision for income taxes.............................. 2,116 486
----------- ----------
Provision for income taxes............................................ 1,026 440
----------- ---------
Net Income ............................................... $ 1,090 $ 46
=========== ==========
Net Income allocated to:
General Partner ..................................................... $ - $ -
=========== =======
Unitholders:
General Partner ................................................ $ - $ -
========== =======
Public Unitholders ............................................. $ 1,090 $ 46
========== =========
PublicUnitholders' Net Income Per Unit/based upon the the weighted average
number of Units outstanding - 2,712,814
for the three months ended March 31, 1996 and 1995 $ .40 $ .02
===== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
Consolidated Balance Sheets
- -------------------------------------------------------------------------------------------------------------------
Mar. 31, 1996 Dec. 31, 1995
(Amounts in thousands) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents (of which $12,486 and $3,834 is unrestricted at March
31, 1996 and December 31, 1995,
respectively).......................................................... $ 22,763 $ 12,362
Current portion of receivables:
Fees, commissions and reimbursements, including accrued interest 4,356 5,488
Related party receivables............................................... 499 234
Other current assets...................................................... 745 1,244
------------ -----------
Total current assets................................................ 28,363 19,328
------------ ------------
Long-term Receivables:
Fees, net of reserves of $8,502 and $16,879 at March 31, 1996
and December 31, 1995.................................................. 10,227 9,678
Loans, net of reserves of $6,539 and $16,888 at March 31, 1996 and
December 31, 1995....................................................... 3,125 3,200
------------ -----------
Total long-term receivables......................................... 13,352 12,878
------------ ------------
Real Estate Assets:
Land..................................................................... 30,727 30,727
Buildings................................................................ 162,363 160,918
Furniture, fixtures, equipment........................................... 7,417 7,255
Accumulated depreciation................................................. (18,276) (16,676)
------------- ------------
Total real estate assets............................................ 182,231 182,224
------------ ------------
Other Assets:
Equity interests in and advances to investment programs - 4,973
Deferred costs (net of accumulated amortization of $4,281 and
$3,837 at March 31, 1996 and December 31, 1995, respectively) 10,898 11,317
Other assets............................................................. 90 181
------------ -----------
Total other assets.................................................. 10,988 16,471
------------ ------------
$ 234,934 $ 230,901
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Notes payable............................................................ $ 2,043 $ 2,059
Accounts payable......................................................... 3,588 2,819
Accrued expenses and other............................................... 10,545 10,759
------------ -----------
Total current liabilities........................................... 16,176 15,637
------------ ------------
Long-term Liabilities:
Notes payable............................................................ 175,422 175,521
Deferred taxes........................................................... 14,398 13,372
Equity interests in and advances to investment programs 1,503 -
Other long-term liabilities.............................................. 5,073 4,859
------------ -----------
Total long-term liabilities......................................... 196,396 193,752
------------ ------------
Commitments and Contingencies
Minority Interest......................................................... 16,611 16,851
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 41,996 40,906
General Partner, 12,571,429 Units without preferential rights (26,636) (26,636)
General Partner........................................................ (5,365) (5,365)
Investment in W.L. Realty Limited Partnership (4,244) (4,244)
------------ ---------------
Total partners' capital............................................. 5,751 4,661
------------ ------------
$ 234,934 $ 230,901
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------------------------------------------
For the Three Months
Ended March 31,
(Amounts in thousands) (Unaudited) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 1,090 $ 46
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................................... 2,044 1,876
Minority interest expense............................................. 501 -
Equity in (income) loss of investment programs (39) 75
Increases (decreases) in cash as a result of changes in operating assets and
liabilities:
Fees receivable..................................................... 867 75
Other current assets................................................ 499 399
Long term receivables............................................... (549) -
Other non current assets............................................ 91 146
Accounts payable.................................................... 769 (564)
Accrued expenses.................................................... (214) (1,748)
Accrued deferred taxes.............................................. 1,026 356
Other liabilities................................................... 214 25
----------- ------------
Net cash provided by operating activities 6,299 686
----------- ---
Cash flows from investing activities:
Capital expenditures.................................................... (1,607) (949)
Contributions to investment programs.................................... (100) -
Distributions from and repayment of advances to investment programs 6,615 3
Decrease in earned money deposit........................................ - 1,027
Decrease loans receivable............................................... 75 (298)
---------- -----------
Net cash provided by (used in) investing activities 4,983 (217)
------- ----
Cash flows from financing activities:
Borrowings of notes payable............................................. - 1,400
Increase in deferred costs.............................................. (25) (100)
Distributions to minority interest...................................... (741) -
Repayments of notes payable............................................. (115) (3,785)
----------- ---------
Net cash used in financing activities............................. (881) (2,485)
----------- ------------
Net increase (decrease) in cash and cash equivalents 10,401 (2,016)
-------- ---------------
Cash and cash equivalents at beginning of period 12,362 18,898
----------- --------------
Cash and cash equivalents at end of period $ 22,763 $ 16,882
================== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Notes to Consolidated Financial Statements March 31, 1996
1. BASIS OF PRESENTATION
1. 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, 1996. 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 March 31, 1996, this unpaid
accumulated preference amounted to $21,363,000 or $7.87 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. The Company made interest and income
tax payments during the three months ended March 31, 1996 and 1996 as
follows:
2. STATEMENTS OF CASH FLOWS
<TABLE>
(Amounts in thousands) 1996 1995
-----------------------------------------------------------
<S> <C> <C>
Interest...................... $ 3,746 $ 3,669
Income Taxes.................. - 84
</TABLE>
3. RELATED PARTY TRANSACTIONS
During the quarter ended March 31, 1996 the Company made advances of
$265,000 to certain affiliates of Apollo. Such advances bear interest
at prime plus 1% and are due on demand.
4. SUBSEQUENT EVENTS
On May 2, 1996, the Company was informed that a summary judgment
previously granted in favor of the Company had been reversed and that
the case was remanded for trial. An unfavorable decision at trial will
have a significant adverse impact on the Company's ability to continue
its operations. See "Part II Item 1, Legal Proceedings".
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
The Company generates substantially all of its income from rental revenues
received at its properties and management fees and tenant service fees received
by its Apartment, Commercial and Asset Management Divisions and is responsible
for costs associated with the ownership and maintenance of its assets as well as
general and administrative costs. At March 31, 1996, the Company had cash
resources available to it of $22,763,000 of which $12,486,000 was unrestricted
as compared to $12,362,000 of cash at December 31, 1995 of which $3,484,000 was
unrestricted. The Company invests its working capital in money markets accounts
or repurchase agreements secured by United States Treasury obligations.
The Company generated $6,299,000 of cash from operating activities and
$4,983,000 of cash from investing activities while utilizing $881,000 in
financing activities during the quarter ended March 31, 1996. The significant
cash provided from operations is primarily the result of a collection of
significant amounts previously advanced to partnerships and fees receivable in
the first quarter of 1996.
In February 1996, the Company contributed approximately $36.6 million of
receivables to Nineteen New York Properties Limited Partnership ("19NY") in
connection with a loan restructuring transaction pursuant to which an affiliate
of Apollo Real Estate Advisors, L.P. ("Apollo") acquired the existing debt on
certain of 19NY's properties. The remaining $10 million of receivables owed by
19NY and 1626 New York Associates Limited Partnership, a general partner of
19NY, were evidenced by a promissory note which the Company sold to an affiliate
of Apollo for $6,000,000.
At this time the Company believes that its cash reserves and cash flow
from operations will be sufficient to satisfy future working capital
requirements. It appears, however, that the original investment objectives of
capital growth and quarterly distributions will not be attained in the
foreseeable future and that limited partners are unlikely to receive a return of
all of their invested capital.
During the first quarter of 1996, distributions to WFA's partners remained
suspended and it is anticipated that distributions will continue to be suspended
for the foreseeable future. However, if the terms of a proposed settlement of a
lawsuit brought by a limited partner of WFA on behalf of all Preferred
Unitholders are approved, it is expected that during 1996 each Preferred
Unitholders' interest in WFA will be liquidated at a price determined by
Londonderry Acquisition Corp. Inc. that is greater than or equal to $10.50 per
Preferred Unit and which must be opined upon by an independent investment
banking firm as fair from a financial point of view.
Subsequent Event
On May 2, 1996, the Company was informed that a summary judgment
previously granted in favor of the Company had been reversed and that the case
was remanded for trial. An unfavorable decision at trial will have a significant
adverse impact on the company's ability to continue its operations. See "Part II
Item 1,Legal Proceedings".
Results of Operations
Operating income improved by $2,017,000 for the three months ended March 31,
1996 as compared to March 31, 1995, due to an increase in revenues of $1,823,000
and a decrease in expenses of $194,000.
The increase in revenues for the three months ended March 31, 1996 as
compared to 1995 is due to increases in rental revenue of $1,278,000, management
fees of $303,000, interest income of $458,000 and other income of $972,000 which
was partially offset by decreases in leasing commissions of $149,000 and tenant
service revenue of $1,039,000.
<PAGE>
The increase in rental revenue is primarily attributable to the acquisition
in April 1995 of a 329 unit apartment complex located in Austin, Texas and
overall improved operations at the Company's properties. The increase in
management fees was primarily attributable to the improved revenues at the
properties the Company manages which were partially offset by non-recurring lost
contract charges and the elimination of construction management fees due to the
outsourcing of these services. Interest income increased as a result of higher
cash balances and the increase in other income is attributable to non-recurring
recoveries of previously recorded fees receivable and fees received for
arranging financings.
Tenant service revenue decreased due to the outsourcing of building cleaning,
security and construction services. The decrease in leasing commissions is
attributable to both timing and the outsourcing of leasing functions at certain
of the Company's properties.
Operating expenses decreased due to a decrease in tenant service expense of
$1,178,000 which was partially offset by increases in management, general and
administrative expense of $54,000, rental expense of $457,000, depreciation and
amortization of $168,000 and interest expense of $305,000.
The increase in management, general and administrative expenses is
attributable to an increase in legal and professional fees partially offset by
savings due to a reduction in the number of employees of the Company as well as
other cost cutting measures. The decrease in tenant service expense is the
result of the outsourcing of these functions. The increases in rental expense,
depreciation and amortization and interest expense are primarily attributable to
the acquisition of the Austin, property.
The increase in interest expense is also attributed to the additional $42
million financing secured by certain of the Company's residential apartment
properties which closed in July, 1995.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
Gray, et al v. First Winthrop Corporation, et al. (No. C-90-2600-JPV), filed
on September 10, 1990 in the U.S. District Court, Northern District of
California. This suit was brought by as a class action by two individuals, who
were limited partners in 353 San Francisco Associates Limited Partnership
("353"), a real estate investment partnership organized in 1984. 353 owned an
office building in San Francisco which was foreclosed upon by the first mortgage
lender in April 1990. The plaintiffs allege violations of common law and
securities law fraud in the conduct of the original offering of investment
interests and seek rescission of their investment, totaling $28 million plus
accrued interest.
In September, 1994, summary judgment was entered against the plaintiffs and in
favor of First Winthrop on all claims asserted by the plaintiffs. In May 1996
the United States Court of Appeals for the Ninth Circuit reversed the summary
judgment granted by the District Court in favor of the Company and remanded the
case for trial. The Company believes that an adverse decision at trial would
have a significant negative impact on the Company's ability to continue
operations.
Albert Friedman, Individually and as representative of a class of similarly
situated persons, v. Linnaeus Associates Limited Partnership et al., No. 94 CH
11524, Cir. Ct. of Cook County, Ill. The plaintiff brought a purported class
action in December 1994 on behalf of all holders of Public Units against
Linnaeus, Management Investors and Nomura.
On April 4, 1996, the Cook County Circuit Court issued a preliminary
approval order with respect to a proposed settlement. The proposed settlement
provides, among other things, that in exchange for a release from the
plaintiffs, (a) Londonderry will undertake to liquidate the investment of the
holders of Public Units by effecting a merger of the Partnership and Londonderry
or an affiliate in which each Public Unit is acquired for no less than $10.50
per Public Unit, (b) the $10.50 per Public Unit merger consideration will be the
subject of a fairness opinion of a nationally-recognized independent investment
banking firm and ( c) each holder of Public Units may elect to seek appraisal of
the fair value of his or her Public Units pursuant to Maryland law. A hearing to
determine whether the proposed settlement terms are fair, reasonable and
adequate has been scheduled for May 23, 1996.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
(b) Reports on Form 8K: No report on Form 8-K was filed during the period.
<PAGE>
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/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
DATED: May 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
three month period ending March 31, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000759253
<NAME> WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 22,763,000
<SECURITIES> 0
<RECEIVABLES> 33,248,000
<ALLOWANCES> 15,041,000
<INVENTORY> 0
<CURRENT-ASSETS> 28,363,000
<PP&E> 200,507,000
<DEPRECIATION> (18,276,000)
<TOTAL-ASSETS> 234,934,000
<CURRENT-LIABILITIES> 16,176,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 5,751,000
<TOTAL-LIABILITY-AND-EQUITY> 234,934,000
<SALES> 0
<TOTAL-REVENUES> 18,456,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,932,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,946,000
<INCOME-PRETAX> 2,116,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,090,000
<EPS-PRIMARY> 00.40
<EPS-DILUTED> 00.00
</TABLE>
