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 June 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
FORM 10-Q
JUNE 30, 1996
Part I. Financial Information
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
June 30, Dec. 31,
1996 1995
-------- ------
(Unaudited) (Audited)
(Amounts in Thousands)
<S> <C> <C>
Land ....................................................................... $ 16,757 $ 16,757
Buildings and improvements...................................................... 239,822 239,769
-------- --------
256,579 256,526
Less: Accumulated depreciation................................................. 127,235 122,065
-------- --------
129,344 134,461
Cash and cash equivalents....................................................... 10,642 9,216
Investment securities........................................................... 1,447 3,672
Other deposits.................................................................. 217 221
Prepaid expenses and other assets............................................... 5,038 5,511
Deferred costs, net of accumulated amortization
of $12,889 and $12,639 as of June 30,
1996 and December 31, 1995, respectively.................................... 5,948 6,394
Equity investment in Development Partnership.................................... 20,500 20,898
---------- --------
Total Assets........................................................... $173,136 $180,373
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan............................................................... $197,954 $198,650
Accounts payable, accrued expenses, accrued
interest and other......................................................... 9,989 9,854
-------- --------
Total Liabilities...................................................... 207,943 208,504
-------- --------
Commitments and Contingencies
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................................................. (14,099) (7,557)
General Partners............................................................ (20,708) (20,574)
--------- --------
Total Partners' Capital................................................ (34,807) (28,131)
---------- ----------
Total Liabilities and Partners' Capital................................ $173,136 $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 Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------ ------ ------ -----
(Amounts in Thousands)
(Except per unit data)
REVENUES:
<S> <C> <C> <C> <C>
Base rent revenue.............................. $ 6,004 $ 6,284 $12,184 $12,564
Common area expense reimbursements 2,728 3,162 5,440 6,327
Interest and other income...................... 192 283 318 438
-------- ------- ------- -------
Total Revenues.............................. 8,924 9,729 17,942 19,329
------- ------- ------- -------
EXPENSES:
Utilities...................................... 443 814 870 1,323
Repairs, maintenance and security 1,508 1,445 2,938 2,783
Real estate taxes.............................. 690 634 1,373 1,266
General and administrative..................... 433 690 927 1,182
Asset and property management fee 187 187 375 375
Interest expense............................... 5,869 5,907 11,751 11,824
Depreciation and amortization 2,930 3,245 5,863 6,490
Insurance...................................... 94 82 181 167
----- ------- ------- -------
Total Expenses.............................. 12,154 13,004 24,278 25,410
------- ------- ------- -------
Operating loss.............................. (3,230) (3,275) (6,336) (6,081)
Equity in Income/(Loss) of Development
Partnership........................................ (198) - (397) 81
------- ------- ------- -------
Loss Before Minority Interest (3,428) (3,275) (6,733) (6,000)
Minority Interest in Operating Partnership
and Management Partnership..................... 29 26 57 50
------ ------- ------- -------
Net Loss.................................... $(3,399) $(3,249) $(6,676) $(5,950)
======== ======= ======= =======
Net Loss Allocated to General Partners $ (68) $ (65) $ (134) $ (119)
========= ======= ======== =======
Net Loss Allocated to Investor
Limited Partners............................... $(3,331) $(3,184) $(6,542) $(5,831)
======== ======= ======= =======
Net Loss per unit of Limited Partner
Interest....................................... $ (951) $ (910) $ (1,869) $ (1,666)
========== ========= =========== ===========
</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 Six Months
Ended June 30,
1996 1995
---------- -------
(Amounts in thousands)
<S> <C> <C>
Cash flow from operating activities:
Net loss.................................................................. $ (6,676) $ (5,950)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.......................................... 5,670 6,307
Minority interest in income of Operating
Partnership and Management Partnership................................. (57) (50)
Equity in loss (gain) of the Development Partnership 397 (81)
Change in assets and liabilities:
Decrease in other deposits............................................. 4 713
Decrease in prepaid expenses and other assets 531 385
Increase (decrease) in accounts payable,
accrued expenses and other............................................
operating activities.................................................. (54) -
------- ----------
Net cash (used in) provided by operating activities (50) 400
------ -------
Cash flows from investing activities:
Capital expenditures...................................................... (53) (141)
Net decrease in investment securities..................................... 2,225 1,312
------ ---------
Net cash provided by investing activities 2,172 1,171
------ ---------
Cash flows from financing activities:
Principal payments on mortgage loan....................................... (696) (619)
------- ---------
Net cash used in financing activities.................................. (696) (619)
------- ---------
Net increase in cash and cash equivalents....................................... 1,426 952
Cash and cash equivalents at beginning of period 9,216 6,767
--------- ---------
Cash and cash equivalents at end of period...................................... $ 10,642 $ 7,719
========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................................... $ 11,752 $ 11,830
============ =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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.................................................. (5,831) (119) (5,950)
---------- ----------- ---------
Balance, June 30, 1995.................................... $ 51,515 $(19,368) $ 32,147
======== ======== ========
Balance, December 31, 1995................................ $ (7,557) $(20,574) $(28,131)
Net Loss.................................................. (6,542) (134) (6,676)
---------- ----------- ----------
Balance, June 30, 1996.................................... $(14,099) $(20,708) $(34,807)
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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").
<PAGE>
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.
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 $197,954,000 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. 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 was not 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 has continued to pay debt service on the
loan during the extension period upon the same terms prior to
maturity. On July 11, 1996 the Partnership received a Notice of
Default and Election to sell under Deed of Trust which gives 90 days
to cure payment defaults. 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 the
headquarters facility could be lost through foreclosure at maturity.
In such event, the Operating Partnership may have to explore
alternative strategies to maintain its interest in the property,
including the filing of a bankruptcy petition.
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.
<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 has not been paid its annual asset management fee. As of June 30,
1996, $4,875,000 of this fee was payable to WFA. 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 may
or may not ask 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.
<PAGE>
As of June 30, 1996, approximately $1,447,000 remains in the Partnership's
reserve account. These funds will be utilized to satisfy operating deficits and
will be available to the Partnership and Operating Partnership in its
restructuring efforts.
Cash used by operating activities for the six months ended June 30, 1996
amounted to $50,000, compared to cash provided by operations of $400,000 for the
six months ended June 30, 1995. This decrease is the result of lower rental
income. Cash used in financing activities, specifically the principal payments
on the mortgage loan were $696,000 and $619,000 during the six months ended June
30, 1996 and 1995, respectively. During the first six months ended June 30, 1996
$2,172,000 of cash was provided by investing activities compared to $1,171,000
for the six months ended June 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 was not 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 has continued to pay debt service on the loan during the
extension period upon the same terms prior to maturity. On July 11, 1996 the
Partnership received a Notice of Default and Election to sell under Deed of
Trust which gives 90 days to cure payment defaults. 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 the headquarters facility
could be lost through foreclosure at maturity. In such event, the Operating
Partnership may have to explore alternative strategies to maintain its interest
in the property, including the filing of a bankruptcy petition.
<PAGE>
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 six months 1996 was
$6,676,000 compared to $5,950,000 for the same period in 1995. The net loss for
the three months ended June 30, 1996 was $3,399,000 compared to $3,249,000 for
the same period in 1995. The increase in the net loss in both periods is
attributable to a decrease in total revenues partially offset by a decrease in
expenses. Total revenues decreased by $805,000 and $1,387,000 for the three
month and six month periods ended June 30, 1996, as compared to the same periods
in 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 expense bases. The average occupancy at the property remained stable
at 98% for the six month periods ended June 30, 1996 and 1995.
Total expenses decreased from $13,004,000 and $25,410,000 for the three and six
months ended June 30, 1995 to $12,154,000 and $24,278,000 for the three and six
months ended June 30, 1996. These decreases were primarily attributed to
decreases in utilities, general and administrative, interest expense, as well as
depreciation and amortization, 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 relate primarily to inflation.
<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.
<PAGE>
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: August 14, 1996 By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
DATED: August 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
six month period ending June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 10,642,000
<SECURITIES> 1,447,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,344,000
<PP&E> 256,579,000
<DEPRECIATION> (127,235,000)
<TOTAL-ASSETS> 173,136,000
<CURRENT-LIABILITIES> 9,989,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (34,807,000)
<TOTAL-LIABILITY-AND-EQUITY> 173,136,000
<SALES> 0
<TOTAL-REVENUES> 17,942,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,527,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,751,000
<INCOME-PRETAX> (6,676,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,676,000)
<EPS-PRIMARY> (1,869.00)
<EPS-DILUTED> (1,869.00)
</TABLE>
