<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, 1999 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)
Five Cambridge Center, Cambridge, MA 02142-1493
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
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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 No X
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<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Balance Sheets
(Unaudited)
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<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- ------------
<S> <C> <C>
(Amounts in Thousands)
Assets
Cash and cash equivalents ................... $ 2,945 $ 3,222
Prepaid expenses and other assets, net............... 45 239
Equity investment in Jamboree LLC.................... 929 1,320
Equity investment in
development partnership (Note 1)................... 30,963 30,963
---------- ----------
Total assets................................ $ 34,882 $ 35,744
--------- ---------
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued expenses
and other..................................... $ - $ 38
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Total liabilities........................... $ - $ 38
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Minority interest of operating partnership
and management partnership...................... 15 12
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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....................... 54,180 54,991
General partners..................................... (19,313) (19,297)
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Total partners' capital..................... 34,867 35,694
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Total liabilities and partners' capital..... $ 34,882 $ 35,744
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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Winthrop California Investors Limited Partnership
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1999 and 1998 (Unaudited)
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------------------- ------------------------
<S> <C> <C> <C> <C>
(Amounts in Thousands, Except Per Unit Data)
Income:
Property management fees.......................... $ 103 $ 209 $ 438 $ 590
Leasing commissions............................... 77 371 524 552
Other income...................................... - - 14 -
Interest income................................... 36 36 122 107
----------- ---------- --------- ---------
Total income.................................. 216 616 1,098 1,249
---------- --------- -------- --------
Expenses:
General and administrative........................ 217 121 547 472
Asset and property management fees................ 188 188 563 563
----------- --------- --------- ---------
Total expenses................................ 405 309 1,110 1,035
----------- ---------- -------- --------
Equity in income of Jamboree LLC..................... 4 255 397 817
Equity in income loss of
development partnership (Note 1)................... _______ ______ ______ ______
Income (loss) before minority interest....... (185) 562 385 1,031
---------- ---------- ---------- ---------
Minority interest in income of:
Operating partnership............................. - (4) (4) (10)
Management partnership............................ (1) (4) (8) (8)
------------ ----------- ------------ ------------
Net income ................................... $ (186) $ 554 $ 373 $ 1,013
--------- --------- --------- --------
Net income (loss) allocated to General
Partners.......................................... $ (4) $ 11 $ 8 $ 20
----------- ---------- ----------- ----------
Net income (loss) allocated to Investor
Limited Partners.................................. $ (182) $ 543 $ 365 $ 993
--------- --------- --------- ---------
Net income per unit of limited
partnership interest.............................. $ 52.00 $155.00 $104.00 $284.00
--------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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Winthrop California Investors Limited Partnership
Consolidated Statements of Partners' Capital
For the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
(Amounts in Thousands)
<TABLE>
<CAPTION>
Units of
Limited Investor
Partnership Limited General
Interest Partners Partners Total
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998........... 3,500 $ 54,991 $ (19,297) $ 35,694
Distributions........................ - (1,176) (24) (1,200)
Net income........................... 365 8 373
----------- ----------- ---------------- ------------
Balance, September 30, 1999.......... 3,500 $ 54,180 $ (19,313) $ 34,867
============ ========= ========== =========
Balance, December 31, 1997........... 3,500 $ 43,103 $ (19,540) $ 23,563
Net income........................... _______ 993 20 1,013
----------- ----------------- ------------
Balance, September 30, 1998.......... 3,500 $ 44,096 $ (19,520) $ 24,576
=========== ========= ========== =========
</TABLE>
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 Nine Months Ended September 30, 1999 and 1998 (Unaudited)
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<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
(Amounts in Thousands)
Cash flows from operating activities:
Net income................................................. $ 373 $ 1,013
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in income of operating partnership
and management partnership............................. 12 18
Equity in income of Jamboree LLC......................... (397) (817)
Changes in current assets and liabilities:
Decrease in prepaid expenses and other assets.......... 194 73
Increase (decrease) in accounts payable,
accrued expenses and other........................... (38) 5
------------ -----------
Net cash provided by (used in) operating
activities...................................... 144 292
------------ -----------
Cash flows from investing activities:
Distribution from Jamboree LLC............................. 788 231
Distribution from Development
Partnership (Note 1)..................................
Distribution to Partners...................................... (1,200) -
---------- --------------
Net cash provide by (used in)
investing activities............................ (412) 231
----------- ---------
Cash flows from financing activities:
Distribution to minority interest.......................... (9) -
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Net cash used in financing activities.............. (9) -
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Increase (decrease) in cash and cash equivalents.............. (277) 523
Cash and cash equivalents, beginning of period................ 3,222 2,607
---------- ----------
Cash and cash equivalents, end of period...................... $ 2,945 $ 3,130
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 1999
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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
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Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 1999
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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
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Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 1999
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4. RELATED PARTIES
The Registrant is required to pay to WFA an asset management fee of
$750,000 per year. Expenses for the nine months ended September 30, 1999
and 1998 include a management fee of $563,000 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
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Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 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
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Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 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
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Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
September 30, 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 nine months ended September 30, 1999, the Operating
Partnership received a distribution of $788,000 from Jamboree LLC.
The Registrant had $2,945,000 of cash and cash equivalents at September 30, 1999
as compared to $3,222,000 at December 31, 1998. The $277,000 decrease in cash
and cash equivalents during the period was due to $144,000 of cash provided by
operating activities, which was more than offset by $412,000 cash used in
investing activities. Cash used in investing activities includes the $788,000
distribution from Jamboree LLC which was more than offset by a $1,200,000
distribution to partners. The $788,000 distribution from Jamboree LLC
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.
During the fourth quarter of 1999, WC Management successfully negotiated a lease
with ConAgra, Inc. for a significant portion of the vacant space at the
Headquarters Facility. Currently, tenant improvements are being made with
respect to the ConAgra lease. ConAgra is not required to commence paying rent
until September 2000 with respect to 262,648 square feet of space and December
1, 2000 with respect to 121,469 square feet of space. At November 30, 1999, 92%
of the Headquarters Facility was leased under leases with an average rental rate
(exclusive of the recently signed lease with ConAgra, Inc.) of $21.00 per square
foot.
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.
13
<PAGE>
Results of Operations
The net income realized by the Registrant for the nine months ended September
30, 1999 was $373,000 as compared to net income of $1,013,000 for the same
period in 1998. The decrease in the net income is attributable to a $151,000
decrease in income, a $75,000 increase in expenses and a $420,000 decrease in
equity in income of Jamboree LLC. The decrease in income is primarily
attributable to a decrease in management fees of $152,000 is a result of
significant tenant vacancies incurred at the Headquarters Facility during the
third quarter of 1999. The increase in expenses is due to an increase in general
and adminstrative expenses which is attributable to increased leasing
commissions. The decrease in equity income of Jamboree LLC is also attributable
to the significant vacancies incurred at the Headquarters Facility during the
third quarter of 1999. As indicated above, the Development Partnership has not
provided operating information for the periods ending September 30, 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.
The Registrant realized a net loss of $186,000 for the three months ended
September 30, 1999 as compared to net income of $554,000 for the same period in
1998. The decrease in the net income is attributable to a $400,000 decrease in
income, a $96,000 increase in expenses and a $251,000 decrease in equity in
income of Jamboree LLC. The decrease in income is primarily attributable to a
decrease in management fees and leasing commissions. The increase in expenses is
due to an increase in general and administrative expenses which is attributable
to increased leasing commissions.
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.
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
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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.
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.
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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 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.
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Winthrop California Investors Limited Partnership
September 30, 1999
- --------------------------------------------------------------------------------
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:
None
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Winthrop California Investors Limited Partnership
September 30, 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
(Registrant)
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
19
