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 March 31, 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>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
<S> <C> <C>
Real estate, at cost:
Buildings and improvements $ 47,284,214 $ 47,253,598
Land and land improvements 4,658,353 4,658,353
51,942,567 51,911,951
Accumulated depreciation 21,440,276 20,984,839
30,502,291 30,927,112
Real estate held for sale 2,021,342 2,021,342
Cash and cash equivalents 2,016,464 2,072,917
Deferred expenses, net 1,228,483 1,277,687
Accounts receivable 2,411,110 1,671,728
Restricted cash 3,315,774 3,570,238
Other assets 308,098 295,889
$ 41,803,562 $ 41,836,913
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Mortgage note payable $ 40,093,731 $ 42,000,000
Due to affiliates 6,512,780 6,385,499
Accounts payable and accrued expenses 3,023,903 3,085,982
Excess of distributions and losses over
cost of investments in partnerships 7,706,024 7,510,575
Minority interests 1,614,642 1,583,135
58,951,080 60,565,191
Partners' capital (deficiency):
General partners (3,235,618) (3,298,849)
Limited partners ($1,000 per Unit,
78,594 Units issued) (13,911,900) (15,429,429)
Total partners' capital (deficiency) (17,147,518) (18,728,278)
$ 41,803,562 $ 41,836,913
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Revenues:
Hotel operating $ 9,138,921 $ 8,368,407
Rental - 372,026
Interest and other 56,137 30,136
9,195,058 8,770,569
Expenses:
Hotel operating 5,701,327 5,480,167
Interest 1,057,153 1,317,445
Property operating 33,912 49,228
Depreciation 455,437 526,052
Amortization 49,204 67,645
Equity in net losses of partnerships 195,449 258,095
General and administrative 90,309 85,318
7,582,791 7,783,950
Income before minority interest 1,612,267 986,619
Minority interest in income of
consolidated partnerships (31,507) (19,012)
Net income $ 1,580,760 $ 967,607
Net income allocated to:
Limited partners $ 1,517,529 $ 928,903
General partners 63,231 38,704
$ 1,580,760 $ 967,607
Net income per Unit of limited partnership
interest $ 19.31 $ 11.82
See accompanying notes to consolidated financial statements.
/TABLE
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<CAPTION>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL DEFICIENCY
Three months ended March 31, 1996
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 1,517,529 63,231 1,580,760
Partners' capital deficiency
at March 31, 1996 $(13,911,900) $(3,235,618) $(17,147,518)
See accompanying notes to consolidated financial statements.
</TABLE>
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<CAPTION>
DEAN WITTER REALTY GROWTH PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,580,760 $ 967,607
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 504,641 593,697
Minority interest in income of unconsolidated
partnership 31,507 19,012
Equity in net losses of partnerships 195,449 258,095
Decrease (increase) in:
Accounts receivable (739,382) (270,338)
Restricted cash 254,464 (1,239,122)
Deferred expenses - 10,207
Other assets (12,209) 40,941
Increase (decrease) in:
Accounts payable and accrued expenses (62,715) (288,928)
Due to affiliates 127,281 62,733
Other liabilities 636 67,848
Net cash provided by operating activities 1,880,432 221,752
Cash flows from investing activities:
Additions to real estate (30,616) (126,687)
Cash flows from financing activities:
Repayment of mortgage notes payable (1,906,269) (43,659)
Borrowings from affiliates - 126,248
Net cash (used in) provided by financing
activities (1,906,269) 82,589
(Decrease) increase in cash and cash equivalents (56,453) 177,654
Cash and cash equivalents at beginning of period 2,072,917 663,387
Cash and cash equivalents at end of period $ 2,016,464 $ 841,041
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,208,305 $ 1,082,069
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 per Unit amounts are calculated by dividing net 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.
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
Real estate held for sale represents two parcels of land at the Braker
Center. The closing of the sale on one of the parcels, for approximately
$856,000, occurred in April 1996, and the closing of the sale of the
final 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.
The mortgage note payable, which is secured by the Bayport Plaza Hotel
property, is not a general obligation of the Partnership. Restricted cash
balances are reserved at the Bayport Plaza Hotel primarily for debt
service, working capital, and the replacement of certain furniture,
fixtures and equipment at 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
March 31, 1996), was $65,661 and $62,931 for the three months ended March
31, 1996 and 1995, respectively. At March 31, 1996, the balance due to
the affiliate, including accrued interest, was $3,160,286.
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 March 31, 1996.
Consequently, the remaining potential liability of the guarantor to the
lender under the guaranty as of March 31, 1996 was $3,183,902. Interest
expense, calculated at the prime rate, was $60,847 and $58,317 for the
three months ended March 31, 1996 and 1995, respectively. At March 31,
1996, the Partnership owed the guarantor $2,928,563, including accrued
interest. 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 three months ended March 31, 1996 or 1995. As of March 31,
1996, $422,987 of management fees earned prior to 1992 remained unpaid.
Realty performs administrative functions, processes investor transactions
and prepares tax information for the Partnership. For the three months
ended March 31, 1996 and 1995, the Partnership incurred expenses of
$44,701 and $58,470, respectively, for these services. These amounts are
included in general and administrative expense. As of March 31, 1996,
the balance due to Realty was $944.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
defendants in five 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 have not yet responded to the complaints and 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.
The condition of the real estate markets varies among different regions
of the country and by property type. The relative absence of office
construction as well as growth in business services has resulted in
absorption of office space in certain cities of the Northeast and
Southeast. In selected cities in the West, technology and entertainment
companies are providing steady demand for office properties. In most
markets, office construction is limited to build-to-suit projects. For
the hotel industry, demand for rooms has revived with little new
construction. As a result, average daily rates, occupancy levels and
profits have increased at many hotel properties.
The Managing General Partner currently plans to offer the Bayport Plaza
hotel for sale in 1996. The Partnership is also evaluating a proposal
to sell its interest in Peninsula Office Park to one of its joint venture
partners. However, there can be no assurance that these investments will
be sold.
The Partnership's liquidity depends upon cash flow from operations of its
properties and capital expenditures. For the three months ended March
31, 1996, all of the Partnership's property investments generated
positive cash flow from operations, and it is anticipated that they will
continue to do so.
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. Because the Partnership has
fewer income-producing investments, the Partnership's cash from
operations will decline in 1996 and thereafter.
For the three months ended March 31, 1996, Partnership cash flow from
operations exceeded capital expenditures, and the Partnership expects
that this will continue for the remainder of 1996.
The Partnership's restricted cash balances are reserved primarily for
debt service, working capital, and the replacement of certain furniture,
fixtures and equipment at the Bayport Plaza hotel pursuant to the hotel
loan and management agreements. In 1996, Bayport Plaza hotel expects to
incur capital expenditures of approximately $600,000. During the three
months ended March 31, 1996, pursuant to the loan agreement, the
Partnership repaid approximately $1.9 million of the debt on the Bayport
Plaza hotel from restricted cash.
The Partnership has lent $210,005 to the Peninsula Office Park joint
venture as of March 31, 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 proceeds from the closings of the remaining parcels of vacant land
at Braker Center (see Note 2 to the consolidated financial statements in
Item 1) will be used to reduce Partnership debt.
The Partnership has not paid a distribution to the Partners since the
fourth quarter of 1990 and does not expect to pay a distribution from
operating cash flows in 1996.
At March 31, 1996, the General Partners have deferred receipt of cash
distributions of $262,316, to which they were entitled through December
31, 1990.
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 months
ended March 31, 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. Hotel occupancy increased by less than 1%.
Hotel expenses increased due to increased staffing requirements and
increases in long distance telephone rates and credit card commissions.
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 during the first
quarter of 1996.
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, 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 first quarter of 1996 as a result of improvement in
the economy and a lack of new supply. Average occupancy for the three-
month period ended March 31, 1996 remained at 83%.
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%. However, the downtown Tampa
market is significantly weaker, and is competing with the Westshore
market for quality tenants. During the first quarter of 1996, occupancy
at the property increased from 96% to 98%. No significant leases expire
prior to 2000.
Although the leasing activity has decreased in San Mateo, CA, the
location of Peninsula Office Park, vacancy rates declined over the past
quarter (to approximately 3% at March 31, 1996). During the first
quarter of 1996, occupancy at Peninsula Office Park decreased slightly
from 99% to 98%. 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
On March 13, 1996, a class action lawsuit (the "Young Action") naming
Dean Witter Realty Income Partnership III, L.P., other unidentified
limited partnerships, Dean Witter, Discover & Co., Dean Witter Reynolds
Inc., and others as defendants was filed in the Circuit Court for
Baltimore City in Baltimore, Maryland. The defendants have removed the
case to the United States District Court for the District of Maryland.
The complaint alleges fraud, negligent misrepresentation, breach of
fiduciary duty, unjust enrichment and related claims and seeks an
accounting of records, compensatory and punitive damages in unspecified
amounts and other equitable relief. The defendants have not yet
responded to the complaint and intend to vigorously defend the action.
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: May 15, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 15, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
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Exhibit Index
Dean Witter Realty Growth Properties, L.P.
Quarter Ended March 31, 1996
Exhibit Sequentially
No. Description Numbered Page
<C> <S>
27 Financial Data Schedule
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E1
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<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,016,464
<SECURITIES> 0
<RECEIVABLES> 2,411,110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,803,562<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (17,147,518)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 41,803,562<F3>
<SALES> 0
<TOTAL-REVENUES> 9,195,058<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,557,145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,057,153
<INCOME-PRETAX> 1,580,760
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,580,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,580,760
<EPS-PRIMARY> 19.31<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $30,502,291, real estate held for sale of $2,021,342, net
deferred expenses of $1,228,483, restricted cash of $3,315,774 and
other assets of $308,098.
<F2>Represents partners' capital deficiency.
<F3>Liabilities include mortgage notes payable of $40,093,731,
investments in unconsolidated partnerships of $7,706,024, due to
affiliates of $6,512,780, minority interests of $1,614,642 and
accounts payable and other liabilities of $3,023,903.
<F4>Total revenue includes hotel operating revenue of $9,138,921 and
interest and other revenue of $56,137.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
