<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 March 31, 1999 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)
Partnership'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 No X
------ -------
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Balance Sheets
(Unaudited)
- ------------------------------------------------------------------------------
March 31, December 31,
1999 1998
-------- ----------
(Amounts in Thousands)
Assets
Cash and cash equivalents........... $ 3,982 $ 3,222
Prepaid expenses and other assets, net... 249 239
Equity investment in Jamboree LLC... 711 1,320
Equity investment in development
Partnership (Note 1)............. 30,963 30,963
--------- ---------
Total assets.................. $ 35,905 $ 35,744
--------- ---------
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued expenses
and other...................... $ 38 $ 38
------------ -----------
Total liabilities............. $ 38 $ 38
------------ -----------
Minority interest of operating partnership
and management partnership....... 16 12
------------- -----------
Commitments and contingencies (Note 7)
Partners' capital:
Limited partners - units of Investor Limited Partnership:
Interest, $65 stated value per cash unit
and $66 stated value per deferred unit;
authorized - 3,500 units; issued and
outstanding - 3,500 units........ 55,145 54,991
General partners.................... (19,294) (19,297)
------------- ----------
Total partners' capital....... 35,851 35,694
------------- ----------
Total liabilities and partners' capital $ 35,905 $ 35,744
------------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Operations
For the Three Months Ended March 31, 1999 and 1998 (Unaudited)
- ------------------------------------------------------------------------------
1999 1998
-------- -------
(Amounts in Thousands, Except Per Unit Data)
Income:
Property management fees.......... $ 158 $ 186
Leasing commissions............... 124 120
Interest income................... 42 34
----------- ----------
Total income................... 324 340
---------- ---------
Expenses:
General and administrative........ 154 215
Asset and property management fees 188 188
---------- ---------
Total expenses................. 342 403
---------- ----------
Equity in income of Jamboree LLC.... 179 329
Equity in income loss of
development partnership (Note 1).. ---------- ----------
Income before minority interest 161 266
---------- ----------
Minority interest in income of:
Operating partnership............. (2) (3)
Management partnership............ (2) (2)
----------- -----------
Net income .................... $ 157 $ 261
--------- ---------
Net income allocated to General Partners $ 3 $ 5
---------- ---------
Net income allocated to Investor
Limited Partners.................. $ 154 $ 256
--------- ---------
Net income per unit of limited
partnership interest.............. $ 44.00 $ 73.00
-------- --------
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Partners' Capital
For the Three Months Ended March 31, 1999 and 1998 (Unaudited)
- ------------------------------------------------------------------------------
(Amounts in Thousands)
Units of
Limited Investor
Partnership Limited General
Interest Partners Partners Total
-------- -------- -------- -----
Balance, December 31, 1998 3,500 $ 54,991 $ (19,297) $ 35,694
Net income................ 154 3 157
------- ------------ --------- ---------
Balance, March 31, 1999... 3,500 $ 55,145 $ (19,294) $ 35,851
======== ========== ========== =========
Balance, December 31, 1997 3,500 $ 43,103 $ (19,540) $ 23,563
Net income................ 256 5 261
------- ---------- ----------- ---------
Balance, March 31, 1998... 3,500 $ 43,359 $ (19,535) $ 23,824
====== ========== =========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
1999 1998
---- ----
(Amounts in Thousands)
Cash flows from operating activities:
Net income.............................. $ 157 $ 261
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in income of operating partnership
and management partnership........... 4 5
Equity in income of Jamboree LLC....... (179) (329)
Changes in current assets and liabilities:
Decrease (increase) in prepaid expenses
and other assets.................... (10) 95
Increase in accounts payable, accrued
expenses and other.................. - 192
--------- ---------
Net cash provided by (used in) operating
activities....................... (28) 224
--------- ---------
Cash flows from investing activities:
Distribution from Jamboree LLC.......... 788 231
Distribution from Development
Partnership (Note 1)................... - -
--------- ---------
Net cash provide by investing activities 788 231
--------- ---------
Increase in cash and cash equivalents..... 760 455
Cash and cash equivalents, beginning of period 3,222 2,607
--------- ---------
Cash and cash equivalents, end of period.. $ 3,982 $ 3,062
--------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
1. DEVELOPMENT PARTNERSHIP
The most significant asset of Winthrop California Investors Limited
Partnership (the "Registrant") is a 25% limited partnership interest in
Crow Winthrop Development Limited Partnership, a Maryland limited
partnership (the "Development Partnership"). Due to a dispute with the
general partner of the Development Partnership, this 10-Q does not contain
certain information relating to the Development Partnership. Accordingly,
in reliance on Rule 12b-21 promulgated under the Securities Exchange Act
of 1934, this 10-Q does not contain certain financial information relating
to the Registrant's interest in the Development Partnership and the
information in this 10-Q is qualified in its entirety as a result thereof.
The Registrant is continually attempting to obtain information regarding
the Development Partnership but the general partner of the Development
Partnership is continually obstructing and hindering the Registrant's
access to such information. See Note 5 below for information regarding the
various lawsuits between the Registrant and the Development Partnership.
2. ORGANIZATION
Winthrop California Investors Limited Partnership (the "Registrant") 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 Registrant 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").
6
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
2. ORGANIZATION (continued)
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 described in Item 2 below, ownership of the Headquarters Facility was
transferred to Jamboree LLC, a newly formed limited liability company, in
exchange for a 10% interest in such entity.
The General Partners of the Registrant are Winthrop Financial Associates,
A Limited Partnership ("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
Registrant.
3. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts
of the Registrant, the Operating Partnership and the Management
Partnership. The Registrant 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
Registrant (Winthrop West Coast Realty, 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 Operating Partnership's 10% interest in Jamboree LLC, the entity
which owns the Headquarters Facility, is accounted for on the equity
method.
The Registrant 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 Registrant'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, 1999. 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 Registrant's Annual Report on Form 10-KSB, for the year
ended December 31, 1998.
7
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
4. RELATED PARTIES
The Registrant is required to pay to WFA an asset management fee of
$750,000 per year. Expenses for the three months ended March 31, 1999 and
1998 include a management fee of $188,000 earned by WFA.
5. LEGAL PROCEEDINGS
Pursuant to an Assignment and Assumption Agreement entered into as of
October 3, 1997 in connection with the bankruptcy proceeding for the
Operating Partnership, In re Crow Winthrop Operating Partnership, U.S.
Bankruptcy Court (C.D. Cal.), Docket No. SA97-14512-JR, Jamboree LLC
assumed the Operating Partnership's obligation to indemnify WFA, the
Registrant, the Operating Partnership and WC Management (the "Subject
Entities"), for all expenses, including reasonable attorneys' fees and
costs, incurred by Winthrop in connection with or arising out of its
participation in the Operating Partnership.
1. Crow Winthrop Development Limited Partnership, et al. v. Winthrop
California Investors Limited Partnership, et al., Civil Action No. 174570,
Circuit Court of Montgomery County, Maryland. In August 1997, the
Development Partnership and its general partner Crow Irvine #2 ("Crow")
sued the Registrant and its general partners seeking a declaratory
judgment and injunctive relief to prevent the Registrant from converting
the Operating Partnership, in which the Registrant and Crow were partners,
from a general partnership to a limited partnership and from converting
Crow to a limited partner. The plaintiffs also sought unspecified damages.
Upon the filing of the action, the Court granted a temporary restraining
order in favor of the plaintiffs. In October 1997, after hearing, the
Court refused to grant a preliminary injunction in favor of the plaintiffs
and the temporary restraining order expired. The Operating Partnership
thereafter was converted to a limited partnership with Crow as its limited
partner.
An answer was filed and each of the parties served written discovery. The
Court thereafter stayed the action due to the pending actions in
California involving the parties or their affiliates. Upon the expiration
of the stay, the plaintiffs moved to dismiss the action without prejudice.
On November 3, 1999, the Court dismissed the action without prejudice.
2. Crow Winthrop Development Limited Partnership and Crow Orange
County Management Company, Inc. v. Winthrop California Management Limited
Partnership, et al., Superior Court of California, County of Orange,
Docket No. 789429. In January 1998, WC Management was named as a
defendant in an action seeking declaratory relief that certain
agreements between the parties have been terminated and that plaintiff
has
8
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
5. LEGAL PROCEEDINGS (continued)
the exclusive right to manage the common areas of certain contiguous
parcels of real estate containing office and retail space located in
Irvine, California. In the alternative, the plaintiffs seek a declaration
that WC Management perform certain tasks and be prevented from assessing
certain charges in connection with its management of the common areas. The
action was removed to federal court and transferred to the Bankruptcy
Court which, in April 1998, granted summary adjudication in favor of WC
Management on plaintiffs' termination claims. The plaintiffs did not
appeal from that decision.
The remainder of the claims were thereafter remanded to state court.
Plaintiffs' alternative claims for declaratory relief concerning
performance issues related to the management of the subject property
remain pending. The case was transferred to the complex litigation panel
of the Orange County Superior Court and deemed related to two other
actions which involve the same subject property. WC Management is not a
party to those other actions.
On or about September 24, 1999, the plaintiffs were granted the right to
file an amended complaint. The amended complaint is not substantively
different from the original complaint, and the only relief sought is
declaratory relief. An answer was filed on behalf of WC Management and
Winthrop Management, LLC on or about October 22, 1999.
There are two motions pending which seek the consolidation of this action
with other pending actions involving the same subject property. One motion
filed on or about October 21, 1999, by the plaintiffs in this action seeks
to consolidate this action with an action captioned as Crow Winthrop
Development Limited Partnership, a Maryland limited partnership, and Crow
Orange County Management Company, Inc., a Texas corporation vs. Jamboree
LLC, a Delaware limited liability company, OCSC Case No. 813915.
The second motion filed by Jamboree LLC on or about November 12, 1999,
in one of the other currently pending actions, in which Winthrop is not
a party, seeks to consolidate this action with the same action for
which consolidation is sought in the first motion to consolidate (OCSC
Case No. 813915) and with three additional cases: Crow Winthrop
Development Limited Partnership v. Jamboree LLC, et al., OCSC Case No.
789562; Crow Winthrop Development Limited Partnership v. Jamboree LLC,
et al., OCSC Case No. 791662; and Jamboree LLC v. Crow Winthrop
Development Limited Partnership, Crow Orange County Management Company,
Inc., et al., OCSC Case No. 806526. WC Management has filed notices
that it does not oppose these motions to consolidate.
3. Winthrop California Investors Limited Partnership v. Crow
Winthrop Development Limited Partnership, Civil Action No. 178303,
Circuit Court of Montgomery County, Maryland. In October 1997, the
Registrant brought suit against the
9
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
5. LEGAL PROCEEDINGS (continued)
Development Partnership and its general partner seeking declaratory and
injunctive relief to allow the Registrant to exercise its rights as a
limited partner in the Development Partnership to audit the Development
Partnership's books and records and seeking damages for the Development
Partnership's past refusals to allow such access. In January 1998, the
Court granted partial summary judgment in favor of the Registrant,
declaring and ordering that the Registrant has the right to inspect and
audit the Development Partnership's books, records and files. The
Registrant's auditors thereafter reviewed the Development Partnership's
books and records. After obtaining access to the Development Partnership's
books and records, the Registrant voluntarily dismissed its claim for
breach of fiduciary duty based on the Development Partnership's past
refusals to allow the Registrant access.
4. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, et al., Superior Court of California,
County of Orange, Case No. 812346. In January 1999, the Registrant, a 25%
limited partner in the Development Partnership, brought suit in Maryland
against defendant the Development Partnership, its general partner, the
general partner of the Development Partnership's general partner, and the
general partner of that entity alleging claims for breach of the
Development Partnership partnership's agreement, breach of fiduciary duty,
and conversion and requested that a receiver be appointed to conduct the
business of the Development Partnership. The Registrant sought
approximately $9 million in damages resulting from wrongful distributions
of capital proceeds of the Development Partnership in connection with a
1998 sale of real estate by the Development Partnership.
The defendants filed a motion to dismiss the action claiming that they are
not subject to personal jurisdiction in Maryland and that Maryland is an
inconvenient forum. Defendants argued that the action should proceed in
California, if at all. The court in Maryland granted the defendants'
motion on the ground of inconvenient forum in July 1999.
The Registrant thereafter filed substantially the same claims in
California, with the above-caption. The defendants filed a demurrer to the
complaint, arguing that it should be dismissed for a variety of reasons.
The court overruled the defendants' demurrer on September 24, 1999. On or
about November 5, 1999, the defendants filed their answer in which they
alleged a general denial to the allegations of the complaint. The case is
now in discovery.
5. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, et al.,/Crow Winthrop Development Limited
Partnership and Crow Irvine #2 v. Winthrop California Investors Limited
Partnership, et al., United States District Court for the Central District
of California, Southern Division, Case No. SACV99-1519 GLT (ANx). On or
about November 5, 1999, defendant the
10
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
March 31, 1999
- ------------------------------------------------------------------------------
5. LEGAL PROCEEDINGS (continued)
Development Partnership and its general partner filed a cross-complaint in
the action described in numbered paragraph 4 above, purporting to allege
claims for breach of fiduciary duty, aiding and abetting breach of
fiduciary duty and unfair business practices. the Registrant and certain
affiliates, as well as several unaffiliated entities are named as
cross-defendants in the cross-complaint. In summary, the cross-complaint
appears to allege that the cross-defendants have engaged in a conspiracy
to fraudulently acquire and manipulate the management positions of
numerous partnerships to their benefit and in particular have done so with
respect to the Operating Partnership, which the cross-claimants allege was
improperly forced into bankruptcy to the alleged detriment of the
cross-claimants. The cross-claimants also allege that the Registrant in
its capacity as a limited partner in the Development Partnership has
breached its alleged fiduciary duties to the Development Partnership by
allegedly participating in or filing lawsuits, in order to hinder the
development of the Development Partnership's land; failing to abide by
agreements; and by disclosing proprietary information concerning the
Development Partnership.
On December 8, 1999, the Registrant and others removed the cross-complaint
to the United States District Court for the Central District of
California, Southern Division seeking the reference of the cross-complaint
to the United States Bankruptcy Court for the Central District of
California where the Operating Partnership bankruptcy proceeding remains
open.
11
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-Q and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Liquidity and Capital Resources
- -------------------------------
The Registrant was formed for the purpose of investing in the Operating
Partnership and the Development Partnership. The Registrant made a subsequent
investment in WC Management. WC Management was formed to provide leasing and
management services for the Headquarters Facility.
As discussed in Item 1. Financial Statements, Note 1, due to a dispute with the
general partner of the Development Partnership, this 10-Q does not contain
certain information relating to the Development Partnership. Accordingly, in
reliance on Rule 12b-21 promulgated under the Securities Exchange Act of 1934,
this 10-Q does not contain certain financial information relating to the
Registrant's interest in the Development Partnership and the information in this
10-Q is qualified in its entirety as a result thereof.
As a result of the inability of the Operating Partnership to satisfy the
Existing Secured Note at maturity, the Operating Partnership entered into a
pre-approved bankruptcy plan (the "Plan") that was approved by the Bankruptcy
Court on October 3, 1997. The Plan provided for, among other things, (i) the
transfer by the Operating Partnership of all of its assets and liabilities,
including, without limitation, $500,000 of unencumbered cash as well as the
Headquarters Facility and debt encumbering the Headquarters Facility, to
Jamboree LLC, a newly formed limited liability company, in exchange for a 10%
interest in such entity, (ii) the forgiveness, immediately prior to the transfer
of the assets and liabilities to Jamboree LLC, by the Certificateholders of
approximately $93 million of the debt plus interest accrued thereon, and the
issuance of intermediate notes as satisfaction of the remaining outstanding
balance of the Existing Secured Note, (iii) the subsequent contribution by
Jamboree Office REIT of $4.5 million of the remaining $104.5 million of debt to
Jamboree LLC in exchange for the remaining 90% interest in Jamboree LLC, and
(iv) the issuance by Jamboree LLC of the New Notes, which will mature in five
years and have an aggregate principal amount of $100 million. In addition, the
Operating Partnership will have the right to exchange its interest in Jamboree
LLC for an interest in Jamboree Office REIT and to obtain cash payments or
equity interests in Jamboree Office REIT upon the occurrence of certain events.
12
<PAGE>
The Registrant derives its liquidity from distributions relating to its
investments in WC Management, the Operating Partnership and the Development
Partnership. During the three months ended March 31, 1999, the Operating
Partnership received a distribution of $788,000 from Jamboree LLC.
The Registrant had $3,982,000 of cash and cash equivalents at March 31, 1999 as
compared to $3,222,000 at December 31, 1998. The $760,000 increase in cash and
cash equivalents during the period was due to $788,000 of cash provided by
investing activities, which was partially offset by $28,000 cash used in
operating activities. Cash provided by investing activities includes the
$788,000 distribution from Jamboree, LLC. This distribution represented the
Operating Partnership's share of cash generated by 1998 operations.
In July 1999, the Headquarters Facility's largest tenant, Fluor Corporation,
vacated the premises and ended its lease. Approximately 75% of this space has
been re-leased to a new tenant with occupancy scheduled for late 2000.
Consequently, it is not expected that the Headquarters Facility 1999 operations
will generate sufficient cash flow to enable Jamboree LLC to make a distribution
to the Operating Partnership.
As detailed in Part II, Item 1, Legal Proceedings, there are a number of
disputes between the Registrant and the general partner of the Development
Partnership. Accordingly, the Registrant is unable to estimate when, if ever and
to what extent, any distributions will be made by the Development Partnership to
the Registrant.
It is expected that WC Management will continue to generate income sufficient to
make distributions to the Registrant.
At this time, it appears that the original investment objective of capital
growth from inception of the Registrant 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.
Results of Operations
- ---------------------
The net income realized by the Registrant for the three months ended March 31,
1999 was $157,000 compared to net income of $261,000 for the same period in
1998. The decrease in the net income is primarily attributable to a decrease in
equity income from the investment in Jamboree, LLC. Operating income decreased
for the three months ended March 31, 1999 as compared to the comparable period
in 1998 due to a decrease in property management fees which more than offset
slight increases in leasing commissions and interest income. The decrease in
management fees as well as the decrease in equity income recognized by the
Registrant from its investment in Jamboree, LLC is primarily the result of a
reduction by Jamboree, LLC of its estimated operating expense escalation
billings in the first quarter of 1999 over 1998. Partially offsetting the
decreases in operating income and equity in income of Jamboree, LLC was a
decrease in expenses. The decrease in expenses was primarily the result of a
decrease in professional fees relative to the various lawsuits.
13
<PAGE>
As indicated above, the Development Partnership has not provided operating
information for the periods ended March 31, 1999 or 1998. Accordingly, the
Registrant's consolidated statement of operations does not take into account the
Registrant's equity in the income or loss of the Development Partnership.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Registrant is exposed to market risks from adverse changes in interest rates
as decreases in U.S. interest rates affect the interest earned on the cash and
cash equivalents of Registrant. The Registrant places its temporary cash
investments with high credit quality financial institutions and, by policy,
limits the amount of credit exposure to any one financial institution. As of
June 30, 1999, the Registrant had no significant concentrations of market risk.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
-----------------
To the best of the Registrant's knowledge, there are no material pending
legal proceedings to which it is a party or to which its properties are subject
except as follows:
Pursuant to an Assignment and Assumption Agreement entered into as of
October 3, 1997 in connection with the bankruptcy proceeding for the Operating
Partnership, In re Crow Winthrop Operating Partnership, U.S. Bankruptcy Court
(C.D. Cal.), Docket No. SA97-14512-JR, Jamboree LLC assumed the Operating
Partnership's obligation to indemnify WFA, the Registrant, the Operating
Partnership and WC Management (the "Subject Entities"), for all expenses,
including reasonable attorneys' fees and costs, incurred by Winthrop in
connection with or arising out of its participation in the Operating
Partnership.
1. Crow Winthrop Development Limited Partnership, et al. v. Winthrop
California Investors Limited Partnership, et al., Civil Action No. 174570,
Circuit Court of Montgomery County, Maryland. In August 1997, the Development
Partnership and its general partner Crow Irvine #2 ("Crow") sued the Registrant
and its general partners seeking a declaratory judgment and injunctive relief to
prevent the Registrant from converting the Operating Partnership, in which the
Registrant and Crow were partners, from a general partnership to a limited
partnership and from converting Crow to a limited partner. The plaintiffs also
sought unspecified damages. Upon the filing of the action, the Court granted a
temporary restraining order in favor of the plaintiffs. In October 1997, after
hearing, the Court refused to grant a preliminary injunction in favor of the
plaintiffs and the temporary restraining order expired. The Operating
Partnership thereafter was converted to a limited partnership with Crow as its
limited partner.
An answer was filed and each of the parties served written discovery. The
Court thereafter stayed the action due to the pendency of actions in California
involving the parties or their affiliates. Upon the expiration of the stay, the
plaintiffs moved to dismiss the action without prejudice. On November 3, 1999,
the Court dismissed the action without prejudice.
2. Crow Winthrop Development Limited Partnership and Crow Orange County
Management Company, Inc. v. Winthrop California Management Limited Partnership,
et al., Superior Court of California, County of Orange, Docket No. 789429. In
January 1998, WC Management was named as a defendant in an action seeking
declaratory relief that certain agreements between the parties have been
terminated and that plaintiff has the exclusive right to manage the common areas
of certain contiguous parcels of real estate containing office and retail space
located in Irvine, California. In the alternative, the plaintiffs seek a
declaration that WC Management perform certain tasks and be prevented from
assessing certain charges in connection with its management of the common areas.
The action was removed to federal court and transferred to the Bankruptcy Court
which, in April 1998, granted summary adjudication in favor of WC Management on
plaintiffs' termination claims. The plaintiffs did not appeal from that
decision.
15
<PAGE>
Winthrop California Investors Limited Partnership
March 31, 1999
- ------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings (continued)
-----------------
The remainder of the claims were thereafter remanded to state court.
Plaintiffs' alternative claims for declaratory relief concerning performance
issues related to the management of the subject property remain pending. The
case was transferred to the complex litigation panel of the Orange County
Superior Court and deemed related to two other actions which involve the same
subject property. WC Management is not a party to those other actions.
On or about September 24, 1999, the plaintiffs were granted the right to
file an amended complaint. The amended complaint is not substantively different
from the original complaint, and the only relief sought is declaratory relief.
An answer was filed on behalf of WC Management and Winthrop Management, LLC on
or about October 22, 1999.
There are two motions pending which seek the consolidation of this action
with other pending actions involving the same subject property. One motion filed
on or about October 21, 1999, by the plaintiffs in this action seeks to
consolidate this action with an action captioned as Crow Winthrop Development
Limited Partnership, a Maryland limited partnership, and Crow Orange County
Management Company, Inc., a Texas corporation vs. Jamboree LLC, a Delaware
limited liability company, OCSC Case No. 813915.
The second motion filed by Jamboree LLC on or about November 12, 1999, in
one of the other currently pending actions, in which Winthrop is not a party,
seeks to consolidate this action with the same action for which consolidation is
sought in the first motion to consolidate (OCSC Case No. 813915) and with three
additional cases: Crow Winthrop Development Limited Partnership v. Jamboree LLC,
et al., OCSC Case No. 789562; Crow Winthrop Development Limited Partnership v.
Jamboree LLC, et al., OCSC Case No. 791662; and Jamboree LLC v. Crow Winthrop
Development Limited Partnership, Crow Orange County Management Company, Inc., et
al., OCSC Case No. 806526. WC Management has filed notices that it does not
oppose these motions to consolidate.
3. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, Civil Action No. 178303, Circuit Court of
Montgomery County, Maryland. In October 1997, the Registrant brought suit
against the Development Partnership and its general partner seeking declaratory
and injunctive relief to allow the Registrant to exercise its rights as a
limited partner in the Development Partnership to audit the Development
Partnership's books and records and seeking damages for the Development
Partnership's past refusals to allow such access. In January 1998, the Court
granted partial summary judgment in favor of the Registrant, declaring and
ordering that the Registrant has the right to inspect and audit the Development
Partnership's books, records and files. The Registrant's auditors thereafter
reviewed the Development Partnership's books and records. After obtaining access
to the Development Partnership's books and records, the Registrant voluntarily
dismissed its claim for breach of fiduciary duty based on the Development
Partnership's past refusals to allow the Registrant access.
16
<PAGE>
Winthrop California Investors Limited Partnership
March 31, 1999
- ------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings (continued)
-----------------
4. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, et al., Superior Court of California, County of
Orange, Case No. 812346. In January 1999, the Registrant, a 25% limited partner
in the Development Partnership, brought suit in Maryland against defendant the
Development Partnership, its general partner, the general partner of the
Development Partnership's general partner, and the general partner of that
entity alleging claims for breach of the Development Partnership partnership's
agreement, breach of fiduciary duty, and conversion and requested that a
receiver be appointed to conduct the business of the Development Partnership.
The Registrant sought approximately $9 million in damages resulting from
wrongful distributions of capital proceeds of the Development Partnership in
connection with a 1998 sale of real estate by the Development Partnership.
The defendants filed a motion to dismiss the action claiming that they are
not subject to personal jurisdiction in Maryland and that Maryland is an
inconvenient forum. Defendants argued that the action should proceed in
California, if at all. The court in Maryland granted the defendants' motion on
the ground of inconvenient forum in July 1999.
The Registrant thereafter filed substantially the same claims in
California, with the above-caption. The defendants filed a demurrer to the
complaint, arguing that it should be dismissed for a variety of reasons. The
court overruled the defendants' demurrer on September 24, 1999. On or about
November 5, 1999, the defendants filed their answer in which they alleged a
general denial to the allegations of the complaint. The case is now in
discovery.
5. Winthrop California Investors Limited Partnership v. Crow Winthrop
Development Limited Partnership, et al.,/Crow Winthrop Development Limited
Partnership and Crow Irvine #2 v. Winthrop California Investors Limited
Partnership, et al., United States District Court for the Central District of
California, Southern Division, Case No. SACV99-1519 GLT (ANx). On or about
November 5, 1999, defendant the Development Partnership and its general partner
filed a cross-complaint in the action described in numbered paragraph 4 above,
purporting to allege claims for breach of fiduciary duty, aiding and abetting
breach of fiduciary duty and unfair business practices. the Registrant and
certain affiliates, as well as several unaffiliated entities are named as
cross-defendants in the cross-complaint. In summary, the cross-complaint appears
to allege that the cross-defendants have engaged in a conspiracy to fraudulently
acquire and manipulate the management positions of numerous partnerships to
their benefit and in particular have done so with respect to the Operating
Partnership, which the cross-claimants allege was improperly forced into
bankruptcy to the alleged detriment of the cross-claimants. The cross-claimants
also allege that the Registrant in its capacity as a limited partner in the
Development Partnership has breached its alleged fiduciary duties to the
Development
17
<PAGE>
Winthrop California Investors Limited Partnership
March 31, 1999
- ------------------------------------------------------------------------------
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings (continued)
-----------------
Partnership by allegedly participating in or filing lawsuits, in order to hinder
the development of the Development Partnership's land; failing to abide by
agreements; and by disclosing proprietary information concerning the Development
Partnership.
On December 8, 1999, the Registrant and others removed the cross-complaint
to the United States District Court for the Central District of California,
Southern Division seeking the reference of the cross-complaint to the United
States Bankruptcy Court for the Central District of California where the
Operating Partnership bankruptcy proceeding remains open.
18
<PAGE>
Winthrop California Investors Limited Partnership
March 31, 1999
- ------------------------------------------------------------------------------
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 27
Financial Data Schedule
(b) Reports on Form 8-K:
None
19
<PAGE>
Winthrop California Investors Limited Partnership
March 31, 1999
- ------------------------------------------------------------------------------
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
(Partnership)
By: Winthrop Financial Associates, A Limited
Partnership
Managing General Partner
DATED: January 27, 2000 By: /s/ Michael L. Ashner
-------------------------
Michael L. Ashner
Chief Executive Officer
DATED: January 27, 2000 By: /s/Thomas C. Staples
-------------------------
Thomas C. Staples
Chief Financial Officer
20
<PAGE>
NEED FDS
21
