<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 25, 2000
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-14536 04-2869812
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Five Cambridge Center, 9th Floor, Cambridge, MA 02142
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 234-3000
Former name or former address, if changed since last report: Not applicable.
1
<PAGE>
Item 5 Other Events.
------------
On January 25, 2000, the Registrant forwarded to its limited partners its
financial statements for the year ended December 31, 1998 together with a
Management's Discussion and Analysis which provides an analysis of the
information presented in the financial statements forwarded to the limited
partners. Due to the dispute between the Registrant and the general partner of
the Development Partnership, the auditors for the Development Partnership have
informed the Registrant and its auditors that they will not consent to the
Registrant relying on the Development Partnership's audited financial statements
in connection with the completion of the Registrant's audited financial
statements. Accordingly, the financial information provided to the limited
partners is unaudited.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99. Letter to Limited Partners dated January 25, 2000.
2
<PAGE>
SIGNATURES
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
By: Winthrop Financial Associates,
A Limited Partnership, as
Managing General Partner
By: /s/Michael L. Ashner
--------------------
Michael L. Ashner
Chief Executive Officer
DATED: January 25, 2000
3
<PAGE>
EXHIBIT INDEX
Exhibit Page
------- ----
99. Letter to Limited Partners dated January 25, 2000 5
4
<PAGE>
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
5 Cambridge Center
9th Floor
Cambridge, Massachusetts 02142
January 25, 2000
To the Limited Partners of
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP:
Enclosed is a copy of the Partnership's financial statements for the year ended
December 31, 1998. Included as part of this Report is a Management's Discussion
and Analysis which provides an analysis of the information presented in the
financial statements included as part of this Report.
Questions concerning services for your investment, including those related to
tax reporting information, transfers and address changes should be directed to
ReSource/Phoenix, the Partnership's investor service representative at (415)
460-6497. Should you have questions regarding property performance or
information included in this letter, please contact Beverly L. Bergman of
Winthrop's Investor Relations Department at (617) 234-3007.
<PAGE>
WINTHROP CALIFORNIA INVESTORS
LIMITED PARTNERSHIP
Financial Statements
For the Year ended
December 31, 1998
5 Cambridge Center
9th Floor
Cambridge, Massachusetts 02142
(617) 234-3000
<PAGE>
Management's Discussion and Analysis or Plan of Operation.
The matters discussed in this Form 10-KSB 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-KSB 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 derives its liquidity from distributions relating to its
investments in the Operating Partnership, the Development Partnership and WC
Management. In 1998, the Registrant received distributions of $230,637, $308,308
and $1,235,000 from the Operating Partnership, the Development Partnership and
WC Management, respectively. These distribution were used to satisfy the
$750,000 annual asset management fee payable to WFA, with the balance being
added to the Registrant's reserves.
The Registrant and its consolidated group had $3,222,000 of cash and
cash equivalents at December 31, 1998 as compared to $2,607,000 at December 31,
1997. The $615,000 increase in cash and cash equivalents at December 31, 1998,
as compared to December 31, 1997, was due to $539,000 of cash provided by
investing activities and $88,000 of cash provided by operating activities, which
was partially offset by $12,000 of cash used in financing activities. Cash
provided by investing activities included the distributions referred to above.
Cash from operations consisted of WC Management's fees of $943,000 and $653,000
for management and leasing of the Headquarters Facility and interest income of
$145,000, net of general and administrative expenses of the Registrant and WC
Management of $903,000 and the annual asset management fee of $750,000 payable
to WFA. Cash used in financing activities included the distribution of $12,000
out to the minority interest holder in WC Management, relative to the 1998
operations distribution.
a. The Operating Partnership
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, as more fully described in Item 1.
Description of Business, 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
<PAGE>
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.
The extent to which the Registrant receives distributions from the
Operating Partnership is dependent upon the results of operations of Jamboree
LLC and distributions made by Jamboree LLC to the Operating Partnership. There
can be no assurance that Jamboree LLC will be able to generate sufficient
operating results with which to make distributions to its members.
b. The Development Partnership
During 1998, the Registrant received a distribution of $308,308 from
the net proceeds received from the sale of approximately 30 acres of land from
the Development Partnership. The Development Partnership has cash of $26,563,075
at December 31, 1998. The Registrant believes it is entitled to a distribution
of approximately $8,000,000 of this cash from the land sale and has initiated a
lawsuit relative to this matter, as described in Item 3. Legal Proceedings - 5.
As is detailed in Item 3. 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, if any, distributions will be made to the Registrant.
The Agreement of Limited Partnership of the Development Partnership
provides that if at any time either the Registrant or the general partner of the
Development Partnership believes in good faith that irreconcilable differences
between them prevent the Development Partnership from achieving its purposes,
either party may make a written offer to purchase the partnership interest of
the other. As a result of the serious disputes between the Registrant and the
general partner of the Development Partnership which, among other things, have
hindered and obstructed the Registrant from being able to timely make available
financial information about the Registrant, the General Partners anticipate
exercising this buy/sell option. Prior to any such exercise, the consent of the
Limited Partners will be sought to enable the Registrant to sell its interest in
the Development Partnership in the event that the general partner of the
Development Partnership elects to purchase the Registrant's interest in the
Development Partnership.
If the Registrant exercises this buy/sell right, assuming that the
general partner does not dispute the Registrant's ability to exercise such
right, the Registrant will either
2
<PAGE>
become the sole owner of the Development Partnership, in which case the
Registrant will need to raise additional funds, either by way of debt financing
or sales of equity interests, or will sell its interest in the Development
Partnership and receive a cash payment. There can be no assurance that the
Registrant will exercise its buy/sell option, or if exercised, that the general
partner of the Development Partnership will comply with the terms of the
Agreement of Limited Partnership of the Development Partnership. If the general
partner of the Development Partnership contests the Registrant's ability to
exercise the buy/sell right, which is likely, the Registrant would be required
to bring an action to compel compliance with the Agreement of Limited
Partnership of the Development Partnership.
c. WC Management
The Registrant received approximately $1,618,000 and $1,235,000 of
distributions from WC Management in 1997 and 1998, respectively. These amounts
were used to pay the annual asset management fee payable to WFA under the terms
of the Partnership Agreement with balance being added to the Registrant's
reserves. It is expected that WC Management will continue to generate income
sufficient to enable it to make distributions to the Registrant. However, in
connection with the implementation of the Plan, the fee payable to WC Management
for its property management and leasing services at the Headquarters Facility
was reduced from 5% of gross receipts of 2% of gross receipts, with an
additional 2% incentive fee. With respect to Registrant's general and
administrative expenses, exclusive of asset management fees (totaling
approximately $849,000 in 1998), it is expected that these costs will continue
to be paid from the distributions from WC Management unless and until there are
distributions made to the Registrant by the Operating Partnership or the
Development Partnership.
Commencing in 1990 and through June 1996, WFA had not been paid its
annual asset management fee. In August 1996, $4,875,000 of this fee was paid to
WFA. In January 1997, the balance of $375,000 was paid. The Registrant paid the
annual asset management fee of $750,000 in 1997 and 1998.
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
Results of operations for the years ended December 31, 1998 and 1997
reflect the consolidated results of the Registrant, the Operating Partnership
and WC Management. Results of the Development Partnership are accounted for on
the equity method. The Operating Partnership results are reported on the equity
method in 1998 and are consolidated for 1997.
3
<PAGE>
The Registrant's 1998 expenses consisted primarily of the investor
service fee to WFA and expenses related to professional fees with regards to
various lawsuits, audit reviews and tax return preparation.
WC Management commenced operations on January 1, 1992. Because WC
Management is 99% owned by the Registrant, it reports for financial purposes on
a consolidated basis with the Registrant and the Operating Partnership. Revenues
of WC Management consist primarily of fees received in connection with the
management and leasing services for the Headquarters Facility. Effective with
the date of approval of the Plan, the Registrant can no longer collect
construction supervision fees. During 1997 and 1998, WC Management received
$1,818,389 and $1,596,000, respectively for management and leasing services. Of
these amounts, $962,000 and $943,000 were attributable to 1997 and 1998 property
management fees and $771,000 and $652,000, were attributable to 1997 and 1998
leasing commissions. Operating expenses associated with performing management
and leasing functions totaled $212,000 and $332,000, respectively, in 1997 and
1998 and included certain reimbursable costs such as payroll of certain senior
level on-site employees and costs associated with payroll, accounting and other
administrative support functions incurred by WC Management in performing
management services on behalf of WC Management at the Headquarters Facility.
In connection with the Plan, on the effective date, October 3, 1997,
the Operating Partnership and recorded its investment in Jamboree, LLC using the
equity method on a basis consistent with the purchase method of accounting. For
the period October 4, 1997 through December 31, 1997, the Operating Partnership
recognized income from its ownership interest in Jamboree, LLC of $206,000 using
the equity method. During 1998, the Operating Partnership recorded income of
$844,000 for its share of the operations of Jamboree, LLC. During 1998, the
Operating Partnership received a distribution from Jamboree, LLC of $230,000
relative to 1997 operations.
The Registrant recorded a loss in 1997 of $264,000 for its share of the
operations of the Development Partnership for that year. Due to the sale of 32
acres of land in 1998, the Registrant recognized $11,168,000 as its share of the
Development Partnership income. The Registrant received a distribution of
$308,308 from the Development Partnership relative to the 1998 land sale.
4
<PAGE>
Winthrop California Investors
Limited Partnership
Consolidated Financial Statements
As of December 31, 1998 and 1997
F-1
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Balance Sheets
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
(Amounts in Thousands)
Assets
<S> <C> <C>
Cash and cash equivalents $ 3,222 $ 2,607
Prepaid expenses and other assets, net 239 158
Equity investment in Jamboree LLC 1,320 706
Equity investment in Development Partnership 30,963 20,103
-------------- --------------
Total assets $ 35,744 $ 23,574
-------------- --------------
Liabilities and Partners' Capital
Liabilities:
Accounts payable, accrued expenses and other $ 38 $ 9
-------------- --------------
Total liabilities 38 9
-------------- --------------
Minority interest of operating partnership and management partnership 12 2
-------------- --------------
Commitments and contingencies (Note 7)
Partners' capital:
Limited partners - units of Investor Limited Partnership
Interest, $65,000 stated value per cash unit and $66,000 state
value per deferred unit; authorized - 3,500 units; issued and
outstanding - 3,500 units as of December 31, 1998 and 1997 54,991 43,103
General partners (19,297) (19,540)
-------------- --------------
Total partners' capital 35,694 23,563
-------------- --------------
Total liabilities and partners' capital $ 35,744 $ 23,574
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------ -------------
(Amounts in Thousands)
<S> <C> <C>
Income:
Rental income $ - $ 18,363
Common area expense reimbursements - 7,886
Property management fees 943 185
Leasing commissions 653 90
Interest income 145 248
Other - 878
------------ -------------
Total income 1,741 27,650
------------ -------------
Expenses:
Utilities - 2,632
Repairs, maintenance and security - 3,004
Real estate taxes - 1,717
Insurance - 267
General and administrative 849 3,261
Asset management fees 750 750
Interest expense - 6,007
Depreciation and amortization - 8,375
------------ -------------
Total expenses 1,599 26,013
------------ -------------
Equity in income of Jamboree LLC 844 206
Equity in income (loss) of Development Partnership 11,168 (264)
------------ -------------
Income before reorganization items, minority interest and
extraordinary items 12,154 1,579
------------ -------------
Reorganization items:
Fresh-start revaluation - (10,943)
Professional fees - (2,763)
Interest earned on accumulated cash resulting from Chapter 11
Proceedings - 114
------------ -------------
Total reorganization items - (13,592)
------------ -------------
Income (loss) before minority interest 12,154 (12,013)
Minority interest in income of: -
Operating partnership (9) (2)
Management partnership (14) (15)
------------ -------------
Income (loss) before extraordinary item 12,131 (12,030)
Extraordinary item due to forgiveness of debt - 101,495
------------ -------------
Net income $ 12,131 $ 89,465
------------ -------------
Net income allocated to General Partners $ 243 $ 1,789
------------ -------------
Net allocated to Investor Limited Partners $ 11,888 $ 87,676
------------ -------------
Net income per unit of limited partnership interest $ 3.40 $ 25.05
------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Units of Investor
Investor Limited
Limited Partners' General Total Partners'
Partnership Capital Partners' Capital
Interest (Deficit) Deficit (Deficit)
-------------- -------------- --------------- ----------------
(Amounts in (Amounts in (Amounts in
Thousands) Thousands) Thousands)
<S> <C> <C> <C> <C>
Balances, December 31, 1996 3,500 $ (44,573) $ (21,329) $ (65,902)
Net income - 87,676 1,789 89,465
-------------- -------------- -------------- ---------------
Balances, December 31, 1997 3,500 43,103 (19,540) 23,563
Net income - 11,888 243 12,131
-------------- -------------- -------------- ---------------
Balances, December 31, 1998 3,500 $ 54,991 $ (19,297) $ 35,694
-------------- -------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(Amounts in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,131 $ 89,465
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization - 8,375
Minority interest in income of operating partnership and management
partnership 23 17
Equity in income of Jamboree LLC (844) (206)
Equity in income (loss) of Development Partnership (11,168) 264
Extraordinary item due to forgiveness of debt - (101,495)
Fresh-start revaluation - 8,291
Changes in current assets and liabilities:
Increase in other deposits - (338)
Decrease (increase) in prepaid expenses and other assets (81) 5,031
Increase in accounts payable, accrued expenses and other 27 4,601
Increase in deferred costs related to operating activities - (1,963)
------------------- -------------------
Net cash provided by operating activities 88 12,042
------------------- -------------------
Cash flows from investing activities:
Capital expenditures - (1,371)
Distribution from Development Partnership 308 -
Distribution from Jamboree LLC 231 -
------------------- -------------------
Net cash provided by (used in) investing activities 539 (1,371)
------------------- -------------------
Cash flows from financing activities:
Distribution to minority interest (12) (15)
Cash distributions in conjunction with the reorganization - (12,378)
Decrease in mortgage escrow - (1,006)
------------------- -------------------
Net cash used in financing activities (12) (13,399)
------------------- -------------------
Increase (decrease) in cash and cash equivalents 615 (2,728)
Cash and cash equivalents, beginning of year 2,607 5,335
------------------- -------------------
Cash and cash equivalents, end of year $ 3,222 $ 2,607
------------------- -------------------
</TABLE>
Non-cash transactions in conjunction with the reorganization are documented
in the table in Note 4.
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. Organization
Winthrop California Investors Limited Partnership (the "Partnership")
was originally organized on January 24, 1985 under the Maryland Uniform
General Partnership Act and was reorganized on October 16, 1985 as a
Delaware limited partnership to own a 99% general partnership 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 (the "Excess Land") surrounding the Headquarters
Facility (the Excess Land together with the Headquarters Facility is
collectively referred to as the "Properties").
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") after development rights were
approved for the Development Partnership.
As indicated in Note 4 below, as part of a reorganization, ownership of
the Headquarters Facility was transferred to a newly formed Limited
Liability Company, in exchange for an equity interest in such entity.
The General Partners of the Partnership are Winthrop Financial
Associates ("WFA") and Three Winthrop Properties, Inc. ("Three
Winthrop") (Note 6). The General Partners made capital contributions
totaling $101 for a 2.0% interest in the operating profits and losses
of the Partnership.
F-6
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. Significant Accounting Policies
Basis of Consolidation
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. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The Partnership owns a 25% Limited Partner's interest in the
Development Partnership, which is accounted for under the equity
method.
As discussed in Note 4, for the period subsequent to the
reorganization, the Operating Partnership owns a 10% member interest in
Jamboree LLC, which is accounted for under the equity method.
Revenues
For the period prior to reorganization, minimum rental revenues were
recognized on a straight-line basis over the terms of their related
lease. Percentage rents were recognized on an accrual basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
No provision has been made for federal, state or local income taxes in
the accompanying financial statements of the Partnership. The partners
are required to report on their individual income tax returns their
allocable share of income, gains, losses, deductions and credits of the
Partnership. The Partnership has elected to file its tax returns on the
accrual basis.
F-7
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Common Area Expense Reimbursement and Reimbursable Common Area Expenses
For the period prior to reorganization of the Operating Partnership,
reimbursable common area expenses were expenses and costs related to
the operation and maintenance of the Properties which were eligible for
reimbursement, as defined in the tenant leases, and used as the basis
for calculating the amounts to be reimbursed from the tenants. Included
in common area expense reimbursements were calculated cost recovery
amounts related to certain capitalized equipment expenditures.
Depreciation and Amortization
For the period prior to reorganization, the Operating Partnership
provided for depreciation of buildings and improvements on the
straight-line method over their estimated useful lives. Real property
was depreciated over a period of six to fifty-four years. Personal
property was depreciated over a period of five to seven years. Building
and improvements were valued at cost and adjusted for impairments
considered other than temporary (see Real Estate Investments). Fully
depreciated asset and assets no longer in service, along with the
related accumulated depreciation, have been written off.
Deferred Costs
For the period prior to reorganization, direct costs associated with
obtaining leases were capitalized and amortized on a straight-line
basis over the primary terms of the respective leases. Direct costs
associated with obtaining financing were capitalized and amortized to
interest expense on a straight-line basis, which approximated the
effective interest method, over the terms of the respective debt.
Extraordinary Item
As discussed in Note 4, a portion of the Mortgage Loan, the
Intermediate Loan and accrued interest were forgiven, resulting in a
gain of $101,495,241 or $28,999 per unit of limited partnership
interest.
Statement of Cash Flows
For purposes of the statements of cash flows, cash equivalents are
defined by the Partnership as investments consisting of certificates of
deposits, money market funds, commercial paper and other instruments
with original maturities of three months or less. The Operating
Partnership made interest payments through the date of reorganization,
October 3, 1997, of $2,341,000. No interest payments were made
subsequent to the reorganization.
F-8
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Real Estate and Equity Investments
For the period prior to reorganization, real estate assets, including
land, building and improvements, were carried at cost adjusted for
depreciation. Expenditures which substantially extend the useful life
of the assets were capitalized. Maintenance and repairs were charged to
operations as incurred.
Depreciation and amortization were provided on a straight-line basis
over the estimated useful lives of the assets as follows:
Buildings 50 years
Improvements Terms of leases or useful lives,
whichever was shorter
The Company assesses whether there has been a permanent impairment in
the value of real estate and equity investments by considering factors
such as expected future operating income, trends and prospects, as well
as the effects of demand, competition and other economic factors.
Management believes no such permanent impairment has occurred during
1998.
Allocation of Net Profits or Losses and Cash Flow
The net operating profits or losses and cash flow of the Partnership
are, in general, allocated as follows:
<TABLE>
<CAPTION>
Profits, Losses and Profits, Losses and Profits, Losses and
Cash Flow Received Cash Flow Received Cash Flow Received
from Operating from Development from Management
Partnership Partnership Partnership
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Investors Limited Partners 97.020% 15.000% 97.020%
WFA 1.881 9.975 1.881
Three Winthrop 0.099 0.025 0.099
-------------- -------------- --------------
Total interest of the Partnership:
Operating Partnership 99.000 - -
Development Partnership - 25.000 -
Management Partnership - - 99.000
Interest of Crow Irvine:
Operating Partnership 1.000 - -
Development Partnership - 75.000 -
Interest of Winthrop West
Coast Realty Services, Inc.:
Management Partnership - - 1.000
-------------- -------------- --------------
100.000% 100.000% 100.000%
-------------- -------------- --------------
</TABLE>
F-9
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Any gains resulting from sales, disposition or refinancing of any of
the Properties are to be allocated to the partners of the Partnerships
according to various provisions of the Partnership Agreements.
3. Equity Investment in Development Partnership
The Partnership's equity investment in the Development Partnership is
summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(Amounts in Thousands)
<S> <C> <C>
Balance, beginning of year $ 20,103 $ 20,367
Equity in income (loss) of Development Partnership 11,168 (264)
Distribution from Development Partnership (308) -
----------------- -----------------
$ 30,963 $ 20,103
----------------- -----------------
</TABLE>
Condensed balance sheets of the Development Partnership are as follows
(unaudited):
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(Amounts in Thousands)
<S> <C> <C>
Assets
Land $ 28,975 $ 28,975
Buildings and other improvements, net 21,420 21,587
Construction in progress 25,609 21,805
Cash and cash equivalents 26,563 4,727
Accounts receivable and other assets 3,111 1,941
----------------- -----------------
$ 105,678 $ 79,035
----------------- -----------------
Liabilities and Partners' Capital
Liabilities:
Notes payable $ 29,555 $ 37,396
Accounts payable, accrued interest and other
liabilities 10,944 14,669
----------------- -----------------
40,499 52,065
----------------- -----------------
Partners' capital:
Winthrop California Investors Limited
Partnership 42,719 31,859
Crow Irvine 22,460 (4,889)
----------------- -----------------
65,179 26,970
----------------- -----------------
$ 105,678 $ 79,035
----------------- -----------------
</TABLE>
F-10
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
(Amounts in Thousands)
<S> <C> <C>
Operating revenues $ 9,501 5,124
Gain on sale of property 42,952 -
Costs and expenses 7,781 6,428
----------------- -----------------
Net income (loss) $ 44,672 $ (1,304)
----------------- -----------------
Net income (loss) allocated to Crow Irvine $ 33,504 $ (978)
----------------- -----------------
Net income (loss) allocated to Winthrop California
Investors Limited Partnership $ 11,168 $ (326)
----------------- -----------------
</TABLE>
In conjunction with an impairment in value determined with respect to
the Properties during 1995, management concluded that there was an
impairment in the value of its equity investment in the Development
Partnership. At December 31, 1998, the Partnership's share of the
underlying net assets of the Development Partnership exceeded the
investment by $11,756,638. The excess is a permanent difference as a
result of the Partnership determining that the investment had
impairments in prior years that were other than temporary.
Significant accounting policies used by the unconsolidated equity
investees are similar to those used by the Partnership.
4. Reorganization of the Operating Partnership
Reorganization
The Operating Partnership, in connection with the acquisition of the
Headquarters Facility, obtained a $204,000,000 mortgage loan (the
"Mortgage Loan") from the Mortgage Lender as of the Acquisition Date.
The Mortgage Loan had a 127-month term, bearing interest at the fixed
rate of 11.85%. The Headquarters Facility was pledged as collateral for
the Mortgage Loan. Under the terms of the loan, monthly payments of
interest only were required through August 1, 1990. Thereafter, monthly
payments of principal and interest of $2,075,000 were made until
maturity. A balloon payment of $198,190,000 was due at maturity on
April 1, 1996.
F-11
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
The Operating Partnership failed to make the balloon payment on April
1, 1996, but continued to make scheduled monthly payments of principal
and interest through August 1996. In July 1996, the Mortgage Lender
swept the funds from the investment accounts in an amount totaling
$1,264,759, which were placed in an interest-bearing escrow account.
The parties agreed that starting in September 1996, the Mortgage Lender
would sweep the Operating Partnership's operating bank account and
would take and apply all funds in excess of $500,000 in the bank
account to the outstanding principal and accrued interest on the
Mortgage Loan. Payments made under this arrangement totaled
approximately $9,958,000. Any unpaid interest accrued interest at
11.85%.
On March 28, 1997, the Operating Partnership filed a petition for
relief under Chapter 11 of the United States Bankruptcy Code in the
U.S. Bankruptcy Court for the Central District of California (the
"Bankruptcy Court"). Concurrently therewith, the Operating Partnership
filed a Plan of Reorganization dated March 28, 1997 (as amended on
April 28, 1997 and July 23, 1997) (the "Plan"). On September 1, 1997,
the Bankruptcy Court entered an order confirming the Plan and with the
satisfaction of certain conditions, the Plan became effective on
October 3, 1997 (the "Effective Date").
Pursuant to the Plan, on the Effective Date, the Operating Partnership
was reorganized ("Reorganized Operating Partnership"), and two new
entities were formed: Jamboree LLC, a Delaware limited liability
company ("Jamboree LLC") and Jamboree Office REIT, Inc., a Maryland
corporation ("Jamboree REIT"). All three entities are successor
entities to the Operating Partnership. Upon the formation of Jamboree
LLC, the initial Jamboree LLC Units were issued 10% to Reorganized
Operating Partnership and 90% to Jamboree REIT. Jamboree REIT was
formed for the purpose of owning 90% of Jamboree LLC.
On the Effective Date of the Plan, title to the Headquarters Facility
and all other assets of the Operating Partnership were deemed to revest
into the Reorganized Operating Partnership subject to certain liens and
liabilities preserved under the Plan. Concurrently therewith, the
Headquarters Facility and all other assets were contributed by the
Reorganized Operating Partnership to Jamboree LLC and Jamboree LLC
assumed the obligations preserved under the Plan.
Under the Plan, the Reorganized Operating Partnership was allowed to
maintain cash and other assets, with a value of $500,000, free and
clear of any liens immediately prior to the Effective Date.
F-12
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
The prepetition debt which was collateralized by the Headquarters
Facility was satisfied through the issuance to the secured debt holders
(the "Certificateholders") of 100% of the outstanding shares of
Jamboree REIT, the issuance by Jamboree REIT of a $4,500,000
Intermediate Note, and the issuance by Jamboree LLC of $80,000,000 of
Class A Senior Secured Notes (the "Class A Notes") and $20,000,000 of
Class B Senior Subordinated Secured Notes (the "Class B Notes"). The
Certificateholders contributed the Intermediate Note to Jamboree LLC as
satisfaction for Jamboree REIT's $4,500,000 member interest and the
Reorganized Operating Partnership contributed $500,000 of cash and
other assets for its member interest.
Certain other secured claims and all general unsecured claims were
unimpaired pursuant to the Plan and were either satisfied or assumed by
Jamboree LLC. All executory contracts and unexpired leases assumed by
the Reorganized Operating Partnership were assigned to Jamboree LLC.
Under the Plan, the Reorganized Operating Partnership has the right to
exchange its 10% interest in Jamboree LLC for a 10% interest in
Jamboree REIT. The Reorganized Operating Partnership also pledged its
interest in the Jamboree LLC (approximately $1,320,000 at cost) as
collateral for the payment in full of all amounts evidenced by the
Class A and Class B Notes.
The Reorganized Operating Partnership received certain Property
Appreciation Rights, which are exercisable through March 27, 2002. The
Reorganized Operating Partnership has the right to purchase an equity
interest in Jamboree REIT representing 10% of the equity value of
Jamboree LLC (subject to dilution) for $10,888,889. The Reorganized
Operating Partnership also has the right to purchase an equity interest
in Jamboree REIT representing an additional 55% of the equity value of
Jamboree LLC (subject to dilution) for $152,777,778. The exercise of
the rights is subject to the value of Jamboree LLC equaling or
exceeding $98 million for the 10% purchase and $125 million for the 55%
purchase. In lieu of issuing shares for these Property Appreciation
Rights, Jamboree REIT has the option of making a net cash payment equal
to the difference between the current market value of Jamboree REIT
shares to be issued and the exercise price.
F-13
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Fresh Start Reporting
In connection with the Plan, on the Effective Date, the Reorganized
Operating Partnership adopted fresh start reporting in accordance with
the provisions of the American Institute of Certified Public
Accountants Statement of Position 90-7, Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code ("SOP 90-7"). The fresh
start reporting reorganization value of $500,000 was recorded as an
investment under the equity method on a basis consistent with the
purchase method of accounting.
The effects of the Plan and fresh start reporting on the Reorganized
Operating Partnership's balance sheet as of the Effective Date are as
follows:
<TABLE>
<CAPTION>
Reorganized
Operating
Predecessor Transfer to Partnership's
Balance Sheet (a) (b) Jamboree LLC Balance Sheet
October 3, Debt Fresh Start October 3, October 3,
1997 Discharge Adjustments 1997 1997
------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Assets
Real estate $ 99,848,696 $ $(4,069,176) $ 95,779,520 $ -
-
Cash and cash equivalents 12,377,584 - - 12,377,584 -
Restricted cash 2,295,228 - - 2,295,228 -
Accounts receivables and
other assets 1,066,335 - - 1,066,335 -
Investment in Jamboree - - 500,000 - 500,000
Other deposits 579,653 - - 579,653 -
Deferred rent receivable 1,230,192 - (1,230,192) - -
Deferred costs, net 3,335,787 (3,335,787) - -
------------ --------- ------------ ------------ --------
Total assets $120,733,475 $ - $(8,135,155) $112,098,320 $500,000
------------ --------- ------------ ------------ --------
</TABLE>
F-14
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Reorganized
Transfer to Operating
Predecessor Jamboree Partnership's
Balance Sheet (a) (b) LLC Balance Sheet
October 3, Debt Fresh Start October 3, October 3,
1997 Discharge Adjustments 1997 1997
------------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Liabilities and
Members' Equity
Mortgage loan $197,712,267 $ (97,712,267) $ - $100,000,000 $ -
Intermediate loan - 4,500,000 (4,500,000) - -
Accrued interest 8,282,974 (8,282,974) - - -
Accounts payable and
accrueds 3,704,761 - - 3,704,761 -
Refundable security
deposits 571,919 - - 571,919 -
Deferred rent revenue 2,821,640 - - 2,821,640 -
------------- ---------- ----------- ------------ --------
Total liabilities 213,093,561 (101,495,241) (4,500,000) 107,098,320 -
------------- -------------- ------------ ------------ --------
Members' equity:
Predecessor partners'
deficit (92,360,086) 101,495,241 (8,635,155) - 500,000
Reorganized members' equity - - 5,000,000 5,000,000 -
------------ ------------- ----------- ------------ --------
Total members' equity (92,360,086) 101,495,241 (3,635,155) 5,000,000 500,000
------------ ------------- ----------- ------------ --------
Total liabilities and
members' equity $120,733,475 $ - $(8,135,155) $112,098,320 $500,000
------------ ------------- ----------- ------------ --------
</TABLE>
(a) To record the discharge of obligations pursuant to the Plan.
Substantially all of these obligations are only entitled to
receive members' equity as provided under the Plan. Portions
of these obligations were restructured and will continue, as
restructured, to be liabilities of Jamboree LLC.
(b) To record the adjustments to reflect assets and liabilities at
estimated fair value, the establishment of the Reorganized
Company's equity value of $5.0 million and the cancellation of
the predecessor's equity.
F-15
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
5. Transactions With Related Parties
WFA or an affiliate earns annual asset management fees of $750,000 paid
from the Partnership's distributive share of cash flow from operations
of the Operating, Development and Management Partnerships.
WFA and Crow Orange County Management ("Crow Management") are entitled
to an incentive asset management fee equal to 10% and 5%, respectively,
of the excess, if any, in any year of actual cash flow over the cash
flow forecast for the Headquarters Facility in the summary of cash flow
forecast from operations of the Operating Partnership set forth in the
Partnership's confidential memorandum describing the Offering. There
were no such amounts paid or accrued in 1998 or 1997.
During 1997, the Partnership received $500,000 from the Operating
Partnership for services rendered in connection with the bankruptcy
filing. The amount has been eliminated in consolidation.
During 1998 and 1997, the Management Partnership occupied space (14,851
rental square feet of office space) and earned management fees, leasing
commissions and fees for supervising the conversion of tenant space and
certain other capital improvements at the Headquarters Facility in
accordance with agreements assigned from Crow Management. All fees have
been eliminated in consolidation during the period prior to
reorganization.
During 1997, the Management Partnership reimbursed approximately
$12,850 of costs incurred by an affiliate in connection with the
operation of the Management Partnership. No amount was reimbursed in
1998.
WFA obtains general liability insurance coverage for the Partnership.
The cost of this coverage charged to the Partnership was $16,901 in
1997. No amount was charged in 1998.
F-16
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
6. Commitments and Contingencies
Litigation
During 1993, the Partnership, both on its own behalf and on behalf of
the Operating Partnership, commenced legal proceedings against Crow
Irvine and its general partners, Crow Management and the Development
Partnership (together, the "Crow Defendants"). The Crow Defendants
filed a cross-complaint against the Partnership, the Operating
Partnership, WFA, Three Winthrop and certain other individuals and
entities affiliated with WFA. On April 1, 1995, the Partnership and its
affiliates, along with the Crow Defendants, agreed to dismiss all
claims pursuant to a settlement agreement. That settlement agreement
required the Partnership to pay $1,050,000 to either Crow Management or
the Development Partnership in full and complete satisfaction of all
amounts due under the management agreement.
The settlement agreement also requires Crow Management to subcontract
all management services to the Management Partnership for the period
April 1, 1995 to December 31, 2000 in consideration for a monthly fee
of $20,833. The Partnership will be required to remit payments for fees
related to common area operations to the Management Partnership. In
addition, the Partnership agreed to pay certain fees for reserved
parking spaces.
During November 1996, Crow Management gave notice to the Management
Partnership that the subcontract entered into in April 1995 was
canceled immediately due to the Management Partnership's failure to
fulfill its obligations under the terms of the sub- contract. It is the
Partnership's position that all required duties are being properly
performed and that the subcontract requires the parties to enter into
arbitration prior to cancellation of the subcontract. Management
believes that any liability that may ultimately result from the
resolution of these matters will not have a material adverse effect on
the financial position or results of operation of the Partnership.
In July 1985, the Operating and Development Partnerships entered into
the Construction, Operation and Reciprocal Easement Agreement (the
"REA") to govern the development and use of the properties under the
control of each. On February 20, 1997, the Development Partnership sent
a notice to the Operating Partnership claiming that the Operating
Partnership was in default of the REA due to its refusal to permit the
Development Partnership to use certain electrical lines located on the
Operating Partnership's property.
In August 1997, the Development Partnership and its general partner
Crow Irvine #2 ("Crow") sued the Partnership and its general partners
seeking a declaratory judgment and injunctive relief to prevent the
Partnership from converting the Operating Partnership, in which the
Partnership and Crow were partners, from a general partnership to a
limited partnership. The Development Partnership and Crow also sought
unspecified damages. Upon the filing of the action, the court granted a
temporary restraining order in favor of the Development Partnership and
Crow. In October 1997, after hearing, the
F-17
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
court refused to grant a preliminary injunction in favor of the
Development Partnership and Crow 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 on behalf of the Partnership and each of the
parties has served written discovery. The court thereafter stayed the
action due to the pendency of actions in California involving the
parties or their affiliates. The stay has now expired and the
Development Partnership and Crow have moved to dismiss the action
without prejudice. The Partnership agrees that the action should be
dismissed but has asked that it be dismissed with prejudice. On
November 3, 1999, the court dismissed the action without prejudice.
In January 1998, the Management Partnership was named as a defendant in
an action seeking declaratory relief that certain agreements between
the Management Partnership and the Crow Defendants have been terminated
and that the Development Partnership and Crow have 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 Development Partnership and Crow seek a
declaration that the Management Partnership 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 the Management Partnership on the
Development Partnership and Crow's termination claims. The Development
Partnership and Crow did not appeal that decision.
The remainder of the claims were thereafter remanded to state court.
The Development Partnership and Crow's 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. The Management Partnership is not a party to
those other actions.
On or about September 24, 1999, the Development Partnership and Crow
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 the Management Partnership and Winthrop Management, L.L.C.
on or about October 22, 1999. Discovery is ongoing, and several of the
Development Partnership and Crow's claims are now moot. Although it is
not possible to predict the likely outcome at this time, no monetary
damages are sought from the Partnership, the Operating Partnership, or
the Management Partnership.
In October 1997, the Partnership brought suit against the Development
Partnership and its general partner seeking declaratory and injunctive
relief to allow the Partnership to exercise its right as a limited
partner in the Development Partnership to audit the Development
Partnership's books and records and seeking damages for the Development
F-18
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Partnership's past refusals to allow such access. In January 1998, the
court granted partial summary judgment in favor of the Partnership,
declaring and ordering that the Partnership has the right to inspect
and audit the Development Partnership's books, records and files. After
obtaining access to the Development Partnership's books and records,
the Partnership voluntarily dismissed its claim for breach of fiduciary
duty based on the Development Partnership's past refusals to allow the
Partnership access.
In January 1999, the Partnership brought suit in Maryland against 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's partnership agreement, breach of fiduciary duty, and
conversion and requested that a receiver be appointed to conduct the
business of the Development Partnership. The Partnership 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 Development Partnership and Crow 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. The Development
Partnership and Crow argued that the action should proceed in
California, if at all. The court in Maryland granted the Development
Partnership and Crow's motion on the ground of inconvenient forum in
July 1999.
The Partnership thereafter filed substantially the same claims in
California. The Development Partnership and Crow filed a demurrer to
the complaint, arguing that it should be dismissed for a variety of
reasons. The court overruled the Development Partnership and Crow's
demurrer on September 24, 1999. On or about November 5, 1999, the
Development Partnership and Crow filed their answer in which they
alleged a general denial to the allegations of the complaint. The case
is now in discovery.
On or about November 5, 1999, the Development Partnership and Crow
filed a cross-complaint in the action, purporting to allege claims for
breach of fiduciary duty, aiding and abetting breach of fiduciary duty
and unfair business practices. The Partnership 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 Partnership has 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 Development Partnership
and Crow allege was improperly forced into bankruptcy to the alleged
detriment of the Development Partnership and Crow. The Development
Partnership and Crow also allege that the Partnership 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.
F-19
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
On December 8, 1999, the Partnership 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 Stated Bankruptcy Court for the Central
District of California where the Operating Partnership bankruptcy
proceeding remains open.
The case is now in discovery. The Partnership believes it has
meritorious arguments in support of its claims in the action. Since the
Development Partnership and Crow have not yet responded substantively
to the complaint, no counterclaims have yet been asserted against the
Partnership, the Operating Partnership or the Management Partnership.
Since the case is in its early stages, it is not possible to predict
the likely outcome of the action at this time.
Financial Instruments
Financial Instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments. The Partnership 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
December 31, 1998, the Partnership had no significant concentrations of
credit risk.
F-20
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Tax Income (Unaudited)
The Partnership's income for federal income tax reporting purposes
differs from the net income for financial reporting purposes primarily
due to timing differences in the recognition of certain revenue and
expense items. The Partnership's federal tax income was calculated as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(Amounts in Thousands)
<S> <C> <C>
Income for financial reporting purposes $12,131 $89,465
Income eliminated for financial reporting but not for federal income
tax reporting - 3,235
Accelerated depreciation (in excess of) less than the depreciation
for financial statement purposes (17) 118
Meals and entertainment 3 13
Prepaid rent - (88)
Deferred rental income - 786
Bad debt reserve - (60)
Other 49 (289)
Cancellation of debt income - 13,129
Difference in income from Jamboree LLC (3,284) (825)
Difference in income from Development Partnership (5,629) (79)
Contingent liability - (783)
------------ -----------
Income for federal income tax reporting purposes $3,253 $104,622
------------ -----------
Allocations of the net income to Investor Limited Partners for
financial statement and tax purposes are computed in accordance with
the Partnership Agreements.
</TABLE>
F-21
<PAGE>
Schedule III
Winthrop California Investors Limited Partnership
Real Estate and Accumulated Depreciation
At December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Initial Cost to Partnership
---------------------------
Cost Capitalized
Subsequent to
Building Acquisition
and Improvements,
Description Encumbrances(A) Land Improvements Net Land
----------- ------------ ---- ------------ ---------------- ----
<S> <C> <C> <C> <C> <C>
Commercial office property $198,650,332 $22,756,500 $279,217,582 ($23,914,913) -
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At Close of Period
-------------------------------
Building Impairment of
and Land and Accumulated Date of Depreciable
Description Improvements Buildings Total(B) Depreciation Acquisition Life
----------- ------------ -------------- ----- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial office property - - - - 7/30/85 5-54 years
</TABLE>
(A) See Note 4 of notes to consolidated financial statements for
information regarding the terms of the various encumbrances.
(B) The total cost of land, buildings and improvements, net of accumulated
depreciation at December 31, 1998, for federal income tax purposes
is $0.
<TABLE>
<CAPTION>
Reconciliation of cost: Reconciliation of depreciation:
<S> <C> <C> <C>
Balance as of December 31, 1996 $ 234,680,529 Balance as of December 31, 1996 $ 130,004,458
Additions during 1997 1,424,678 Depreciation expense during 1997 6,569,918
Retirements during 1997 - Retirements during 1997 -
Bankruptcy restructuring of real estate: Bankruptcy restructuring of real estate (136,574,374)
-------------
Land (22,756,500)
Building (213,348,707) Balance as of December 31, 1997 -
--------------
Balance as of December 31, 1997 - Depreciation expense during 1998 -
Retirements during 1998 -
-------------
Additions during 1998 -
Retirement during 1998 - Balance as of December 31, 1998 $ -
--------------- =============
Balance as of December 31, 1998 $ -
===============
</TABLE>
