UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number: 0-18151
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3286866
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30,
1994 December 31,
(Unaudited) 1993
ASSETS
<S> <C> <C>
Real estate, at cost:
Buildings and improvements $ 57,850,954 $ 57,129,839
Land and land improvements 14,917,159 14,917,159
72,768,113 72,046,998
Accumulated depreciation 23,237,680 20,687,639
49,530,433 51,359,359
Cash and short-term investments, at cost
which approximates market 5,039,675 3,642,942
Deferred expenses, net 1,765,798 1,823,559
Accounts receivable 1,358,519 1,184,355
Other assets 314,563 374,790
$ 58,008,988 $ 58,385,005
LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY
Mortgage notes payable $ 57,911,229 $ 57,844,135
Accounts payable and accrued expenses 3,703,591 3,746,933
Due to affiliates 5,784,573 5,532,001
Other liabilities 658,210 642,908
Excess of distributions and losses over
cost of investment in unconsolidated partnerships 6,326,631 5,624,202
Minority interests 2,229,128 2,169,470
76,613,362 75,559,649
Partners' capital deficiency:
General partners (3,273,217) (3,216,028)
Limited partners ($1,000 per Unit,
78,594 Units issued) (15,331,157) (13,958,616)
Total partners' capital deficiency (18,604,374) (17,174,644)
$ 58,008,988 $ 58,385,005
See accompanying notes to consolidated financial statements.
</TABLE>
[FN]<PAGE>
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended September 30, 1994 and 1993
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Hotel operating $ 5,297,067 $ 4,792,168 $19,818,221 $17,783,435
Rental 551,920 747,933 1,613,429 3,790,413
Interest and other 30,073 83,805 86,944 165,537
5,879,060 5,623,906 21,518,594 21,739,385
Expenses:
Hotel operating 4,631,065 4,354,044 15,031,558 14,396,734
Interest 1,309,050 1,581,525 3,860,770 5,473,395
Property operating 124,508 240,402 397,960 1,335,391
Depreciation 860,055 960,388 2,550,040 3,240,704
Amortization 70,572 68,377 240,941 327,487
Equity in net losses of
unconsolidated partnerships 336,051 307,104 607,619 468,862
General and administrative 92,985 329,029 290,580 514,598
7,424,286 7,840,869 22,979,468 25,757,171
Loss before minority interest (1,545,226) (2,216,963) (1,460,874) (4,017,786)
Minority interest in losses of
consolidated partnerships 31,244 34,939 31,144 63,454
Net loss $(1,513,982) $(2,182,024) $(1,429,730) $(3,954,332)
Net loss per Unit of limited
partnership interest $(18.49) $(26.65) $(17.46) $(48.30)
See accompanying notes to consolidated financial statements.
</TABLE>
[FN]
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL DEFICIENCY
Nine months Ended September 30, 1994
(Unaudited)
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital deficiency
at January 1, 1994 $(13,958,616) $(3,216,028) $(17,174,644)
Net loss (1,372,541) (57,189) (1,429,730)
Partners' capital deficiency
at September 30, 1994 $(15,331,157) $(3,273,217) $(18,604,374)
See accompanying notes to consolidated financial statements.
</TABLE>
[FN]
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,429,730) $ (3,954,332)
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation and amortization 2,790,981 3,568,191
Equity in net losses of unconsolidated Partnerships 607,619 468,862
Minority interests in joint ventures' operations (31,144) (63,454)
Decrease (increase) in:
Accounts receivable (174,164) (190,667)
Deferred expenses (183,180) (225,162)
Other assets 60,227 91,363
Increase (decrease) in:
Accounts payable and accrued expenses (43,342) 19,893
Due to affiliates (30,432) 90,238
Other liabilities 15,302 114,033
Net cash provided by (used in) operating activities 1,582,137 (81,035)
Cash flows from investing activities:
Investments in real estate (721,115) (721,377)
Distribution from unconsolidated partnerships 94,810 -
Minority interests in joint ventures' distributions - (125,000)
Additional investment by minority interests 90,803 -
Net cash used in investing activities (535,502) (846,377)
Cash flows from financing activities:
Proceeds from mortgage notes payable 67,094 114,785
Borrowings from affiliates 283,004 983,722
Net cash provided by financing activities 350,098 1,098,507
Increase in cash and short-term investments 1,396,733 171,095
Cash and short-term investments at beginning of period 3,642,942 2,839,481
Cash and short-term investments at end of period $ 5,039,675 $ 3,010,576
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,181,814 $ 5,683,128
See accompanying notes to consolidated financial statements.
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[FN]<PAGE>
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Nine Months Ended September 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Supplemental disclosure of non-cash investing activities:
Change from consolidation to equity accounting:
Accounts receivable $ - $ 2,298,445
Real estate, net - 20,385,700
Deferred expenses, net - 658,887
Other assets - (111,485)
Accounts payable and accrued expenses - (4,001,304)
Mortgage note payable - (24,607,271)
Other liabilities - (83,587)
Excess of distributions and losses over
cost of investment in partnerships - 3,823,503
Minority interests - 1,637,112
$ - $ -
See accompanying notes to consolidated financial statements.
</TABLE>
[FN]<PAGE>
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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1. The Partnership
Dean Witter Realty Growth Properties, L.P. (the "Partnership") was
formed as a limited partnership in 1985 under the laws of the State of
Delaware. The Managing General Partner of the Partnership is Dean
Witter Realty Growth Properties Inc., which is wholly-owned by Dean
Witter Realty Inc. ("Realty").
Assets of the Partnership are subject to substantial leverage. All
mortgage notes payable are secured by the real estate and are not
general obligations of the Partnership.
The Partnership's current cash balances are being reserved primarily for
(1) the replacement of certain furniture, fixtures and equipment and
working capital at the hotel which it is required to maintain pursuant
to the hotel management agreement, and (2) the cost of tenant
improvements and leasing commissions at the Peninsula Office Park
investment, at which there is a property-specific cash reserve, the
disposition of which is subject to the approval of both the Partnership
and its joint venture partner. Other than these reserves, the
Partnership's current cash reserves are nominal.
The financial statements include the accounts of the Partnership,
Bayport Ltd.'s investment in the Bayport hotel, and Braker Associates
on a consolidated basis. The Partnership's interest in Peninsula/DW
Associates and, effective July 19, 1993, the Partnership's investment
in the Bayport office building are accounted for on the equity method.
The partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes.
Net loss per Unit amounts are calculated by dividing net loss allocated
to Limited Partners, in accordance with the Partnership Agreement, by
the weighted average number of units outstanding.
In the opinion of the Managing General Partner, the accompanying
financial statements reflect all adjustments necessary to present fairly
the results for the interim periods.
2. Real Estate and Investments in Partnerships
In May 1994, the Partnership completed an extension and modification
agreement for mortgage loans on the Peninsula Office Park Properties
which matured in December 1993. Under this agreement, the lender agreed
to reduce the interest accrual and pay rates under the loans to 9.5%,
and 8.25%, respectively, and to extend the maturity dates to December
1, 1996. The borrowers may further extend the maturity dates of the
modified loans if they make partial paydowns of the mortgage debt.
If the Partnership fails to repay the loans at maturity, it has agreed
not to file for bankruptcy or contest any foreclosure proceedings
brought by the lender.
During the loan term, the borrowers are prohibited from making cash
distributions to the Partnership and the Partnership's joint venture
partner. The principal balances of these loans totalled approximately
$41.5 million as of September 30, 1994.
In October 1994, the Partnership completed an extension and modification
agreement for the $4,1 million mortgage loan encumbering the 150,000
square foot warehouse facility at Braker Center, which had matured in
December 1993. The loan maturity date will be extended to July 1, 1995,
and the interest rate will remain at 9.109% per annum with monthly
payments of principal and interest of $43,000 payable through maturity.
Further, additional interest of approximately $128,000 will be due
should the loan not be paid on or prior to maturity.
In addition, in October 1994, the Partnership transferred its ownership
interest in the partnership which owns the 87,500 square foot warehouse
building encumbered by a $2.9 million mortgage loan at Braker Center to
its joint venture partner at Braker Center. In exchange, the
Partnership received the joint venture partner's ownership interests in
the partnerships which own the 150,000 square foot warehouse building,
encumbered by the $4.1 million mortgage loan described above, and the
additional developable land at Braker Center.
3. Related Party Transactions
The Partnership borrowed funds from an affiliate of Realty to fund
property operating deficits and capital expenditures at certain
properties. Interest expense, calculated at the prime rate, was
$138,952 and $88,490 for the nine months ended September 30, 1994 and
1993, respectively. The prime rate was 7.75% at September 30, 1994.
At September 30, 1994 and 1993 the balances due to the affiliate
including accrued interest were $2,772,678 and $2,502,512.
Additionally, in conjunction with a 1991 refinancing of the hotel at
Bayport Plaza, an affiliate of Realty guaranteed a maximum of $5,350,000
of the first mortgage debt. Advances made by the guarantor to the first
mortgage lender under this guaranty (which constitute loans from the
guarantor to the Partnership which must be repaid by the Partnership)
equalled $2,166,098 through September 30, 1994 and 1993. Consequently,
the remaining liability of the guarantor to the lender under the
guaranty as of September 30, 1994 was $3,183,902. Taking into account
interest accruals, at the prime rate, as a result of these advances
under the guaranty, the Partnership owed the guarantor $2,569,378 and
$2,403,029 as of September 30, 1994 and 1993, respectively. No portion
of this indebtedness to the affiliate has been repaid to date.
The Managing General partner is entitled to receive a management fee
based on a percentage of distributable cash. Because there was no
distributable cash flow, the Managing General Partner did not receive
a fee for the quarters ended September 30, 1994 or 1993. As of
September 30, 1994 and 1993 $423,263 remained unpaid.
An affiliate of the Managing General Partner performs administrative
functions and processes certain investor and tax information on behalf
of the Partnership. For the nine months ended September 30, 1994 and
1993, the affiliate incurred $170,208 and $170,456, respectively for
these services.
An affiliate of the Partnership's joint venture partner at Braker Center
had funded shortfall loans to the property. As of September 30, 1994
and 1993, the balances due to the affiliate were $19,254 and $213,686,
respectively.
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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership raised $78,594,000 in a public offering which was
terminated in 1986. The Partnership has no plans to raise additional
capital.
The Partnership used the proceeds from the offering to make leveraged
investments in four properties (one of which was lost through foreclosure
in July 1992). No additional investments are planned.
Many real estate markets are stabilizing or improving primarily due to
the continued absence of significant construction activity. The recovery
of the office market, however, will be slow because tenant demand is weak
as a result of continued downsizing by many major corporations. Improvement
in the economy and a lack of new construction in the hotel market is slowly
resulting in increased occupancy and room rates.
Real estate markets are generally divided into sub-markets by
geographic location and property type. Not all sub-markets have been
affected equally by the above factors.
The Partnership's liquidity depends upon the operating cash flow of its
properties, expenditures for tenant improvements and leasing commissions in
connection with the leasing of vacant space.
The Partnership's current cash balances are being reserved primarily
for (1) the replacement of certain furniture, fixtures and equipment and
working capital at the hotel which it is required to maintain pursuant to
the hotel management agreement, and (2) the cost of tenant improvements and
leasing commissions at the Peninsula Office Park investment, at which there
is a property-specific cash reserve, the disposition of which is subject to
the approval of both the Partnership and its joint venture partner. Other
than these reserves, the Partnership's current cash reserves are nominal.
As of September 30, 1994, the Partnership has borrowed $5,342,056,
including accrued and unpaid interest, from an affiliate of the Managing
General Partner.
The Partnership has omitted its distribution to the Partners since the
fourth quarter of 1990 and does not expect to pay a distribution in 1994.
As of September 30, 1994, the General Partners have deferred cash
distributions totaling $262,316.
As of September 30, 1994 and 1993, the Partnership had loans
outstanding with the Peninsula Office Park investment of $170,222, which
bear interest at the prime rate plus 1%.
Operations
Fluctuations in the Partnership's operating results for the three and
nine-month periods ended September 30, 1994, as compared to 1993 are
primarily attributable to the following:
Hotel operating revenue increased as a result of an increased average
daily room rate, higher occupancy and an increase in food and beverage
income. The hotel's average occupancy rate was 69% for the first nine
months of 1994 as compared to 65% for the first nine months of 1993. The
increase in occupancy was primarily related to an increase in group room
sales. Food and beverage revenue increased primarily due to greater banquet
sales, in-room dining sales and outlet beverage sales. The higher operating
revenue led to higher occupancy-related costs and food and beverage costs.
The decreases in rental income, property operating expenses, interest
expense, and depreciation are attributable to the change from consolidation
to the equity method of accounting for the Partnership's investment in the
Bayport Plaza office building in July 1993, and the sale of a building at
Braker Center in October 1993.
Equity in net losses of partnerships increased in 1994 as compared to
1993 as a result of decreased rental revenue at Peninsula Office Park.
The decreases in general and administrative expense are primarily
attributable to legal fees incurred in connection with the restructuring of
the Bayport Plaza Office building investment during the third quarter of
1993.
Minority interest in losses of consolidated partnerships decreased
during the first nine months of 1994 as compared to 1993 primarily as a
result of increased income at the hotel and the change from consolidation
to the equity method of accounting for the partnership's investment in the
Bayport Plaza office building.
A summary of the hotel, office and warehouse/research and development
building markets where the Partnership properties are located and the
performance of each property is as follows:
The hotel market in the Westshore area of Tampa Bay continued to
improve during the nine months ended September 30, 1994 as a result of
improvements in the economy and lack of new supply. As described above, the
hotel's revenues for the nine months ended September 30, 1994 have
increased. The Bayport Plaza office building located in the same project
as the hotel, is in an improved office market due to a lack of new
construction. The current market vacancy rate for class A office space in
the Westshore area of Tampa Bay is approximately 11%. During the third
quarter of 1994, occupancy at the property increased slightly from 90% to
91%.
Braker Center, located in the Austin industrial market, consists of
four office/research and development buildings and two bulk warehouses. The
industrial building market in Austin continues to remain strong. The
current market vacancy rate is 5%, which has resulted in new development of
warehouse space. An estimated 559,000 square feet of new warehouse space
is expected to be in various stages of completion in the Austin market by
December 31, 1994. During the third quarter of 1994, the project's overall
occupancy remained at 96%.
The office market in San Mateo, California, the location of Peninsula
Office Park, is an improving market characterized by declining vacancy
rates, steady leasing activity, diminishing availability of space greater
than 20,000 square feet, and no new speculative construction. In the third
quarter of 1994, occupancy at the property decreased from 95% to 90%.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect on
the operations of the Partnership or its properties.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 2. Changes in Securities - not applicable.
Item 3. Defaults upon Senior Securities - not applicable.
Item 4. Submission of Matters to a Vote of Security Holders -
not applicable.
Item 5. Other Information - not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits - not applicable.
b) Reports on Form 8-K - not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEAN WITTER REALTY GROWTH
PROPERTIES, L.P.
By: Dean Witter Realty Growth
Properties Inc.
Managing General Partner
Date: November 14, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 5,039,675
<SECURITIES> 0
<RECEIVABLES> 1,358,519
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,008,988<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (18,604,374)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 58,008,988<F3>
<SALES> 0
<TOTAL-REVENUES> 21,518,594<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,087,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,860,770
<INCOME-PRETAX> (1,429,730)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,429,730)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,429,730)
<EPS-PRIMARY> (17.46)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $49,530,433, net deferred expenses of $1,765,798 and
other assets of $314,563.
<F2>Represents partners' capital deficiency.
<F3>Liabilities include mortgage notes payable of $57,911,229,
investments in unconsolidated Partnerships of $6,326,631, due to
affiliates of $5,784,573, minority interests of $2,229,128,
accounts payable and other liabilities of $4,361,801.
<F4>Total revenue includes hotel operating revenue of $19,818,221; rental
revenue of $1,613,429 and interest and other revenue of $86,944.
<F5>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
