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, 1996
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 1 of 14<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Real estate held for sale $ 31,281,279 $ 2,021,342
Real estate:
Buildings and improvements - 47,253,598
Land and land improvements - 4,658,353
- 51,911,951
Accumulated depreciation - 20,984,839
- 30,927,112
Cash and cash equivalents 13,023 2,072,917
Deferred expenses, net 1,163,944 1,277,687
Accounts receivable 1,808,880 1,671,728
Restricted cash 4,487,680 3,570,238
Other assets 444,805 295,889
$ 39,199,611 $ 41,836,913
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Mortgage note payable $ 40,093,731 $ 42,000,000
Due to affiliates 3,858,329 6,385,499
Accounts payable and accrued expenses 2,627,384 3,085,982
Excess of distributions and losses over
cost of investments in partnerships 7,821,340 7,510,575
Minority interests 1,620,667 1,583,135
56,021,451 60,565,191
Partners' capital (deficiency):
General partners (3,222,591) (3,298,849)
Limited partners ($1,000 per Unit,
78,594 Units issued) (13,599,249) (15,429,429)
Total partners' capital (deficiency) (16,821,840) (18,728,278)
$ 39,199,611 $ 41,836,913
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, 1996 and 1995
<CAPTION>
Three months ended Six months ended
June 30 June 30
Revenues: 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Hotel operating $ 7,618,344 $6,502,656 $16,757,265 $14,871,063
Rental - 373,485 - 745,511
Interest and other 48,529 34,787 104,666 64,923
7,666,873 6,910,928 16,861,931 15,681,497
Expenses:
Hotel operating 5,546,400 4,816,166 11,247,727 10,296,333
Interest 997,590 1,557,871 2,054,743 2,875,316
Property operating - 83,865 33,912 133,093
Depreciation 455,437 526,158 910,874 1,052,210
Amortization 49,205 70,557 98,409 138,202
Equity in net losses of
partnerships 115,316 191,575 310,765 449,670
General and administrative 149,517 143,970 239,826 229,288
Loss on real estate
sold/held for sale 21,705 1,043,167 21,705 1,043,167
7,335,170 8,433,329 14,917,961 16,217,279
Income (loss) before
minority interest 331,703 (1,522,401) 1,943,970 (535,782)
Minority interest in
(income) loss of joint
ventures (6,025) 16,739 (37,532) (2,273)
Net income (loss) $ 325,678 $(1,505,662) $ 1,906,438 $ (538,055)
Net income (loss) allocated to:
Limited partners $ 312,651 $(1,445,436) $ 1,830,180 $ (516,533)
General partners 13,027 (60,226) 76,258 (21,522)
$ 325,678 $(1,505,662) $ 1,906,438 $ (538,055)
Net income (loss) per Unit
of limited partnership
interest $ 3.98 $(18.39) $ 23.29 $(6.57)
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, 1996
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital deficiency
at January 1, 1996 $(15,429,429) $(3,298,849) $(18,728,278)
Net income 1,830,180 76,258 1,906,438
Partners' capital deficiency
at June 30, 1996 $(13,599,249) $(3,222,591) $(16,821,840)
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, 1996 and 1995
<CAPTION>
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 1,906,438 $ (538,055)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,009,283 1,190,412
Loss on real estate sold/held for sale 21,705 1,043,167
Minority interest in joint ventures'
operations 37,532 2,273
Equity in net losses of partnerships 310,765 449,670
Decrease (increase) in:
Accounts receivable (137,152) 480,517
Restricted cash (917,442) (107,504)
Deferred expenses - (66,907)
Other assets (148,916) 54,734
Increase (decrease) in:
Accounts payable and accrued expenses (459,234) 76,032
Due to affiliates 242,830 121,508
Other liabilities 636 79,672
Net cash provided by operating activities 1,866,445 2,785,519
Cash flows from investing activities:
Proceeds from sale of real estate 856,280 -
Additions to real estate (106,350) (216,289)
Net cash provided by (used in)
investing activities 749,930 (216,289)
Cash flows from financing activities:
Repayment of mortgage notes payable (1,906,269) (3,088,320)
Repayment of loan to affiliates (2,770,000) -
Borrowings from affiliates - 254,043
Net cash used in financing activities (4,676,269) (2,834,277)
Decrease in cash and cash equivalents (2,059,894) (265,047)
Cash and cash equivalents at beginning of period 2,072,917 663,387
Cash and cash equivalents at end of period $ 13,023 $ 398,340
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,396,615 $ 2,361,064
See accompanying notes to consolidated financial statements.
(continued)
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1995
<CAPTION>
1996 1995
Supplemental disclosure of non-cash investing
activities:
Reclassification of real estate held for sale:
Real estate:
<S> <C> <C>
Land $ 4,658,353 $ -
Buildings and improvements 47,359,948 -
Deferred expenses, net 15,334 -
Accumulated depreciation (21,895,713)
Real estate held for sale $ 30,137,922 $ -
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") is a
limited partnership formed 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").
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 Bayport Ltd.'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 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.
These financial statements should be read in conjunction with the annual
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
2. Real Estate
The closing of the sale of one of the remaining two parcels of land at
Braker Center, for approximately $856,000 (net of miscellaneous closing
costs of approximately $22,000), occurred in April 1996.
Real estate held for sale includes the final parcel of land at Braker
Center, with a carrying value of approximately $1,144,000. The closing
of this parcel is scheduled to occur no later than March 1997. Pursuant
to the Agreement of Sale, the Partnership and Hill Partners may continue
to market the final parcel prior to the closing date of the sale of that
parcel. If the final parcel is sold to a third party, the excess of the
proceeds from such sale over the purchase price otherwise to be paid by
Hill Partners, Inc. will be divided between the Partnership and Hill
Partners, Inc.
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
During the second quarter of 1996, the Partnership determined to sell the
Bayport Plaza Hyatt Hotel (the "Hotel"). Accordingly, the Hotel and
related assets, with a total carrying value of approximately $30,138,000,
were reclassified to real estate held for sale.
In July 1996, the Partnership sold the Hotel to Hyatt Corporation, the
manager of the Hotel, for a net sales price of approximately $72.2
million, pursuant to Hyatt Corporation's right of first offer contained
in the Hotel management agreement. The purchase price was paid in cash
at closing. A portion of the sales proceeds was used to repay the
mortgage note encumbering the Hotel and certain balances due to
affiliates (see Note 3). In August 1996, the Partnership will make a
distribution to the Limited Partners of $29.3 million ($373 per unit)
from the net proceeds from the sale of the Hotel.
3. Related Party Transactions
Prior to 1995, the Partnership borrowed funds from an affiliate of Realty
to fund working capital needs and capital expenditures at certain
properties. Interest expense, calculated at the prime rate (8.25% at
June 30, 1996), was $99,543 and $129,297 for the six months ended June
30, 1996 and 1995, respectively. In May 1996, the Partnership repaid
$2,770,000 from the proceeds from the sale of the Braker Center
properties. At June 30, 1996, the balance due to the affiliate,
including accrued interest, was $363,863. The loan was repaid from the
proceeds of the sale of the Hotel.
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 (all of which were made prior to
1994) 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 at June 30, 1996.
Interest expense, calculated at the prime rate, was $124,918 and $119,746
for the six months ended June 30, 1996 and 1995, respectively. At June
30, 1996, the Partnership owed the guarantor $3,052,939, including
accrued interest. The loan was repaid from the proceeds of the sale of
the Hotel.
The Managing General Partner is entitled to receive a management fee
based on a percentage of distributable cash. Because there was no
distributable cash, the Managing General Partner did not receive a fee
for the six months ended June 30, 1996 or 1995. As of June 30, 1996,
$422,987 of management fees recorded prior to 1992 remained unpaid. Upon
review of such liability in the third quarter of 1996, the Managing
General Partner determined that the Partnership has no liability for such
management fees, and the Managing General Partner waived any claim to
such fees.
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Notes to Consolidated Financial Statements
Realty performs administrative functions, processes investor transactions
and prepares tax information for the Partnership. For the six months
ended June 30, 1996 and 1995, the Partnership incurred expenses of
$89,387 and $124,286, respectively, for these services. These amounts
are included in general and administrative expense. As of June 30, 1996,
the balance due to Realty was $18,540.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
defendants in a number of class action lawsuits pending in state and
federal courts. The complaints allege a variety of claims, including
breach of fiduciary duty, fraud, misrepresentation and related claims,
and seek compensatory and other damages and equitable relief. The
defendants intend to vigorously defend the actions. It is impossible to
predict the effect, if any, the outcome of these actions might have on
the Partnership's financial statements.
<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.
During the second quarter of 1996, the Partnership determined to sell the
Hotel. The closing occurred in July 1996 (see Note 2 to the consolidated
financial statements in Item 1). The Managing General Partner believes
that the timing of the sale took advantage of both the Hotel's improved
operating performance and the current investment environment for hotel
properties. The Partnership's restricted cash balances were 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. During the six months ended June
30, 1996, pursuant to the loan agreement, the Partnership repaid
approximately $1.9 million of the debt on the Hotel from restricted cash.
The closing of the sale of one of the remaining two parcels of land at
Braker Center, for approximately $856,000 (net of miscellaneous closing
costs of approximately $22,000), occurred in April 1996.
In May 1996, the Partnership repaid $2,770,000 to an affiliate from the
proceeds from the sales of Braker Center properties in 1995 and 1996.
The Partnership is negotiating an agreement to sell its interest in
Peninsula Office Park to one of its joint venture partners. The
agreement is expected to provide for two closings, one for the office
buildings and, at a later date, a second closing for the unoccupied
restaurant building.
The Partnership's liquidity has depended upon cash flow from operations
of its properties and capital expenditures. For the six months ended
June 30, 1996, all of the Partnership's property investments generated
positive cash flow from operations.
In addition, the Partnership's liquidity has been affected by the
disposition of the properties at Braker Center and will be affected by
the sale of other Partnership properties and interests. After the sale
of the Hotel, the Partnership's remaining investments will consist of the
final parcel of undeveloped land at Braker Center, the Bayport Office
Building and the Joint Venture. The Bayport Office Building is not
expected to produce significant operating cash flow for the Partnership
in the near future. Although the Joint Venture generates cash flow from
operations, it is prohibited from making cash distributions to its
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
partners pursuant to its loan agreement. Accordingly, subsequent to June
30, 1996, the Partnership will only realize significant cash from the
closings on the Hotel and the final parcel of land at Braker Center and
the sale of Partnership interests in its remaining investments.
The Partnership has lent $210,005 to the Peninsula Office Park joint
venture as of June 30, 1996. The loan bears interest at the prime rate
plus 1%. Peninsula Office Park expects to incur capital expenditures
during 1996 of approximately $1 million to be funded from cash reserves
at the joint venture.
The Partnership has not paid a distribution to the Partners since the
fourth quarter of 1990. In August 1996, the Partnership will make a
distribution to the Limited Partners of $29.3 million ($373 per unit)
from the net proceeds from the sale of the Hotel.
At June 30, 1996, the General Partners deferred receipt of cash
distributions totaling $262,316 through December 31, 1990. Upon review
of such deferred distributions in the third quarter of 1996, the Managing
General Partner determined that the Partnership has no liability for such
distributions and the General Partners waived any claim to such
distributions.
Except as discussed herein and in the consolidated financial statements,
the Managing General Partner is not aware of any trends or events,
commitments or uncertainties that will have a material impact on
liquidity.
Operations
Fluctuations in the Partnership's operating results for the three and six
months ended June 30, 1996 compared to 1995 are primarily attributable
to the following:
The increase in Hotel operating revenue was primarily the result of
increases in room rates, occupancy and food and beverage sales. Hotel
expenses increased because of increased food and beverage costs, room
costs and higher management fees based on the increased revenues.
The disposition of the Partnership's interests in the properties at
Braker Center in 1995 (and the satisfaction of the related mortgage loans
thereon) caused the decrease in rental income, interest expense, property
operating expenses, depreciation and amortization.
The decrease in equity in net losses of partnerships is primarily
attributable to higher rents on new leases at Peninsula Office Park.
A summary of the hotel and office 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 second quarter of 1996 as a result of improvement in
DEAN WITTER REALTY GROWTH PROPERTIES, L.P
the economy and a lack of new supply. As of June 30, 1996, average
occupancy was 78%.
The Bayport Plaza Office Building, located in the same project as the
Hotel, is in a stable market with only a few large blocks of space
available. The market vacancy rate for Class A buildings in the
Westshore market is approximately 14%. The downtown Tampa market is
significantly weaker, and is competing with the Westshore market for
quality tenants; however, the property's accessability to the Tampa
airport and its ability to offer free parking are competitive advantages.
During the first half of 1996, occupancy at the property increased from
98% to 100%. A lease for approximately 6% of the space at the property
expires in the third quarter of 1996. No other significant leases expire
prior to 2000.
Leasing activity decreased during the second quarter in San Mateo, CA,
the location of Peninsula Office Park. However, vacancy rates remained
at approximately 3% during the six months ended June 30, 1996. During
the second quarter of 1996, occupancy at Peninsula Office Park increased
slightly from 98% to 99%. The 17,000 square foot restaurant remains
vacant. No significant leases expire prior to 1998.
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 1. Legal Proceedings
The following developments have occurred since the filing of the
Partnership's most recent quarterly report on Form 10-Q with respect to
the purported class actions filed against the Partnership.
Pursuant to an order to the U.S. District Court for the Southern District
of California entered May 24, 1996, the Grigsby Action was transferred
to the U.S. District Court for the Southern District of New York.
The parties in the Schechtman Action, the Dosky Action and the Segal
Action intend to ask the Delaware Court of Chancery that such Actions be
consolidated in a single matter. The Grigsby Action has been stayed
indefinitely subject to being reopened for good cause. The Young Action
has been dismissed without prejudice. The defendants in the Young Action
understand that the plaintiffs in the Young Action intend to join the
Schechtman Action, the Dosky Action and the Segal Action if such Actions
are consolidated.
DEAN WITTER REALTY GROWTH PROPERTIES, L.P
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An exhibit index has been filed as part of this Report on
Page E1.
(b) 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, 1996 By: /s/ E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 14, 1996 By: /s/ Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
Exhibit Index
Quarter Ended June 30, 1996
Exhibit Sequentially
No. Description Numbered Page
27 Financial Data Schedule
E1
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,023
<SECURITIES> 0
<RECEIVABLES> 1,808,880
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,199,611<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (16,821,840)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 39,199,611<F3>
<SALES> 0
<TOTAL-REVENUES> 16,861,931<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,900,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,054,743
<INCOME-PRETAX> 1,906,438
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,906,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,906,438
<EPS-PRIMARY> 23.29<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include real estate held
for sale of $31,281,279, net deferred expenses of $1,163,944, restricted
cash of $4,487,680 and other assets of $444,805.
<F2>Represents partners' capital deficiency.
<F3>Liabilities include mortgage notes payable of $40,093,731, investments
in unconsolidated partnerships of $7,821,340, due to affiliates of
$3,858,329, minority interests of $1,620,667 and accounts payable and
other liabilities of $2,627,384.
<F4>Total revenue includes hotel operating revenue of $16,757,265 and interest and
other revenue of $104,666.
<F5>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
