<PAGE>
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, 1997 Commission File Number 0-14536
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
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(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
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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
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<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
ASSETS
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited) (Audited)
(Amounts in Thousands)
<S> <C> <C>
Land ........................................................ $ 13,339 $ 13,339
Buildings and improvements .................................. 222,187 221,342
--------- ---------
235,526 234,681
Less: Accumulated depreciation ............................. 134,310 130,004
--------- ---------
101,216 104,677
Cash and cash equivalents ................................... 10,363 5,335
Investment securities, restricted ........................... 2,646 1,289
Other deposits .............................................. 520 241
Prepaid expenses and other assets ........................... 5,069 7,485
Deferred costs, net of accumulated amortization
of $5,918 and $5,554 as of June 30,
1996 and December 31, 1996, respectively ................ 3,516 3,205
Equity investment in Development Partnership ................ 20,164 20,367
--------- ---------
Total Assets ....................................... $ 143,494 $ 142,599
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities not subject to compromise
Accounts payable and accrued expenses and other ......... $ 1,978 $ --
--------- ---------
Liabilities subject to compromise
Mortgage loan ........................................... 197,712 197,712
Accounts payable, accrued expenses and accrued
interest of $8,283 at June 30, 1997 and $4,617
at December 31, 1996 ................................... 11,358 10,789
--------- ---------
Total Liabilities subject to compromise ............ 209,070 208,501
--------- ---------
Total Liabilities .................................. 211,048 208,501
--------- ---------
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 .............................. (46,192) (44,573)
General Partners ........................................ (21,362) (21,329)
--------- ---------
Total Partners' Capital ............................ (67,554) (65,902)
--------- ---------
Total Liabilities and Partners' Capital ............ $ 143,494 $ 142,599
========= =========
</TABLE>
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1997 1996 1997 1996
----- ------ ----- -----
(Amounts in Thousands)
(Except per unit data)
<S> <C> <C> <C> <C>
REVENUES:
Base rent revenue .............................. $ 5,962 $ 6,004 $ 11,724 $ 12,184
Common area expense reimbursements ............. 2,564 2,808 5,081 5,600
Interest and other income ...................... 98 192 220 318
-------- -------- -------- --------
Total Revenues .............................. 8,624 9,004 17,025 18,102
-------- -------- -------- --------
EXPENSES:
Repairs, maintenance and security .............. 1,456 1,508 3,090 2,938
Real estate taxes .............................. 657 690 1,315 1,373
Utilities ...................................... 698 523 1,209 1,030
General and administrative ..................... 219 433 622 927
Asset and property management fee .............. 187 187 375 375
Insurance ...................................... 88 94 176 181
Interest expense ............................... -- 5,869 5,992 11,751
Depreciation and amortization .................. 2,390 2,930 4,838 5,863
-------- -------- -------- --------
Total Expenses .............................. 5,695 12,234 17,617 24,438
-------- -------- -------- --------
Operating Income (loss) ..................... 2,929 (3,230) (592) (6,336)
Equity in Loss of Development
Partnership ........................................ (133) (198) (203) (397)
Reorganization items:
Professional fees .............................. (1) -- (886) --
Interest earned on accumulated cash resulting
from Chapter 11 proceedings .................... 8 -- 8 --
-------- -------- -------- --------
Total reorganization items .................. 7 -- (878) --
-------- -------- -------- --------
Income (Loss) Before Minority Interest ...... 2,803 (3,428) (1,673) (6,733)
Minority Interest in Operating Partnership
and Management Partnership ........................... (15) 29 21 57
-------- -------- -------- --------
Net Income (Loss) ........................... $ 2,788 $ (3,399) $ (1,652) $ (6,676)
======== ======== ======== ========
Net Income (Loss) Allocated to General Partners...... $ 56 $ (68) $ (33) $ (134)
======== ======== ======== ========
Net Income (Loss) Allocated to Investor
Limited Partners ............................... $ 2,732 $ (3,331) $ (1,619) $ (6,542)
======== ======== ======== ========
Net Income (Loss) per unit of Limited Partner
Interest ....................................... $ 781 $ (951) $ (463) $ (1,869)
======== ======== ======== ========
</TABLE>
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------
1997 1996
------ ------
(Amounts in thousands)
<S> <C> <C>
Cash flow from operating activities:
Net loss before reorganization item and after minority interest ........... $ (774) $ (6,676)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization .......................................... 4,679 5,670
Minority interest in income of Operating
Partnership and Management Partnership ................................. (21) (57)
Equity in loss of the Development Partnership .......................... 203 397
Change in assets and liabilities:
(Decrease) Increase in other deposits .................................. (279) 4
Decrease in prepaid expenses and other assets .......................... 2,428 531
Increase in accounts payable and
accrued expenses ...................................................... 2,547 135
Increase in deferred costs related to
operating activities .................................................. (675) (54)
-------- --------
Net cash provided by (used in) operating activities ................... 8,108 (50)
before reorganization item -------- --------
Cash flows from reorganization items:
Professional fees paid for services rendered in connection with the Chapter
11 proceedings ............................................................ (886) --
Interest received on cash accumulated because of the Chapter 11
proceedings ............................................................... 8 --
-------- --------
Net cash used for reorganization items: ................................ (878) --
-------- --------
Cash flows from investing activities:
Capital expenditures ...................................................... (845) (53)
Net decrease (increase) in investment securities .......................... (1,357) 2,225
-------- --------
Net cash provided by (used) in investing activities ................... (2,202) 2,172
-------- --------
Cash flows from financing activities:
Principal payments on mortgage loan ....................................... -- (696)
-------- --------
Net cash used in financing activities .................................. -- (696)
-------- --------
Net increase in cash and cash equivalents ....................................... 5,028 1,426
Cash and cash equivalents at beginning of period ................................ 5,335 9,216
-------- --------
Cash and cash equivalents at end of period ...................................... $ 10,363 $ 10,642
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest .................................................... $ 1,323 $ 11,751
======== ========
</TABLE>
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED) (NOTE 1)
Investor
Limited General
Partners Partners Total
-------- -------- -----
(Amounts in Thousands)
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)
======== ======== ========
Balance, December 31, 1996 ........ $(44,573) $(21,329) $(65,902)
Net Loss .......................... (1,619) (33) (1,652)
-------- -------- --------
Balance, June 30, 1997 ............ $(46,192) $(21,362) $(67,554)
======== ======== ========
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
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 1,606,000 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 in the
Operating Partnership is held by an unaffiliated entity (Crow Irvine
#2) and the remaining 1% ownership interest in the Management
Partnership is held by an affiliate of the Partnership (First Winthrop
Properties, Inc.). The ownership interests of these entities 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, 1997. 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 Annual
Report on Form 10-K, for the year ended December 31, 1996.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
The accompanying consolidated financial statements have been prepared on an
ongoing concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Partnership
did not have the financial resources to fund the principal amount of
$197,712,000 due under the mortgage loan upon maturity. (See Note Below). 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.
Certain amounts have been reclassified to conform to the June 30, 1997
presentation.
<PAGE>
3. 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
continued to pay this asset management fee and has paid in this year $750,000
representing the fee due for July 1, 1996 to June 30, 1997. In addition, the
Partnership has provided overhead reimbursement to an affiliate of the general
partner in the amount of $13,662 and $36,250 for the six months ended June 30,
1997 and 1996.
4. PLAN OF REORGANIZATION OF OPERATING PARTNERSHIP
The Operating Partnership filed for bankruptcy under Chapter 11 of the U.S.
Bankruptcy Code on March 28, 1997. Pursuant to the terms of the Operating
Partnership's Third Amended Plan of Reorganization dated July 23, 1997, the
Mortgage Lender will reduce the Operating Partnership's mortgage obligation to
$104.5 million through forgiveness of indebtedness. Based upon this proposed
plan the Operating Partnership has neither paid nor accrued interest expense
subsequent to the date of the bankruptcy filing. The debt will be evidenced by
two new notes in the principal amounts of $100 million and $4.5 million (the
Intermediate Debt). The Operating Partnership will then contribute $500,000 in
cash, and all of it's other assets and liabilities (including Headquarters
Facility subject to the Intermediate Debt) to a limited liability corporation
(LLC) formed for this purpose. In return, the Operating Partnership will receive
a 10% interest in the LLC.
A real estate investment trust (REIT), will be formed to acquire a 90% interest
in the LLC, the other members of which will be the existing mortgage
noteholders, in exchange for a capital contribution consisting of the $4,500,000
intermediate debt note. The remaining $100 million balance of the intermediate
debt will be satisfied by the LLC issuing to the REIT $100 million in secured
debentures, which will be divided into two classes. Class A Notes in principal
amount of $80 million will bear interest at a floating annual rate of 2.25%
above the interest rate on U.S. Treasury Bonds or Notes with a maturity date
closest to the Class A Notes, and be payable monthly in interest only through
March 28, 1999. Thereafter, monthly payment of interest and principal will be
based on a 25-year amortization schedule. Through March 28, 1998, the interest
may be made by issuing additional Class A Notes. Class B Notes in the principal
amount of $20 million will bear interest at a floating annual rate of 3.0% above
the interest rate on U.S. Treasury Bonds or Notes with a maturity date closest
to the Class B Notes, and be payable monthly in interest only through March 28,
2000. Thereafter, monthly payments of interest and principal will be based on a
25-year amortization schedule. Through March 28, 2001, the interest may be made
by issuing additional Class B Notes. Both Class A and B Notes mature March 28,
2002.
The LLC will terminate upon the earlier of the sale or disposition of the
Headquarters Facility or September 28, 2002, although its term may be extended
by the members.
The Operating Partnership will have the right to exchange its 10% interest in
the LLC for a 10% interest in the REIT. It will also pledge its interest in the
LLC as collateral for the payment in full of all amounts evidenced by the Class
A and Class B Notes.
The Operating Partnership will also receive certain Property Appreciation
Rights, which will be exercisable through March 27, 2002. The Operating
Partnership will have the right to purchase an equity interest in the REIT
representing 10% of the equity value of the LLC (subject to dilution) for
$10,888,889. The Operating Partnership will also have the right to purchase an
equity interest in the REIT representing 55% of the equity value of the LLC
(subject to dilution) for $152,777,778. The exercise of the rights is subject to
the fair market value of the LLC equaling or exceeding $98 million and $125
million, respectively. The REIT has the right to substitute cash payments in
lieu of REIT shares.
In return for its services in connection with assistance in negotiating the
reorganization plan, the LLC will pay a fee of $500,000 to the Partnership.
The above terms of the proposed plan of reorganization are subject to change and
are also subject to approval by the Bankruptcy Court and the Partnership's
limited partners.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-Q JUNE 30, 1997
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 99% general partnership interest in
Crow Winthrop Operating Partnership, a Maryland general partnership (the
"Operating Partnership") which owns a 1.6 million square foot office facility
known as the Fluor Corporation World Headquarters Facility in Irvine (Orange
County), California (the "Headquarters Facility"), (ii) a 25% 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 WC Management.
Commencing in 1990, and through the second quarter of 1996, however, WFA had not
been paid its annual asset management fee. As of June 30, 1996, $4,875,000 of
this fee was payable to WFA. This deferred fee was paid in the third quarter of
1996 and has been paid currently to the second quarter of 1997. To the extent
there are no cash distributions from the Operating Partnership or the
Development Partnership, WFA may permit the payment of its asset management fee
to be deferred. There can be no assurance, however, that the deferral of this
fee will be permitted. Any 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.
At March 31, 1997, the balance of the Operating Partnership's reserve account
was transferred to a tenant improvement escrow account along with operating
funds of $1,467,000. This investment securities account had a balance of
$2,646,000 at June 30, 1997.
The Partnership had $10,363,000 of cash and cash equivalents at June 30, 1997,
as compared to $5,335,000 at December 31, 1996. This increase is attributable to
$8,108,000 of net cash provided by operating activities which was partially
offset by $878,000 of net cash used for reorganization items and $2,202,000 of
net cash used by investing activities. The significant increase in net cash
provided by operating activities for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996 is primarily attributable to the
cessation of interest payments on the mortgage loan encumbering the Headquarters
Facility during the six months ended June 30, 1997. Net cash from reorganization
items consist primarily of professional fees paid to third parties in
connection with the Operating Partnership's Chapter 11 filing. Cash used in
investing activities consists of $845,000 of building improvements and the
transfer of $1,357,000 to the reserve account at March 31, 1997.
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 the
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 Headquarters Facility is dependent upon the
confirmation of the Plan as defined below.
<PAGE>
Bankruptcy of the Operating Partnership
THE FOLLOWING DISCUSSION WITH RESPECT TO THE PROPOSED WORKOUT OF THE OPERATING
PARTNERSHIP'S DEFAULT UNDER ITS EXISTING INDEBTEDNESS IS BASED ON THE CURRENT
STRUCTURE OF THE NEGOTIATED PLAN OF REORGANIZATION OF THE OPERATING PARTNERSHIP.
THERE CAN BE NO ASSURANCE, HOWEVER, THAT THE PLAN ULTIMATELY APPROVED, IF ANY,
WILL BE ON THE SAME TERMS AND CONDITIONS AS THE CURRENT PLAN. LIMITED PARTNERS
SHOULD BE AWARE, HOWEVER, THAT PRIOR TO THE IMPLEMENTATION OF THE PLAN AS
CURRENTLY PROPOSED, THE CONSENT OF LIMITED PARTNERS IS BEING SOUGHT PURSUANT TO
THE STATEMENT FURNISHED IN CONNECTION WITH THE SOLICITATION OF CONSENTS, DATED
JULY 31, 1997, AS SUPPLEMENTED BY SUPPLEMENT NO. 1 THERETO, DATED AUGUST 7,
1997.
The Operating Partnership filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") on March 28, 1997. As a
condition to the transfer of the Headquarters Facility as contemplated by the
Operating Partnership's Third Amended Plan of Reorganization dated July 23, 1997
(the "Plan"), the requisite consent of the Limited Partners is required with
respect to the Proposal.
Pursuant to the terms of the Plan, the Operating Partnership will contribute all
of its assets and liabilities, including $500,000 of unencumbered cash and all
of its right, title and interest in the Headquarters Facility, to a newly formed
Delaware limited liability company to be known as Jamboree LLC. In exchange for
transferring all of its assets and liabilities to Jamboree LLC, the Operating
Partnership will receive an initial 10% ownership interest in Jamboree LLC. In
addition, the Partnership will receive a restructuring fee of $500,000 in
connection with the Plan. Immediately prior to the transfer by the Operating
Partnership of its assets and liabilities to Jamboree LLC, the Existing Secured
Note will be satisfied by (i) the discharge of an amount of the existing debt
sufficient to reduce the outstanding balance thereof to $104.5 million
(approximately $93 million plus accrued interest thereon) and (ii) the issuance
by the Operating Partnership of two intermediate notes, one in the original
principal amount of $4.5 million (the "First Intermediate Note") and the second
in the original principal amount of $100 million (the "Second Intermediate
Note"), which will be secured by all of the assets of the Operating Partnership.
Simultaneous with the contribution by the Operating Partnership of all of its
assets and liabilities to Jamboree LLC, the Certificateholders will contribute
the First Intermediate Note to Jamboree Office REIT (a newly formed real estate
investment trust, the initial stockholders of which will be the
Certificateholders) and Jamboree Office REIT will, in turn, contribute the First
Intermediate Note to Jamboree LLC in exchange for the remaining 90% interest in
Jamboree LLC. Jamboree LLC will satisfy the Second Intermediate Note by issuing
the New Notes (as defined below) in the original principal amount of $100
million to the Certificateholders.
Jamboree LLC will be a newly formed limited liability company organized under
the laws of the State of Delaware. Jamboree LLC will terminate on the earlier to
occur of (i) one year after the sale or transfer by Jamboree LLC of the
Headquarters Facility, provided that the Jamboree LLC Board (as defined below)
does not vote to continue the company, (ii) September 28, 2002 (iii) the
consent of the members of Jamboree LLC or (iv) as required by applicable law.
Jamboree LLC will be governed by a five person board of member representatives
(the "Jamboree LLC Board"). The initial five members will be designated one by
the Operating Partnership and four by Jamboree Office REIT. A majority of the
members of the Jamboree LLC Board must approve (i) all operating decisions not
designated as requiring unanimous approval in Jamboree LLC's Limited Liability
Company Agreement (the "LLC Agreement") and (ii) termination for cause of the
Management Agreement (as hereinafter defined). Unanimous approval of the
Jamboree LLC Board will be required for (i) the commencement of a voluntary case
under the Bankruptcy Code, (ii) termination of the Management Agreement without
cause, (iii) sale of all or any material portion of the Headquarters Facility
prior to the date which is three years after the effective date of the Plan,
(iv) except as otherwise provided in the LLC Agreement, issuance of additional
units representing membership interests (v) the authorization of business
activities other than the ownership and operation of the Headquarters Facility
within three years of the Effective Date, (vi) following the sale of the
Headquarters Facility, authorize the continued existence of Jamboree LLC for
more than one year, and (vii) certain other matters as provided in the LLC
Agreement. See "Certain Federal Income Tax Consequences" below for information
with respect to the tax effect of the Proposal.
<PAGE>
In addition, the Operating Partnership will have the right (the "Exchange
Right") to exchange its interest in Jamboree LLC at any time on or after one
year from the effective date of the Plan through March 27, 2002 for shares in
Jamboree Office REIT ("Shares"); provided, however, such one year lock-out
period shall be waived if, among other things (i) Jamboree Office REIT shall (a)
file a registration statement registering Shares, (b) issue, or provide rights
to subscribe for, additional Shares to its shareholders, (c) effect a capital
reorganization or reclassification, (d) sell all or substantially all or its
assets or (e) dissolve or liquidate, or (ii) Jamboree LLC shall sell all or
substantially all of its assets. In general, the Operating Partnership may
exchange its interest in Jamboree LLC for a fixed number of Shares (on a
one-for-one basis) in Jamboree Office REIT. All Shares received by the Operating
Partnership either upon the exchange of its interest in Jamboree LLC or as
payment for the Property Appreciation Right (as defined below) will be
"Registerable Securities" pursuant to the provisions of the Property
Appreciation and Exchange Right. In general, upon the occurrence of certain
events, the Operating Partnership can request that Jamboree Office REIT prepare
a registration statement to effect the registration of the shares held by the
Operating Partnership in Jamboree Office REIT.
Furthermore, the Operating Partnership also will have the right to receive
additional equity interests or cash payments from Jamboree Office REIT (the
"Property Appreciation Rights"). The Property Appreciation Rights will be
exercisable, if at all, at any time until the close of business on March 27,
2002. In general, the Property Appreciation Rights entitle the Operating
Partnership to purchase (i) Shares representing 10% of the equity value of
Jamboree LLC (subject to dilution) for a purchase price of $10,888,888.89 in the
aggregate, if the fair market value of Jamboree LLC equals or exceeds $98
million and (ii) Shares representing 55% of the equity value of Jamboree LLC
(subject to dilution) for a purchase price of $152,777,777.78 in the aggregate,
if the fair market value of Jamboree LLC equals or exceeds $125 million.
Alternatively, the Operating Partnership can purchase such additional Shares on
a "cashless basis" by surrendering a portion of the Shares to be purchased in
payment of the applicable purchase price. If the Operating Partnership elects to
exercise either of the property appreciation rights, Jamboree Office REIT has
the option to deliver to the Operating Partnership in lieu of the issuance of
Shares a cash payment equal to the difference between the then current market
value of the Shares which would otherwise be issued and the exercise price for
such Shares.
The fair market value of the Shares for the purpose of the Property Appreciation
Right will be determined by an appraisal obtained by Jamboree Office REIT. If
the Operating Partnership disputes the appraisal obtained by Jamboree Office
REIT, it may obtain a second appraisal. If the appraisals differ by less than
10% then the value will be deemed to be the average of the two determinations.
If the appraisals differ by 10% or more, then the two appraisers will select a
third appraiser to perform a third appraisal, and the value will be deemed to be
the value that constitutes the mid-point of the range between the two
determinations that are closest in amount.
To satisfy the Second Intermediate Note, Jamboree LLC will issue promissory
notes (the "New Notes") having an aggregate principal amount of $100,000,000 to
the Certificateholders. The New Notes will be divided into two tranches, the
Class A and Class B Notes. The Class A Tranche will have an initial principal
balance of $80,000,000 bear interest at 2.25% above the interest rate on United
States Treasury Bonds or Notes with a maturity date closest to the Class A Notes
and be payable in interest only for the first 36 months (provided, however, that
payments of interest for the 12 month period may be made by issuing additional
Class A Notes) and thereafter, monthly payments of interest and principal based
on a 25-year amortization schedule. The Class B Tranche will have an initial
principal balance of $20,000,000, bear interest at 3.0% above interest rate on
United States Treasury Bonds or Notes with a maturity date closest to the Class
B Notes and be payable in interest only for the first 36 months (provided,
however, that payments of interest for the first 48 months may be made by
issuing additional Class B Notes) and thereafter, monthly payments of interest
and principal based on a 25-year amortization schedule.
As security for the New Notes, among other things, Jamboree LLC will grant the
Certificateholders a security interest on the Headquarters Facility and the
Operating Partnership will execute a Pledge and Security Agreement pursuant to
which the Operating Partnership will pledge its interest in Jamboree LLC to the
Class A Noteholders and the Class B Noteholders as collateral for the payment in
full of all amounts evidenced by the New Notes. If Jamboree LLC were to default
on its obligations under the New Notes, the Class A Noteholders and the Class B
Noteholders will have the right to foreclose on the Partnership's interest in
Jamboree LLC. If this were to occur, the Partnership would lose its entire
ownership interest in the Headquarters Facility. There can be no assurance that
the Headquarters Facility will be able to generate sufficient cash flow to
enable it to satisfy its obligations under the New Notes.
<PAGE>
RESULTS OF OPERATIONS
The net loss realized by the Partnership for the six months ended June 30, 1997
was $1,652,000 compared to $6,676,000 for the same period in 1996. The decrease
in the net loss is attributable to a decrease in expenses, which was partially
offset by a decrease in total revenues. Total expenses decreased to $17,617,000
for the six months ended June 30, 1997 from $24,438,000 for the six months ended
June 30, 1996. This decrease is primarily attributable to a decrease in interest
expense due to the cessation of interest accruals on the mortgage loan
encumbering the Headquarters Facility. From the date of the Operating
Partnership's Bankruptcy filing no mortgage interest has been accrued or paid.
In addition depreciation and amortization decreased by $1,025,000 in the first
six months of 1997 compared to 1996, as a result of the additional writedown of
property value ($23,261,000) in 1996.
Total revenues decreased by $1,077,000 for the six months ended June 30, 1997,
as compared to the same period for 1996. Although average occupancy at the
property remains stable at 98%, base rental revenue decreased due to space being
re-leased at lower rental rates and higher bases for operating escalation charge
backs.
The net income realized by the Partnership for the three months ended June 30,
1997 was $2,788,000 compared to the net loss of $3,399,000 for the three months
ended June 30, 1996. This increase in income of $6,187,000 is mainly
attributable to the mortgage interest not being accrued, approximately
$5,870,000. The remaining increase of approximately $200,000 represents the
decrease in depreciation and amortization, approximately $540,000 offset by the
decrease in rental income, approximately $380,000. Depreciation and amortization
decreased because of the additional 1996 property writedown of $23,261,000.
Total revenue decreased because of space being re-leased at lower rental rates
and higher bases for operating escalation charge backs.
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-Q JUNE 30, 1997
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 27
Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the six
months ended June 30, 1997, however a Form 8-K was
filed on August 7, 1997 with respect to the
solicitation of consents, as supplemented.
(Material Event - Item 5 of Form 8-K)
<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, 1997 By: /s/ Michael L. Ashner
----------------------
Michael L. Ashner
Chief Executive Officer
DATED: August 14, 1997 By: /s/ Edward V. Williams
----------------------
Edward V. Williams
Chief Financial Officer
<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, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 10,363,000
<SECURITIES> 2,646,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 235,526,000
<DEPRECIATION> (134,310,000)
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0
0
<OTHER-SE> (67,554,000)
<TOTAL-LIABILITY-AND-EQUITY> 143,494,000
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<INCOME-CONTINUING> (774,000)
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<EXTRAORDINARY> (878,000)
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<EPS-PRIMARY> (462.57)
<EPS-DILUTED> (462.57)
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