SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 0-14536
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2869812
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
One International Place, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8600
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>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
<TABLE>
ASSETS
September 30, December. 31,
1996 1995
(Unaudited) (Audited)
(Amounts in Thousands)
<S> <C> <C>
Land ....................................................................... $ 16,757 $ 16,757
Buildings and improvements...................................................... 239,843 239,769
-------- --------
256,600 256,526
Less: Accumulated depreciation................................................. 129,820 122,065
-------- --------
126,780 134,461
Cash and cash equivalents....................................................... 5,434 9,216
Investment securities........................................................... 1,266 3,672
Other deposits.................................................................. 217 221
Prepaid expenses and other assets............................................... 5,441 5,511
Deferred costs, net of accumulated amortization
of $13,389 and $12,639 as of September 30,
1996 and December 31, 1995, respectively.................................... 5,689 6,394
Equity investment in Development Partnership.................................... 20,302 20,898
---------- --------
Total Assets........................................................... $165,129 $180,373
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan............................................................... $197,712 $198,650
Accounts payable, accrued expenses, accrued
interest and other......................................................... 6,896 9,854
-------- --------
Total Liabilities...................................................... 204,608 208,504
-------- --------
Partners' Capital:
Limited Partners - Units of Investor Limited Partnership Interest, $65,000
stated value per cash unit and $66,000 stated value per deferred unit;
3,500 units, authorized,
issued and outstanding................................................. (18,678) (7,557)
General Partners............................................................ (20,801) (20,574)
--------- --------
Total Partners' Capital................................................ (39,479) (28,131)
---------- ----------
Total Liabilities and Partners' Capital................................ $165,129 $180,373
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
(Amounts in Thousands)
(Except per unit data)
REVENUES:
<S> <C> <C> <C> <C>
Base rent revenue.............................. $ 5,983 $ 5,447 $18,167 $18,011
Common area expense reimbursements 2,635 2,727 8,075 9,054
Interest and other income...................... 82 169 400 607
--------- ------- ------- -------
Total Revenues.............................. 8,700 8,343 26,642 27,672
------- ------- ------- -------
EXPENSES:
Utilities...................................... 1,194 1,147 2,064 2,470
Repairs, maintenance and security 1,643 1,402 4,581 4,185
Real estate taxes.............................. 721 632 2,094 1,898
General and administrative..................... 575 440 1,502 1,622
Asset and property management fee 188 188 563 563
Interest expense............................... 5,859 5,898 17,610 17,722
Depreciation and amortization 2,942 3,264 8,805 9,754
Insurance...................................... 90 76 271 243
----- ------- ------- -------
Total Expenses.............................. 13,212 13,047 37,490 38,457
------- ------- ------- -------
Operating loss.............................. (4,512) (4,704) (10,848) (10,785)
Equity in Loss of Development
Partnership........................................ (199) (399) (596) (480)
------- -------- ------- ---------
Loss Before Minority Interest (4,711) (5,103) (11,444) (11,265)
Minority Interest in Operating Partnership
and Management Partnership..................... 39 42 96 92
------ ------- ------- -------
Net Loss.................................... $(4,672) $(5,061) $(11,348) $(11,173)
======== ======== ======== ========
Net Loss Allocated to General Partners $ (93) $ (101) $ (227) $ (223)
========= ======== ======== =======
Net Loss Allocated to Investor
Limited Partners............................... $(4,579) $(4,960) $(11,121) $(10,950)
======== ======= ======== ========
Net Loss per unit of Limited Partner
Interest....................................... $ (1,308) $ (1,417) $ (3,177) $ (3,129)
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
For the Nine Months
Ended September 30,
1996 1995
(Amounts in thousands)
Cash flow from operating activities:
<S> <C> <C>
Net loss.................................................................. $ (11,348) $ (11,173)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization.......................................... 8,601 9,550
Minority interest in income of Operating
Partnership and Management Partnership................................. (96) (92)
Equity in loss of the Development Partnership 596 480
Change in assets and liabilities:
Decrease in other deposits............................................. 4 713
Decrease in prepaid expenses and other assets 70 652
(Decrease) increase in accounts payable,
accrued expenses and other............................................ (2,958) 364
Increase in deferred costs related to
operating activities.................................................. (45) -
------- -------
Net cash (used in) provided by operating activities (5,176) 494
--------- -------
Cash flows from investing activities:
Capital expenditures...................................................... (74) (616)
Net decrease in investment securities..................................... 2,406 1,682
------ ---------
Net cash provided by investing activities 2,332 1,066
------ ---------
Cash flows from financing activities:
Principal payments on mortgage loan....................................... (938) (942)
------- ---------
Net cash used in financing activities.................................. (938) (942)
------- ---------
Net increase in cash and cash equivalents....................................... (3,782) 618
Cash and cash equivalents at beginning of period 9,216 6,767
--------- ---------
Cash and cash equivalents at end of period...................................... $ 5,434 $ 7,385
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................................... $ 17,798 $ 17,732
============ =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND
1995 (UNAUDITED) (NOTE 1)
<TABLE>
Investor
Limited General
Partners Partners Total
(Amounts in Thousands)
<S> <C> <C> <C>
Balance, December 31, 1994 $ 57,346 $(19,249) $ 38,097
Net Loss (10,950) (223) (11,173)
----------- ----------- ----------
Balance, September 30, 1995 $ 46,396 $(19,472) $ 26,924
======== ======== ========
Balance, December 31, 1995 $ (7,557) $(20,574) $(28,131)
Net Loss (11,121) (227) (11,348)
----------- ----------- -----------
Balance, September 30, 1996 $(18,678) $(20,801) $(39,479)
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION
Winthrop California Investors Limited Partnership (the "Partnership")
was originally organized on January 24, 1985 under the Maryland
Uniform Limited Partnership Act and was reorganized on October 16,
1985 as a Delaware Limited Partnership, to own a 99% General
Partnership interest in Crow Winthrop Operating Partnership, a
Maryland General Partnership (the "Operating Partnership") as well as
a 25% Limited Partnership interest in Crow Winthrop Development
Limited Partnership, a Maryland Limited Partnership (the "Development
Partnership").
The Partnership subsequently acquired in March 1992 a 99% limited
partnership interest in Winthrop California Management Limited
Partnership, a Maryland limited partnership (the "Management
Partnership").
On July 30, 1985 (the "Acquisition Date"), the Operating Partnership
acquired the Fluor Corporation World Headquarters Facility (the
"Headquarters Facility") in Irvine, California from Fluor Corporation
("Fluor") consisting of approximately 1,817,000 rentable square feet,
the directly underlying land of approximately 14.8 acres and all
related rights and easements.
As of the same date, the Development Partnership acquired 122.2 acres
of undeveloped land surrounding the Headquarters Facility (the "Excess
Land" - together with the Headquarters Facility, the "Property").
The Properties were acquired for a total price of $337,000,000 (the
"Purchase Price") consisting of $302,000,000 paid on the Acquisition
Date (the "Fixed Purchase Price") and $35,000,000 paid in August 1986
(the "Contingent Purchase Price") when certain development rights were
approved for the Development Partnership.
The General Partners of the Partnership are Winthrop Financial
Associates ("WFA") and Three Winthrop Properties, Inc. ("Three
Winthrop"). The General Partners made capital contributions totaling
$101 for a 2.0% interest in the operating profits and losses of the
Partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of the Partnership, the Operating Partnership and the
Management Partnership. The Partnership is the 99% General Partner of
the Operating Partnership and the 99% Limited Partner of the
Management Partnership.
The remaining 1% ownership interest held by an unaffiliated partner of
the Operating Partnership (Crow Irvine #2) and by an affiliated
partner of the Management Partnership (First Winthrop Properties,
Inc.) have been included in other assets in the accompanying
consolidated balance sheets. All significant intercompany accounts and
transactions have been eliminated in consolidation.
<PAGE>
Significant Accounting Policies (continued)
The Partnership owns a 25% Limited Partnership interest in the
Development Partnership, which is accounted for under the equity
method.
The consolidated financial statements were prepared on the accrual
basis of accounting and reflect the Partnership's results of
operations for an interim period which may not necessarily be
indicative of the results of operations for the year ending December
31, 1996. All adjustments considered necessary for a fair presentation
of results of operations for an interim period have been made in the
accompanying consolidated financial statements. These consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Partnership's 1995 Annual
Report on Form 10-K.
The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
The Partnership does not have the financial resources to fund the
principal amount of $197,712,000 due under the mortgage loan upon
maturity. In addition, the General Partner has been unsuccessful in
obtaining financing from the current lender or other available sources
of capital. This matter raises substantial doubt as to the
Partnership's ability to continue as a going concern for a reasonable
period of time.
The consolidated financial statements do not include any adjustments
relating to the recoverability of recorded asset amounts or the amounts
of liabilities that might be necessary should the Partnership be unable
to continue as a going concern. The Partnership's continuation as a
going concern is dependent on its ability to generate sufficient cash
flow to meet its obligations on a timely basis and obtain financing as
may be required. Management's plan, with respect to the Partnership, is
to pursue concessions on the mortgage loan.
RELATED PARTIES
The Partnership is required to pay to WFA an asset management fee of
$750,000 per year. From 1990 through June 1996, this fee was accrued
and unpaid by the Partnership. During the third quarter of 1996, the
Partnership paid to WFA $4,875,000 in asset management fees which
represented the asset management fees due for the period from January
1990 through June 1996. The Partnership has accrued the $187,500 in
asset management fees due for the three months ended September 30,
1996. In addition, the Partnership has provided overhead reimbursement
to an affiliate of the general partner in the amount of $108,750 for
each of the nine months ended September 30, 1996 and 1995.
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's assets consist of (i) a general partnership interest
in Crow Winthrop Operating Partnership, a Maryland general partnership (the
"Operating Partnership") which owns a 1.8 million square foot office facility
known as the Fluor Corporation World Headquarters Facility in Irvine (Orange
County), California (the "Headquarters Facility"), (ii) a limited partnership
interest in Crow Winthrop Development Limited Partnership, a Maryland limited
partnership (the "Development Partnership") which owns in excess of 120 acres of
land surrounding the Headquarters Facility (the "Excess Land") and (iii) a 99%
limited partnership interest in Winthrop California Management Limited
Partnership, a Maryland limited partnership ("WC Management").
The Partnership's ability to continue in existence is contingent on (i)
the ability of the Operating Partnership to continue in existence, and in
particular to restructure the mortgage loan encumbering the Headquarters
Facility, and to generate revenue allocable to the Partnership either as a
result of distributions from WC Management (derived from the management of the
Operating Partnership's properties) and/or distributions from operations of the
Operating Partnership and (ii), to a lesser extent, the ability of the
Development Partnership to continue in existence and to generate revenue to the
Partnership as a result of distributions from the Development Partnership.
To date the annual asset management fee due Winthrop Financial
Associates ("WFA") and the monies to pay general and administrative expenses
have been funded by the Partnership's reserves and cash flow from the Operating
Partnership. Commencing in 1990, and through the second quarter of 1996,
however, WFA was not paid its annual asset management fee. As of September 30,
1996, $4,875,000 was paid to WFA, which amount represents the asset management
fee due through June 30, 1996. The General Partners do not anticipate that there
will be cash distributions from the Operating Partnership or the Development
Partnership in the near future and the General Partners are not asking WFA to
continue to defer the payment of its asset management fee. The deferred asset
management fees will be paid as a priority from available sources of cash prior
to any future distributions to partners of the Partnership if and when they are
paid.
As of September 30, 1996, approximately $1,266,000 remains in the Operating
Partnership's reserve account. These funds are now controlled by the lender.
Cash used by operating activities for the nine months ended September
30, 1996 amounted to $5,176,000, compared to cash provided by operations of
$494,000 for the nine months ended September 30, 1995. This decrease is the
result primarily of the $4,875,000 payment of asset management fees. Cash used
in financing activities, specifically the principal payments on the mortgage
loan were $938,000 and $942,000 during the nine months ended September 30, 1996
and 1995, respectively. During the nine months ended September 30, 1996,
$2,406,000 of cash was provided by investing activities compared to $1,682,000
for the nine months ended September 30, 1995.
On April 1, 1996 the mortgage held by Pacific Mutual Life Insurance Company
("PAC") matured and the final principal payment of $198 million became due. The
current value of the Headquarters Facility is less than the balance due on its
mortgage debt. The Operating Partnership has not been able to refinance the loan
or sell the Headquarters Facility for an amount sufficient to pay the amount
currently due under the loan. On April 10, 1996 PAC verbally notified the
Partnership that it had agreed to extend the maturity date through June 1996.
The Partnership continued to pay debt service on the loan upon the same terms
prior to maturity through August 31, 1996. For the months of September and
October 1996, the lender has received payments equal to $3,895,001 on account to
the loan, which amount represents the cash flow of the Operating Partnership
less $500,000 for working capital. On July 11, 1996 the Partnership received a
Notice of Default and Election to sell under Deed of Trust and the 90-day cure
period under which the partnership has been operating, expired October 11, 1996.
To date, the lender has not exercised its option to file an Election to sell
under Deed of Trust. The Partnership is currently negotiating with the
Headquarters Facility's largest tenant to renegotiate a long term lease that may
assist the Operating Partnership in securing restructured financial terms from
PAC. If these negotiations are not successful and the Partnership is unable to
refinance this debt, it is likely that the Headquarters Facility will be lost
through foreclosure.
The Operating Partnership, however, is exploring alternative strategies to
maintain its interest in the property, including the filing of a bankruptcy
petition.
At this time, it appears that the original investment objective of
capital growth from the inception of the Partnership will not be attained and
that Limited Partners will not receive a return of their invested capital. The
extent to which invested capital is refunded to Limited Partners is dependent
upon the performance of the properties and the market in which they are located.
The ability to hold and operate the properties is dependent upon the Operating
Partnership's ability to restructure or refinance its mortgage indebtedness.
Results of Operations
The net loss realized by the Partnership for the first nine months of
1996 was $11,348,000 compared to $11,173,000 for the same period in 1995. The
increase in the net loss is attributable to a decrease in the total revenues
partially offset by a decrease in expenses. Total revenues decreased by
$1,030,000 for the nine months ended September 30, 1996 as compared to the same
period of 1995. Base rent revenue and common area expense reimbursements
decreased primarily as a result of leases turning over at lower base rents and
higher operating expenses bases.
Total expenses decreased from $38,457,000 for the nine months ended
September 30, 1995 to $37,490,000 for the nine months ended September 30, 1996.
These decreases were primarily attributed to decreases in utilities, general and
administrative, interest expense and depreciation and amortization, which were
partially offset by increases in real estate taxes, insurance, repairs,
maintenance and security expenses. Utilities decreased due to rate decreases and
rebates received. General and administrative expenses decreased primarily as a
result of non-recurring legal fees incurred in 1995. Depreciation and
amortization decreased as a result of the write-down of the value of the
property at December 31, 1995. The increase in repairs, maintenance and security
relates primarily to the increased costs associated with maintenance of the
common area utilized by the Operating Partnership.
The net loss for the three months ended September 30, 1996 was
$4,672,000 compared to $5,061,000 for the same period in 1995. Total revenues
increased $357,000 for the three month period ended September 30, 1996 as
compared to the same period in 1996. The increase in revenue is the result of
space which was vacant for most of the third quarter of 1995 being occupied in
1996. As of September 30, 1996 and 1995, the property's occupancy was 98% and
85% respectively.
<PAGE>
Results of Operations (continued)
Total expenses increased from $13,047,000 for the three months ended
September 30, 1995 to $13,212,000 for the three months ended September 30, 1996.
These increases were primarily attributed to increases in utilities, repairs and
maintenance, real estate taxes, general and administrative, as well as
insurance, partially offset by decreases in interest expense and depreciation
and amortization. Utilities increased due to increased occupancy. Repairs and
maintenance increased due to the increase in the common area expenses. General
and administrative increased due to the expenses incurred on the loan and tenant
negotiations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: No Report on Form 8-K was filed during the
period.
SIGNATURE
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.
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
(Registrant)
By: Winthrop Financial Associates, A Limited Partnership
Managing General Partner
DATED: November 14, 1996 By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
DATED: November 14, 1996 By: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
nine month period ending September 30, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000776105
<NAME> WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 5,434,000
<SECURITIES> 1,266,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,358,000
<PP&E> 256,600,000
<DEPRECIATION> (129,820,000)
<TOTAL-ASSETS> 165,129,000
<CURRENT-LIABILITIES> 6,896,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (39,479,000)
<TOTAL-LIABILITY-AND-EQUITY> 165,129,000
<SALES> 0
<TOTAL-REVENUES> 26,642,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,880,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,610,000
<INCOME-PRETAX> (11,348,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,348,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,348,000)
<EPS-PRIMARY> (3,177.43)
<EPS-DILUTED> (3,177.43)
</TABLE>
