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 June 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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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30,
1994 December 31,
(Unaudited) 1993
ASSETS
<S> <C> <C>
Real estate, at cost:
Buildings and improvements $ 57,355,916 $ 57,129,839
Land and land improvements 14,917,159 14,917,159
72,273,075 72,046,998
Accumulated depreciation 22,377,625 20,687,639
49,895,450 51,359,359
Cash and short-term investments, at cost
which approximates market 5,473,957 3,642,942
Deferred expenses, net 1,832,758 1,823,559
Accounts receivable 1,252,985 1,184,355
Other assets 298,034 374,790
$ 58,753,184 $ 58,385,005
LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY
Mortgage notes payable $ 57,891,166 $ 57,844,135
Accounts payable and accrued expenses 3,331,090 3,746,933
Due to affiliates 5,683,478 5,532,001
Other liabilities 686,889 642,908
Excess of distributions and losses over
cost of investment in unconsolidated partnerships 5,990,580 5,624,202
Minority interests 2,260,373 2,169,470
75,843,576 75,559,649
Partners' capital deficiency:
General partners (3,212,658) (3,216,028)
Limited partners ($1,000 per Unit,
78,594 Units issued) (13,877,734) (13,958,616)
Total partners' capital deficiency (17,090,392) (17,174,644)
$ 58,753,184 $ 58,385,005
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Hotel operating $ 6,401,104 $ 5,764,351 $14,521,154 $12,991,267
Rental 530,421 1,537,915 1,061,509 3,042,480
Interest and other 15,507 58,094 56,871 81,732
6,947,032 7,360,360 15,639,534 16,115,479
Expenses:
Hotel operating 4,929,960 4,830,520 10,400,493 10,042,690
Interest 1,294,063 2,036,136 2,551,720 3,891,870
Property operating 131,225 534,907 273,452 1,094,989
Depreciation 844,992 1,137,111 1,689,985 2,280,316
Amortization 85,185 133,654 170,369 259,110
Equity in net (income) losses of
unconsolidated partnerships 66,293 (12,042) 271,568 161,758
General and administrative 98,284 95,041 197,595 185,569
7,450,002 8,755,327 15,555,182 17,916,302
Income (loss) before minority interest (502,970) (1,394,967) 84,352 (1,800,823)
Minority interest in losses (income)
of consolidated partnerships 10,607 24,274 (100) 28,515
Net income (loss) $ (492,363) $(1,370,693) $ 84,252 $(1,772,308)
Net income (loss) per Unit of limited
partnership interest $ (6.01) $(16.74) $ 1.03 $(21.65)
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL DEFICIENCY
Six months Ended June 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 income 80,882 3,370 84,252
Partners' capital deficiency
at June 30, 1994 $(13,877,734) $(3,212,658) $(17,090,392)
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 84,252 $ (1,772,308)
Adjustments to reconcile net income (loss) to
net cash flow from operating activities:
Depreciation and amortization 1,860,354 2,539,426
Equity in net losses of unconsolidated Partnerships 271,568 161,758
Minority interests in joint ventures' operations 100 (28,504)
Minority interests in joint ventures' distributions - (125,000)
Minority interests in joint ventures' contributions 90,803 -
Decrease (increase) in:
Accounts receivable (68,630) 2,798
Deferred expenses (179,567) (59,188)
Other assets 76,756 (141,857)
Increase (decrease) in:
Accounts payable and accrued expenses (415,843) (499,895)
Due to affiliates (30,432) 85,117
Other liabilities 43,981 115,807
Net cash provided by operating activities 1,733,342 278,154
Cash flows from investing activities:
Investments in real estate (226,077) (443,154)
Distribution from unconsolidated partnerships 94,810 -
Net cash used in investing activities (131,267) (443,154)
Cash flows from financing activities:
Proceeds from mortgage notes payable 47,031 66,389
Borrowings from affiliates 181,909 674,689
Net cash provided by financing activities 228,940 741,078
Increase in cash and short-term investments 1,831,015 576,078
Cash and short-term investments at beginning of period 3,642,942 2,839,481
Cash and short-term investments at end of period $ 5,473,957 $ 3,415,559
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,230,054 $ 3,758,834
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1. The Partnership and Current Operations
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 investment in Braker Center is expected to
generate sufficient funds to satisfy the properties' operating cash
and debt service requirements. However, a loan financing an
investment at Braker Center matured in 1993, but has not been repaid
and is therefore in technical default. The Partnership is
continuing to pay debt service on this loan and is negotiating an
extension and modification.
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) loan
restructuring costs, 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 income (loss) per Unit amounts are calculated by dividing net
income (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.
<PAGE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements (continued)
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
with principal balances aggregating $41,380,198 as of June 30, 1994,
which had 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 Partnership's investment in Braker Center is expected to
generate sufficient funds to satisfy the property's operating cash
and debt service requirements. However, a $4.1 million mortgage
loan encumbering the 150,000 square foot warehouse facility matured
in December 1993, but has not been repaid and is in technical
default. The Partnership has continued to pay debt service on this
loan and is currently negotiating an extension and modification with
the lender.
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
$86,481 and $58,364 for the six months ended June 30, 1994 and 1993,
respectively. The prime rate was 7.25% at June 30, 1994. At June
30, 1994 and 1993 the balances due to the affiliate including
accrued interest were $2,720,207 and $2,233,962.
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 June 30, 1994
and 1993. Consequently, the remaining liability of the guarantor to
the lender under the guaranty as of June 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 $2,520,752 and $2,362,546 as of June 30, 1994 and
1993, respectively. No portion of this indebtedness to the
affiliate has been repaid to date.
<PAGE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements (continued)
The Managing General partner is entitled to receive a management fee
based on a percentage of distributable cash. The Managing General
Partner did not receive a fee for the quarters ended June 30, 1994
or 1993. As of June 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 six months ended June 30, 1994
and 1993, the affiliate incurred $113,472 and $116,718, 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 June 30,
1994 and 1993, the balances due to the affiliate were $19,254 and
$213,686, respectively.
Entities controlled by officers of Realty have earned approximately
$36,000 and $77,000 respectively, for the six months ended June 30,
1994 and 1993 for providing asset management services. In May 1994,
the affiliate agreed to terminate these fees or transfer them to the
partnerships.
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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.
Most real estate markets are stabilizing or gradually improving.
No dramatic turnarounds are forecast for the second half of 1994.
Continued absence of significant construction activity is the primary
reason for market improvement. Office properties are still not in
demand but the suburban office market appears to be strengthening as
prices are well below replacement costs.
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 also 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) loan restructuring costs, 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 June 30, 1994, the Partnership has borrowed $5,240,959,
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 June 30, 1994, the General Partners have deferred cash
distributions totaling $262,316.
As of June 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 six-month periods ended June 30, 1994, as compared to the comparable
periods in 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 74% for the
first six months of 1994 as compared to 71% for the first half 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 decrease in rental income, property operating expenses, interest
expense, depreciation and amortization is 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.
Minority interest in income (losses) of consolidated partnerships
decreased in the first half 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 first six months of 1994 as a result of improvements
in the economy and lack of new supply. As described above, the hotel's
revenues for the six months ended June 30, 1994 have increased. The
Bayport Plaza office building located in the same project as the hotel,
is in a highly-competitive office market due to overbuilding. The
current market vacancy rate for class A office space in the Westshore
area of Tampa Bay is approximately 12%. During the second quarter of
1994, occupancy at the property remained at 90%.
Braker Center, located in the Austin industrial market, consists of
four office/research and development buildings and two bulk warehouses.
The office/research and development market in Austin is overbuilt;
however, demand for bulk warehouse space in Austin is strong. During
the second quarter of 1994, the project's overall occupancy remained at
97%.
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 second quarter of 1994, occupancy at the property
remained approximately 95%.
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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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
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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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
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: August 15, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 15, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
