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, 1995
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 <PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Real estate, at cost:
Buildings and improvements $ 51,740,941 $ 55,690,646
Land and land improvements 6,906,449 13,161,632
58,647,390 68,852,278
Accumulated depreciation 22,326,697 22,452,497
36,320,693 46,399,781
Real estate held for sale 8,200,000 -
Cash and cash equivalents, at cost
which approximates market ($4,150,284 and
$4,042,780 restricted as of June 30, 1995
and December 31, 1994, respectively) 4,548,624 4,706,167
Deferred expenses, net 1,584,052 1,655,347
Accounts receivable 1,390,254 1,870,771
Other assets 411,188 465,922
$ 52,454,811 $ 55,097,988
LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY
Mortgage notes payable $ 51,848,664 $ 54,936,984
Due to affiliates 7,088,216 6,712,665
Accounts payable and accrued expenses 3,346,464 3,270,432
Other liabilities 588,952 509,280
Excess of distributions and losses over
cost of investment in unconsolidated partnerships 7,154,451 6,704,781
Minority interests 1,245,813 1,243,540
71,272,560 73,377,682
Partners' capital deficiency:
General partners (3,281,752) (3,260,230)
Limited partners ($1,000 per Unit,
78,594 Units issued) (15,535,997) (15,019,464)
Total partners' capital deficiency (18,817,749) (18,279,694)
$ 52,454,811 $ 55,097,988
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended June 30, 1995 and 1994
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Hotel operating $6,502,656 $6,401,104 $14,871,063 $14,521,154
Rental 373,485 530,421 745,511 1,061,509
Interest and other 34,787 15,507 64,923 56,871
6,910,928 6,947,032 15,681,497 15,639,534
Expenses:
Hotel operating 4,816,166 4,929,960 10,296,333 10,400,493
Interest 1,557,871 1,294,063 2,875,316 2,551,720
Property operating 83,865 131,225 133,093 273,452
Depreciation 526,158 844,992 1,052,210 1,689,985
Amortization 70,557 85,185 138,202 170,369
Equity in net losses of
unconsolidated partnerships 191,575 66,293 449,670 271,568
General and administrative 143,970 98,284 229,288 197,595
7,390,162 7,450,002 15,174,112 15,555,182
Income (loss) before minority interest
and loss on write-down of real estate
held for sale (479,234) (502,970) 507,385 84,352
Loss on write-down of real estate
held for sale 1,043,167 - 1,043,167 -
Income (loss) before minority interest (1,522,401) (502,970) (535,782) 84,352
Minority interest in earnings
of consolidated partnerships 16,739 10,607 (2,273) (100)
Net income (loss) $(1,505,662) $ (492,363) $ (538,055) $ 84,252
Net income (loss) per Unit of limited
partnership interest $(18.39) $ (6.01) $ (6.57) $ 1.03
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL DEFICIENCY
Six months ended June 30, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital deficiency
at January 1, 1995 $(15,019,464) $(3,260,230) $(18,279,694)
Net loss (516,533) (21,522) (538,055)
Partners' capital deficiency
at June 30, 1995 $(15,535,997) $(3,281,752) $(18,817,749)
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (538,055) $ 84,252
Adjustments to reconcile net (loss) income to net
cash flow from operating activities:
Depreciation and amortization 1,190,412 1,860,354
Loss on write-down of real estate held for sale 1,043,167 -
Equity in net losses of unconsolidated partnerships 449,670 271,568
Minority interests in joint ventures' operations 2,273 100
Minority interests in joint ventures' contributions - 90,803
Decrease (increase) in:
Accounts receivable 480,517 (68,630)
Deferred expenses (66,907) (179,567)
Other assets 54,734 76,756
Increase (decrease) in:
Accounts payable and accrued expenses 76,032 (415,843)
Due to affiliates 121,508 (30,432)
Other liabilities 79,672 43,981
Net cash provided by operating activities 2,893,023 1,733,342
Cash flows from investing activities:
Investments in real estate (216,289) (226,077)
Distributions from unconsolidated partnerships - 94,810
Net cash used in investing activities (216,289) (131,267)
Cash flows from financing activities:
(Repayment of) proceeds from mortgage notes payable (3,088,320) 47,031
Borrowings from affiliates 254,043 181,909
Net cash (used in) provided by financing activities (2,834,277) 228,940
(Decrease) increase in cash and cash equivalents (157,543) 1,831,015
Cash and cash equivalents at beginning of period 4,706,167 3,642,942
Cash and cash equivalents at end of period $ 4,548,624 $ 5,473,957
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,361,064 $ 2,230,054
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
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
debt service, working capital, and the replacement of certain furniture,
fixtures and equipment at the hotel pursuant to the hotel loan and
management agreements. 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 investments in Peninsula/DW
Associates and 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) income per Unit amounts are calculated by dividing net (loss)
income allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of Units outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
2. Real Estate
During the second quarter of 1995, the Partnership determined to sell the
warehouse and the undeveloped land at Braker Center in 1995.
Accordingly, the property was reclassified to real estate held for sale,
and its carrying value was reduced to $8.2 million (its estimated fair
value net of selling costs), resulting in a loss of $1,043,167. Also
during the second quarter, the Partnership paid a fee of approximately
$165,000 (included in interest expense) to the mortgage lender on the
warehouse for an extension of the loan's maturity through October 1,
1995.
Subsequent to quarter-end, the Partnership entered into an agreement to
sell the property, at a price approximating its revised carrying value.
$3.7 million of proceeds from the sale will be used to pay down the
mortgage on the warehouse.
In December 1994, the partnership which owns the four office/R&D
buildings at Braker Center ("Office/R&D Building Partnership") was in
default on its loan. The Office/R&D Building Partnership has two general
partners: (i) L.S. Braker Associates ("Braker Associates"), a subsidiary
of the Partnership, and (ii) an unaffiliated partner. The unaffiliated
general partner caused the partnership to file for protection under
Chapter 11 of the United States Bankruptcy Code. Braker Associates had
not consented to the filing and the unaffiliated general partner has
initiated litigation to compel it to do so. The ultimate outcome of the
litigation and the Office/R&D Building Partnership's Chapter 11
reorganization is uncertain.
In May 1995, the Partnership and Hyatt Hotel Corporation modified the
management agreement for the hotel at Bayport Plaza. Under the terms of
the new agreement, Hyatt is entitled to an annual fee equal to a
percentage of the hotel's net revenues in excess of annual debt service,
not to exceed an overall percentage cap. In addition, Hyatt has agreed
to certain expense reductions that should increase the hotel's cash flow.
During the second quarter of 1995, the Partnership prepaid $3 million of
the senior debt at the hotel with accumulated cash.
3. Related Party Transactions
The Partnership had 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 $129,297
and $86,481 for the six months ended June 30, 1995 and 1994,
respectively. The prime rate was 9.0% at June 30, 1995. At June 30,
1995 and 1994, the balances due to the affiliate, including accrued
interest, were $2,964,946 and $2,720,207, respectively.
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, 1995 and 1994. Consequently, the
remaining potential liability of the guarantor to the lender under the
guaranty as of June 30, 1995 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 $2,742,843 and
$2,520,752 as of June 30, 1995 and 1994, 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 the Partnership's distributable cash. Because
there was no distributable cash flow, the Managing General Partner did
not receive a fee for the six months ended June 30, 1995 or 1994. As of
June 30, 1995 and 1994, $422,987 remained unpaid.
Realty performs administrative functions, processes investor transactions
and prepares tax information for the Partnership. For the six months
ended June 30, 1995 and 1994, the Partnership incurred $124,286 and
$113,472, respectively, for these services. As of June 30, 1995 and
1994, the balances due to Realty were $957,440 and $804,053,
respectively.
<PAGE>
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. However, the
recovery of the office market has been and may continue to be slow
because tenant demand is weak as a result of slow job growth. Increases
in import/export sales could provide support for continuing absorption
of space. 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 cash flow from operations of its
properties and expenditures for tenant improvements and leasing
commissions in connection with the leasing of vacant space. For the six
months ended June 30, 1995, all the Partnership's property investments
generated positive cash flow from operations. The Partnership expects
that its property investments will continue to generate positive cash
flow for the remainder of 1995.
The Partnership's current cash balances are being reserved primarily for
debt service, working capital, and the replacement of certain furniture,
fixtures and equipment at the hotel pursuant to the hotel loan and
management agreements. Other than these reserves, the Partnership's
current cash reserves are nominal.
In May 1994, the partnerships that own the Peninsula Office Park
properties completed an extension and modification agreement for mortgage
loans on the properties. 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.
During the revised loan term, the borrowers are prohibited from making
cash distributions to the Partnership and the Partnership's joint venture
partner.
As of June 30, 1995, the Partnership has borrowed $5,707,789, including
accrued and unpaid interest, from an affiliate of the Managing General
Partner.
The Partnership has not paid a distribution to the Partners since the
fourth quarter of 1990. Through June 30, 1995, the General Partners have
deferred cash distributions totaling $262,316.
See also Note 2 to the consolidated financial statements in Item 1.
Operations
Fluctuations in the Partnership's operating results for the three and six
months ended June 30, 1995, as compared to 1994, are primarily
attributable to the following:
The increase in hotel operating revenue is primarily the result of
increased food and beverage income. Hotel operating expenses declined
because increases in food and beverage costs were more than offset by
decreased management fees.
The decreases in rental revenue and property operating expense is
attributable to the sale of one of the warehouses at Braker Center in
1994. Rental revenue also decreased because of lower pass-through
revenue in 1995 than in 1994.
Depreciation expense decreased primarily because certain of the assets
at the hotel at Bayport Plaza are fully depreciated.
Equity in net losses of partnerships increased as a result of the accrual
to recognize rental revenue on a straight-line basis and increased
interest and operating expenses at Peninsula Office Park.
Increases in general and administrative expenses and primarily
attributable to increased legal fees.
A summary of the hotel, office and warehouse/research and development
building markets where the Partnership's properties are located and the
performance of each property is as follows:
The hotel market in the Westshore area of Tampa Bay, FL continued to
improve during the six months ended June 30, 1995 as a result of
improvements in the economy and a lack of new supply. As of June 30,
1995, average occupancy was 74%. As described above, revenues and
profits at the Bayport Plaza Hyatt Regency Hotel increased during the
first six months of 1995.
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 market vacancy rate for Class A buildings in the Westshore market is
approximately 12%. However, the downtown Tampa market is significantly
weaker, and this may adversely impact the Westshore market. However,
during the first six months of 1995, occupancy at the property increased
from 90% to 97%.
Braker Center, located in the Austin, TX industrial market, consists of
four office/research and development buildings, a warehouse and vacant
land. The industrial building market in Austin remains 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 currently under construction. During the first six months of
1995, occupancy at the four office/research and development buildings
increased from 85% to 90% and the occupancy at the warehouse remained at
100%.
The office market in San Mateo, CA, the location of Peninsula Office
Park, is characterized by declining vacancy rates (approximately 4% at
June 30, 1995), steady leasing activity, and diminishing availability of
space greater than 20,000 square feet. As of June 30, 1995, occupancy
at the six office buildings increased from 99% to 100%. The 17,000
square foot restaurant remains vacant.
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.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K - not applicable
<PAGE>
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 14, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 14, 1995 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>
<CIK> 0000765923
<NAME> DEAN WITTER REALTY GROWTH PROPERTIES L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,548,624
<SECURITIES> 0
<RECEIVABLES> 1,390,254
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,454,811<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (18,817,749)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 52,454,811<F3>
<SALES> 0
<TOTAL-REVENUES> 15,681,497<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,301,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,875,316
<INCOME-PRETAX> (538,055)
<INCOME-TAX> 0
<INCOME-CONTINUING> (538,055)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (538,055)<F5>
<EPS-PRIMARY> (6.57)<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $36,320,693, real estate held for sale of $8,200,000, net
deferred expenses of $1,584,052 and other assets of $411,188.
<F2>Represents partners' capital deficiency.
<F3>Liabilities include mortgage notes payable of $51,848,664,
investments in unconsolidated partnerships of $7,154,451, due to
affiliates of $7,088,216, minority interests of $1,245,813 and
accounts payable and other liabilities of $3,935,416.
<F4>Total revenue includes hotel operating revenue of $14,871,063, rental
revenue of $745,511 and interest and other revenue of $64,923.
<F5>Net loss includes loss on write-down of real estate held for sale of
$1,043,167.
<F6>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
