<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 September 30, 1997 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)
Five Cambridge Center, Cambridge, MA 02142 -1493
- ------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
--------------
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
ASSETS
------
Item 1. Consolidated Financial Statements
September 30, December 31,
1997 1996
(Unaudited) (Audited)
(Amounts in Thousands)
Land............................................ $ 13,339 $ 13,339
Buildings and improvements...................... 222,640 221,342
-------- --------
235,979 234,681
Less: Accumulated depreciation................. 136,462 130,004
-------- --------
99,517 104,677
Cash and cash equivalents....................... 16,288 5,335
Investment securities, restricted............... 2,367 1,289
Other deposits.................................. 580 241
Prepaid expenses and other assets............... 5,502 7,485
Deferred costs, net of accumulated
amortization $6,104 and $5,554 as of
September 30,1996 and December 31, 1996,
respectively.................................. 3,420 3,205
Equity investment in Development Partnership.... 20,030 20,367
-------- --------
Total Assets............................... $147,704 $142,599
======== ========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Liabilities not subject to compromise
Accounts payable and accrued expenses
and other.................................... $ 7,572 $ 6,172
Liabilities subject to compromise..............
Mortgage loan................................ 197,712 197,712
Accrued interest of $8,283 at September 30,
1997 and $4,617 at December 31, 1996........ 8,283 4,617
-------- -------
Total Liabilities subject to compromise... 205,995 202,329
-------- -------
Total Liabilities......................... 213,567 208,501
-------- -------
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...................... (44,535) (44,573)
General Partners............................. (21,328) (21,329)
-------- -------
Total Partners' Capital................... (65,863) (65,902)
Total Liabilities and Partners' Capital... $147,704 $142,599
======== ========
2
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<PAGE>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
1997 1996 1997 1996
-------------------- -------------------
(Amounts in Thousands)
(Except per unit data)
REVENUES:
Base rent revenue................... $ 6,465 $ 5,983 $18,189 $18,167
Common area expense reimbursements.. 2,716 2,635 7,797 8,075
Interest and other income........... 869 82 1,089 400
------- ------- ------- -------
Total Revenues...................... 10,050 8,700 27,075 26,642
------- ------- ------- -------
EXPENSES:
Repairs, maintenance and
security...................... 1,661 1,643 4,751 4,581
Real estate taxes............... 385 721 1,700 2,094
Utilities....................... 1,388 1,194 2,597 2,064
General and administrative...... 448 575 1,070 1,502
Asset and property management
fee........................... 188 188 563 563
Insurance....................... 87 90 263 271
Interest expense................ 2 5,859 5,994 17,610
Depreciation and amortization... 2,377 2,942 7,215 8,805
------- ------- ------- -------
Total Expenses................ 6,536 13,212 24,153 37,490
------- ------- ------- -------
Operating Income (loss)....... 3,514 (4,512) 2,922 (10,848)
Equity in Loss of Development
Partnership..................... (134) (199) (337) (596)
Reorganization items:
Professional fees............... (1,764) -- (2,650) --
Interest earned on accumulated
cash resulting from Chapter 11
proceedings................... 106 -- 114 --
------- ------- ------- -------
Total reorganization items.... (1,658) -- (2,536) --
------- ------- ------- -------
Income (Loss) Before
Minority Interest........... 1,722 (4,711) 49 (11,444)
Minority Interest in Operating
Partnership and Management
Partnership........................ (31) 39 (10) 96
------- ------- ------- -------
Net Income (Loss)............. $ 1,691 $(4,672) $ 39 $(11,348)
======= ======= ======= =======
Net Income (Loss) Allocated to
General Partners................... $ 34 $ (93) $ 1 $ (227)
======= ======= ======= =======
Net Income (Loss) Allocated
to Investor Limited Partners....... $ 1,657 $(4,579) $ 38 $(11,121)
======= ======= ======= =======
Net Income (Loss) per unit of
Limited Partner Interest........... $ 473 $(1,308) $ 11 $ (3,177)
======= ======= ======= =======
3
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Nine Months
Ended September 30,
--------------------
1997 1996
----------------------
(Amounts in thousands)
Cash flow from operating activities:
Net income (loss) before reorganization item
and after minority interest....................... $ 2,575 $ (11,348)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization...................... 7,008 8,601
Minority interest in income (loss) of
Operating Partnership and Management
Partnership........................................ 10 (96)
Equity in loss of the Development Partnership...... 337 596
Change in assets and liabilities:
(Increase) decrease in other deposits.............. (339) 4
Decrease in prepaid expenses and other assets...... 1,973 70
Increase in accounts payable and
accrued expenses................................... 5,066 (2,958)
Increase in deferred costs related to
operating activities............................... (765) (45)
------ ------
Net cash provided by (used in) operating
activities before reorganization item.............. 15,865 (5,176)
------- -------
Cash flows from reorganization items:
Professional fees paid for services rendered in
connection with the Chapter 11 proceedings......... (2,650) --
Interest received on cash accumulated because
of the Chapter 11 proceedings...................... 114 --
------ ------
Net cash used for reorganization items:.......... (2,536) --
------ ------
Cash flows from investing activities:
Capital expenditures................................. (1,298) (74)
Net decrease (increase) in investment securities..... (1,078) 2,406
------ ------
Net cash provided by (used) in investing
activities......................................... (2,376) 2,332
------ ------
Cash flows from financing activities:
Principal payments on mortgage loan................... -- (938)
------ ------
Net cash used in financing activities.................... -- (938)
------ ------
Net increase in cash and cash equivalents................ 10,953 3,782
Cash and cash equivalents at beginning of period......... 5,335 9,216
------ ------
Cash and cash equivalents at end of period............... $16,288 $ 5,434
====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest............................. $ 1,323 $ 17,798
====== ======
4
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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............................. (11,121) (227) (11,348)
--------- --------- ---------
Balance, September 30, 1996.......... $(18,678) $(20,801) $(39,479)
========= ========= =========
Balance, December 31, 1996........... $(44,573) $(21,329) $(65,902)
Net Income........................... 38 1 39
--------- --------- ---------
Balance, September 30, 1997.......... $(44,535) $(21,328) $(65,863)
========= ========= =========
5
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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.
As indicated in Note 4 below, ownership of the Headquarters Facility
was transferred to a newly formed Limited Liability Company, in
exchange for an interest in such entity.
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 of 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.
6
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 did not have the financial resources to fund the principal
amount of $197,712,000 due under the mortgage loan upon maturity (see
note 4 below).
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 September 30,
1997 presentation.
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 $937,500 representing the fee
due for July 1, 1996 to September 30, 1997. In addition, the Partnership
has reimbursed an affiliate of the general partner for certain
administrative expenses in an amount of $25,586 and $108,750 for the
nine months ended September 30, 1997 and 1996.
4. PLAN OF REORGANIZATION OF OPERATING PARTNERSHIP/SUBSEQUENT EVENT
The Operating Partnership filed for bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code on March 28, 1997. The Operating Partnership's
Third Amended Plan of Reorganization dated July 23, 1997 was approved by
the bankruptcy court.
On October 3, 1997, the reorganization of the Operating Partnership as
provided for in the Plan was implemented. For a description of the Plan,
see Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
7
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
5. PRO FORMA
The pro forma consolidated balance sheet data as of September 30, 1997
has been prepared to reflect the contribution of the Operating
Partnership's real estate and new debt to Jamboree LLC, as if such
contribution had occurred on September 30, 1997. The pro forma
consolidated operating statement for the nine months ended September 30,
1997 and the year ended December 31, 1996 have been prepared to reflect
the contribution as if such contribution had occurred on January 1,
1996.
PROFORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
Assets (Amounts in Thousands)
September 30,
1997
----
Cash and cash equivalents $ 2,448
Prepaid expenses and other assets 554
Deferred costs net of accumulated amortization
of $115 and $100 as of September 30, 1997
and December 31, 1996, respectively 1,082
Equity interest in Operating Partnership 500
Equity interest in Development Partnership 20,031
-------
Total Assets $24,615
=======
Liabilities and Partners' Capital
Accounts payable and accrued expenses $ 20
Partners' Capital 24,595
-------
$24,615
=======
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months For the Twelve Months
Ended September 30, Ended December 31,
1997 1996
---- ----
REVENUES:
Interest and other income $ 2,098 $ 965
EXPENSES:
General and administrative 659 857
Asset management fee 563 750
Amortization 15 20
------- -------
Total Expenses 1,237 1,627
------- -------
Operating Income (Loss) 859 (662)
Equity in Loss of Development Partnership (336) (531)
Equity in Income of Operating Partnership 533 989
Reorganization Income -- 53,396
------- -------
Net Income $ 1,058 $53,192
======= =======
8
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 currently holds a 10% interest in Jamboree LLC
which in turn, 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 90 acres of partially
improved 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
continued management of the Headquarters Facility by WC Management generating
revenue to the Partnership as a result of distributions from WC Management
(derived from the management of the LLC properties), (ii) the ability of the
Operating Partnership to continue in existence and to generate revenue to the
Partnership as a result of distributions from the Operating Partnership, and
(iii) 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.
WFA has in the past and may in the future 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 account (investment securities) had a balance of
$2,367,000 at September 30, 1997 and is available to be used for tenant
improvements at the Headquarters Facility.
The Partnership had $16,288,000 of cash and cash equivalents at September 30,
1997, as compared to $5,335,000 at December 31, 1996. This increase is
attributable to $15,865,000 of net cash provided by operating activities which
was partially offset by $2,536,000 of net cash used for reorganization items and
$2,376,000 of net cash used by investing activities. The significant increase in
net cash provided by operating activities for the nine months ended September
30, 1997 as compared to the nine months ended September 30, 1996 is primarily
attributable to the cessation of interest payments on the mortgage loan
encumbering the Headquarters Facility during the nine months ended September 30,
1997. Net cash from reorganization items consist primarily of professional fees
paid in connection with the Operating Partnership's Chapter 11 filing. Cash used
in investing activities consists of $1,298,000 of building improvements and the
transfer of $1,357,000 to the reserve account at March 31, 1997, net of $279,000
of disbursements from reserve account.
Fluor Corporation, which currently leases apaproximately 53% of the total
rentable space at the Headquarters Facility, has informed the Operating
Partnership that it intends to vacate the Headquarters Facility when its lease
expires in 1999. It is expected that to the extent that new tenants can be found
for the vacated space, the lease payments under any such new leases will be at
rates lower than those currently being paid by Fluor Corporation. Leases have
been signed for approximately 10% of the Fluor space that is being vacated,
which come into effect August 1, 1998. Accordingly, it is expected that the
pending vacancy by Fluor Corporation will have an adverse effect on the
Partnership's cash flow.
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.
9
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLICATED FINANCIAL STATEMENTS
September 30, 1997
Plan of Reorganization of the Operating Partnership
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 was obtained, and on
October 3, 1997 the Plan was approved.
Pursuant to the terms of the Plan, the Operating Partnership contributed 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 Jamboree LLC, a
newly formed Delaware limited liability company. In exchange for transferring
all of its assets and liabilities to Jamboree LLC, the Operating Partnership
received an initial 10% ownership interest in Jamboree LLC. In addition, the
Partnership received 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 was 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 are 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 contributed the First Intermediate Note to Jamboree
Office REIT (a newly formed real estate investment trust, the initial
stockholders of which are the Certificateholders) and Jamboree Office REIT, in
turn, contributed the First Intermediate Note to Jamboree LLC in exchange for
the remaining 90% interest in Jamboree LLC. Jamboree LLC satisfied 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 is 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 is governed by a five-person board of member representatives (the
"Jamboree LLC Board"). The initial five members were 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 is 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.
In addition, the Operating Partnership has 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
10
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
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 has 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 has issued 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 has 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 has 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 has granted the
Certificateholders a security interest on the Headquarters Facility, and the
Operating Partnership has executed 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.
11
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
RESULTS OF OPERATIONS
The net income realized by the Partnership for the nine months ended September
30, 1997 was $39,000 compared to a net loss of $11,348,000 for the same period
in 1996. The decrease in the net loss is attributable to a decrease in expenses,
and an increase in total revenues. Total expenses decreased to $24,153,000 for
the nine months ended September 30, 1997 from $37,490,000 for the nine months
ended September 30, 1996. This decrease is primarily attributable to a decrease
in interest expense of $11,616,000 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 $1,590,000 in
the first nine months of 1997 compared to 1996, as a result of the additional
writedown of property value ($23,261,000) in 1996.
Total revenues increased by $433,000 for the nine months ended September 30,
1997, as compared to the same period for 1996. Average occupancy at the property
remains stable at 98%. Total revenue increased by approximately $800,000, in
other income, representing real estate tax abatements received. This was offset
by approximately $400,000 lower rent and common area reimbursements due to space
being released at lower rental rates and higher bases for operating escalation
reimbursements for leases in effect in the first quarter.
The net income realized by the Partnership for the three months ended September
30, 1997 was $1,691,000 compared to the net loss of $4,672,000 for the three
months ended September 30, 1996. This increase in income of $6,363,000 is mainly
attributable to the mortgage interest not being accrued, approximately
$5,859,000. The remaining increase of $504,000 represents the decrease in
depreciation and amortization, approximately $560,000 and the increase in rental
income, approximately $1,300,000 offset by the increase in reorganization items
of $1,764,000. Depreciation and amortization decreased because of the additional
1996 property writedown of $23,261,000. Total revenue increased because of the
real estate tax abatements received, approximately $800,000, in other income.
Also total revenue increased approximately $500,000 in higher rents for leases
coming into effect in the second and third quarter. This reflects the increase
in market rental rates in the Irvine area.
12
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 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:
A Form 8-K was filed on October 9, 1997 with respect
to the implementation of the Operating Partnership's
Plan of Reorganization (Item 5 - Other Events).
13
<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: November 14, 1997 By: /s/ Michael L. Ashner
----------------------
Michael L. Ashner
Chief Executive Officer
DATED: November 14, 1997 By: /s/Edward V. Williams
---------------------
Edward V. Williams
Chief Financial Officer
14
<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, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 16,288,000
<SECURITIES> 2,367,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 235,979,000
<DEPRECIATION> (136,462,000)
<TOTAL-ASSETS> 147,704,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (65,863,000)
<TOTAL-LIABILITY-AND-EQUITY> 147,704,000
<SALES> 0
<TOTAL-REVENUES> 25,986,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,089,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,994,000
<INCOME-PRETAX> 39,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,575,000
<DISCONTINUED> 0
<EXTRAORDINARY> (2,536,000)
<CHANGES> 0
<NET-INCOME> 39,000
<EPS-PRIMARY> 10.86
<EPS-DILUTED> 10.86
</TABLE>
