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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d)
of Securities Exchange Act of 1934
Commission File
For the fiscal year ended December 31, 1998 Number 0-14536
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2869812
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(State of organization) (IRS Employer Identification No.)
Five Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 234-3000
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
No market exists for the limited partnership interests of the Registrant, and,
therefore, a market value for such interests cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
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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"). Although the Registrant has been provided with
audited financial statements for the Development Partnership, due to a dispute
with the general partner of the Development Partnership (See Item 3.
Litigation), the general partner of the Development Partnership has obstructed
the Registrant's auditors ability to rely on the audited financial
statements of the Development Partnership and 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
financial statements. Accordingly, the financial statements contained in
Item 8 hereto are unaudited in reliance on Rule 12b-21 promulgated under the
Securities Exchange Act of 1934.
PART I
Item 1. Business.
Organization
Winthrop California Investors Limited Partnership (the "Registrant")
was originally organized on January 24, 1985 as a Maryland limited partnership.
On October 16, 1985, the Registrant was reorganized as a Delaware limited
partnership in accordance with the provisions of the Delaware Revised Uniform
Limited Partnership Act. The Registrant was organized for the purpose of owning
(i) a general partnership interest in, and serving as a general partner of, Crow
Winthrop Operating Partnership, a Maryland general partnership (the "Operating
Partnership") which was originally organized on January 24, 1985 to acquire, own
and operate an approximately 1.6 million square foot office facility known as
the Fluor Corporation World Headquarters Facility in Irvine (Orange County),
California (the "Headquarters Facility"), and (ii) a limited partnership
interest in Crow Winthrop Development Limited Partnership, a Maryland limited
partnership (the "Development Partnership" and, collectively with the Registrant
and the Operating Partnership, the "Partnerships") which was organized on
January 24, 1985 to acquire and own in excess of 120 acres of land surrounding
the Headquarters Facility (the "Excess Land" and, collectively with the
Headquarters Facility, the "Properties") and to develop such Excess Land with
office, hotel, retail and entertainment complexes. In March 1992, the Registrant
acquired a 99% limited partnership interest in Winthrop California Management
Limited Partnership, a Maryland limited partnership ("WC Management"), which has
the right to perform management and leasing functions at the Headquarters
Facility.
The general partners of the Registrant (the "General Partners") are
Winthrop Financial Associates, A Limited Partnership ("WFA") and Three Winthrop
Properties, Inc. ("Three Winthrop").
The Registrant was initially capitalized with nominal capital
contributions from the General Partners. In December 1986, the Registrant
completed an offering of 3,500 units of limited partnership interest ("Units")
in the Registrant to limited partners ("Limited Partners"), raising capital
contributions of $217,780,500. One of the Limited Partners is WILCAP Limited
Partnership, a Massachusetts limited partnership which is wholly-owned by WFA
and its
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affiliates ("WILCAP"). On May 9, 1986, WILCAP purchased 1,000 Units for
an aggregate price of $54 million, or $54,000 per Unit, payable in cash upon its
admission to the Registrant. The purchase price equaled the purchase price paid
by other Limited Partners in the offering less brokerage commissions which
otherwise would have been payable to an affiliate of WFA and a pro rata portion
of certain acquisitions fees which otherwise would have been payable to WFA. Of
the total capital contributions raised, $151,194,500 was paid upon admission of
the Limited Partners, and the balance was payable in installments pursuant to
the terms of promissory notes. As of May 1, 1988, the Limited Partners' capital
contributions had been paid in full.
Description of Business
Until 1997, the only business of the Registrant was investing as a 99%
general partner in the Operating Partnership, as a 25% limited partner in the
Development Partnership and as a 99% limited partner in WC Management. The other
partner of the Operating Partnership is Crow Irvine #2, a California limited
partnership ("Crow Irvine"). Pursuant to an amendment to the partnership
agreement of the Operating Partnership entered into in February 1992, the
Registrant assumed sole responsibility for the management of the business of the
Operating Partnership. Crow Irvine is also the general partner of the
Development Partnership. The general partner of Crow Irvine is Crow Irvine #1, a
Texas limited partnership, and the limited partner is the Fluor Corporation. The
general and limited partners of Crow Irvine #1 are certain partners and an
affiliate of Trammel Crow Company. Trammel Crow Company is one of the largest
private real estate development and investment firms in the United States.
In exchange for its interests in the Operating Partnership and the
Development Partnership, the Registrant agreed to contribute as capital $138
million and $45 million, respectively, payable in installments. As of May 1988,
the Registrant had fully funded the capital contributions. The Registrant is
entitled to (i) 97% (of which the Limited Partners receive 98%) of the profits,
losses and cash flow of the Operating Partnership and (ii) after certain
priorities, 90% (of which the Limited Partners receive 90% of the proceeds) from
a sale or refinancing in respect of the Operating Partnership. The Registrant is
entitled to 25% (of which the Limited Partners receive 60%) of (i) the profits,
losses and cash flow of the Development Partnership and (ii) after certain
priorities, the proceeds from a sale or refinancing in respect of the
Development Partnership.
Change in Ownership; Mortgage Loan Workout
After the acquisition of the Headquarters Facility, the Orange County
rental market, in general, and the rental market in the area proximate to John
Wayne Airport (the "Greater Airport market") weakened dramatically as supply of
office space outpaced demand. In addition, in the late 1980s an affiliate of
Fluor Corporation ("Fluor"), which originally occupied 100% of the Headquarters
Facility in 1985, began exercising its right to cancel the lease with respect to
significant portions of space at the Headquarters Facility. While WC Management
was able to re-let much of the vacated space and maintain low vacancy rates as
the result of an aggressive leasing campaign, the Headquarters Facility suffered
a decline in achievable rents. The decline in rents was due to significantly
lower rental rates for the re-let Flour space, which were consistent with the
then current market rates. Furthermore, Fluor notified the Registrant in 1996
that it intended to construct a new facility to serve as its headquarters and
vacated the Headquarters Facility upon its lease expiration in 1998.
As a result of the adverse events described above, the Operating
Partnership was unable
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to satisfy the approximately $198 million due under a Secured Promissory Note
(the "Existing Secured Note") at its April 1, 1996 maturity. Prior to the
maturity of the Existing Secured Note, the Operating Partnership and the holders
of the Existing Secured Note (the "Certificateholders") commenced negotiations
to restructure the Existing Secured Note. On April 10, 1996, Pacific Mutual
Realty Finance, Inc. ("Pacific Mutual"), the agent for the Certificateholders,
notified the Operating Partnership that it had received the requisite consents
from the Certificateholders to extend the maturity date through June 1996.
Although the Operating Partnership was unable to repay the principal amount
outstanding on the Existing Secured Note at such extended maturity date, the
Operating Partnership continued to pay interest at the non-default rate after
such maturity date. As a result of its inability to satisfy the Existing Secured
Note at maturity, a notice of default against the Headquarters Facility was
filed in June 1996 and in July 1996, Pacific Mutual took possession of
approximately $1.3 million in cash that was held in a pledged account.
Nonetheless, negotiations among the parties continued, and in August 1996 the
parties reached an agreement providing for the payment of excess cash to the
Certificateholders pursuant to a monthly cash sweep of the Operating
Partnership's rent account.
On November 27, 1996, the Certificateholders and the Operating
Partnership reached an agreement (the "Agreement of Understanding") in principle
on the terms of a plan of reorganization. Under the Agreement of Understanding,
the Certificateholders agreed to support a pre-arranged bankruptcy plan of
reorganization for the Operating Partnership on certain terms and conditions.
The Certificateholders also agreed to forbear from exercising any remedies so
long as the Agreement of Understanding was in effect.
In connection with, and as contemplated by, the Agreement of
Understanding, the Operating Partnership filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") on March
28, 1997. As a condition to the transfer of the Headquarters Facility as
contemplated by the Operating Partnership's Second Amended and Restated Plan of
Reorganization dated June 27, 1997 (the "Plan"), the requisite consent of the
Limited Partner to the Plan was sought and subsequently obtained. The Plan was
approved by the Bankruptcy Court on October 3, 1997.
Pursuant to the terms of the Plan, the Operating Partnership
contributed all of its assets and liabilities, including all of its right, title
and interest in the Headquarters Facility and $500,000 of unencumbered cash, to
Jamboree LLC, a newly formed Delaware limited liability company, in exchange for
an initial 10% ownership interest in Jamboree LLC. In addition, Jamboree LLC
paid to the Registrant a $500,000 fee in connection with the Plan. Immediately
prior to the transfer by the Operating Partnership of its assets and liabilities
to Jamboree LLC, the Existing Secured Note was satisfied by (i) the forgiveness
of approximately $93 million of the debt plus interest accrued thereon and (ii)
the issuance by the Operating Partnership of two intermediate notes, one in the
original principal amount of $4.5 million (the "First Intermediate Note") and
the second in the original principal amount of $100 million (the "Second
Intermediate Note"). Subsequent to the contribution by the Operating Partnership
of all of its assets and liabilities to Jamboree LLC, the Certificateholders
contributed the First and Second Intermediate Notes to Jamboree Office REIT (a
newly formed real estate investment trust, the initial stockholders of which
were the Certificateholders) and Jamboree Office REIT, in turn, contributed the
First Intermediate Note to Jamboree LLC in exchange for the remaining 90%
interest in Jamboree LLC. Jamboree LLC satisfied the Second Intermediate Note by
issuing the New Notes (as defined below) in the original principal amount of
$100 million in satisfaction of the $100 million outstanding balance.
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Pursuant to the terms of the Operating Agreement of Jamboree LLC,
Jamboree LLC will terminate on the earlier to occur of (i) one year after the
sale or transfer of the Headquarters Facility, provided that the Jamboree LLC
Board (as defined below) does not vote to continue the company, (ii) September
28, 2002, (iii) the consent of the members of Jamboree LLC or (iv) as required
by applicable law. Jamboree LLC is governed by a five person board of member
representatives (the "Jamboree LLC Board"). The initial five members will be
designated one by the Operating Partnership and four by Jamboree Office REIT. A
majority of the members of the Jamboree LLC Board must approve (i) all operating
decisions not designated as requiring unanimous approval in Jamboree LLC's
Limited Liability Company Agreement (the "LLC Agreement") and (ii) termination
for cause of the Management Agreement (as hereinafter defined). Unanimous
approval of the Jamboree LLC Board is required to (i) commence a voluntary case
under the Bankruptcy Code, (ii) terminate the Management Agreement without
cause, (iii) sell all or any material portion of the Headquarters Facility prior
to three years after the effective date of the Plan, (iv) except as otherwise
provided in the LLC Agreement, issue additional units representing membership
interests (v) authorize business activities other than the ownership and
operation of the Headquarters Facility within three years of the Effective Date,
(vi) following the sale of the Headquarters Facility, authorize the continued
existence of Jamboree LLC for more than one year, and (vii) authorize certain
other matters as provided in the LLC Agreement.
In addition, the Operating Partnership was granted the right (the
"Exchange Right") to exchange its interest in Jamboree LLC at any time after one
year from the effectiveness of the Plan (subject to certain exceptions) through
March 27, 2002 for shares in Jamboree Office REIT ("REIT Shares"). In general,
the Operating Partnership may exchange its 10% interest in Jamboree LLC for a
fixed number of REIT Shares (on a one-for-one basis) in Jamboree Office REIT,
subject to adjustment, equal to 900,000 multiplied by the Operating
Partnership's then ownership percentage in Jamboree LLC. All REIT Shares
received by the Operating Partnership either upon the exchange of its interest
in Jamboree LLC or as payment for the Property Appreciation Right (as defined
below) will be "Registerable Securities" pursuant to the provisions of the
Property Appreciation and Put Right. In general, upon the occurrence of certain
events, the Operating Partnership can request that Jamboree Office REIT prepare
a registration statement to effect the registration of the shares held by the
Operating Partnership in Jamboree Office REIT.
Furthermore, the Operating Partnership has the right to acquire
additional equity interests in, or receive cash payments from, Jamboree Office
REIT (the "Property Appreciation Rights"). The Property Appreciation Rights will
be exercisable, if at all, at any time until the close of business on March 27,
2002. In general, the Property Appreciation Rights entitle the Operating
Partnership to purchase (i) REIT Shares representing 10% of the equity value of
Jamboree LLC for a purchase price of $10,888,888.89 in the aggregate, if the
fair market value of all of the issued and outstanding REIT Shares equals or
exceeds $98 million divided by Jamboree Office REIT's interest in Jamboree LLC
and (ii) REIT Shares representing 55% of the equity value of Jamboree LLC for a
purchase price of $152,777,777.78 in the aggregate, if the fair market value of
the issued and outstanding REIT Shares equals or exceeds $125 million divided by
Jamboree Office REIT's interest in Jamboree LLC. Alternatively, the Operating
Partnership can purchase such additional REIT Shares on a "cashless basis" by
surrendering a portion of the REIT Shares to be purchased in payment of the
applicable purchase price. If the Operating Partnership elects to exercise
either of the property appreciation rights, Jamboree Office REIT has the option
to deliver to the Operating Partnership in lieu of the issuance of REIT Shares a
cash payment equal to the difference between the then current market value of
the REIT Shares which would
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otherwise be issued and the exercise price for such REIT Shares.
The fair market value of the REI Shares for the purpose of the Property
Appreciation Right will be determined by an appraisal obtained by Jamboree
Office REIT. If the Operating Partnership disputes the appraisal obtained by
Jamboree Office REIT, it may obtain a second appraisal. If the appraisals differ
by less than 10%, then the value will be deemed to be the average of the two
determinations. If the appraisals differ by 10% or more, then the two appraisers
will select a third appraiser to perform a third appraisal, and the value will
be deemed to be the value that constitutes the mid-point of the range between
the two determinations that are closest in amount.
To satisfy the Second Intermediate Note, Jamboree LLC issued promissory
notes (the "New Notes") having an aggregate principal amount of $100,000,000 to
the Certificateholders. The New Notes are divided into two tranches, the Class A
Notes and the Class B Notes. The Class A Tranche had an initial principal
balance of $80,000,000, bears interest at 2.25% above the interest rate on
United States Treasury Bonds or Notes with a maturity date closest to the Class
A Notes and is payable in interest only for the first 36 months (provided,
however, that payments of interest for a the first 12 month period may be made
by issuing additional Class A Notes) and thereafter, monthly payments of
interest and principal based on a 25-year amortization schedule. In this regard,
additional Class A Notes in the original principal amount of approximately
$2,633,000 were issued as of December 31, 1998 to satisfy a portion of the
interest payments due on the Class A Notes. The Class B Tranche had an initial
principal balance of $20,000,000, bears interest at 3.0% above the interest rate
on United States Treasury Bonds or Notes with a maturity date closest to the
Class B Notes and is payable in interest only for the first 36 months (
provided, however, that payments of interest for the first 48 months may be made
by issuing additional Class B Notes) and thereafter, monthly payments of
interest and principal based on a 25-year amortization schedule. In this regard,
additional Class A Notes in the original principal amount of approximately
$1,920,000 were issued as of December 31, 1998 to satisfy a portion of the
interest payments due on the Class B Notes.
As security for the New Notes, among other things, Jamboree LLC granted
the Certificateholders a security interest on the Headquarters Facility and the
Operating Partnership executed a Pledge and Security Agreement pursuant to which
the Operating Partnership pledged its interest in Jamboree LLC to the Class A
Noteholders and the Class B Noteholders as collateral for the payment in full of
all amounts evidenced by the New Notes. If Jamboree LLC were to default on its
obligations under the New Notes, the Class A Noteholders and the Class B
Noteholders will have the right to foreclose on the Registrant's interest in
Jamboree LLC. If this were to occur, the Registrant would lose its entire
ownership interest in the Headquarters Facility. There can be no assurance that
the Headquarters Facility will be able to generate sufficient cash flow to
enable it to satisfy its obligations under the New Notes.
Change in Management
Pursuant to a series of transactions which were consummated in February
1992, the following changes in management were effected: (i) in consideration of
the payment of approximately $4 million to Crow Management, effective March 10,
1992, Crow Management transferred its rights under the Management Contract to a
newly organized affiliate of the Registrant, WC Management (see "Property
Management" below); (ii) the partnership agreement of the Operating Partnership
was amended to give the Registrant the right to manage the business of the
Operating Partnership; (iii) the partnership agreement for the Development
Partnership and
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the agreement with respect to the development of the Excess Land were amended to
afford greater flexibility to Crow Irvine and its principals in modifying the
master plan for the development of the Excess Land; and (iv) the Operating
Partnership agreed to provide Crow Management with 3,000 square feet of rent
free space until April 1, 1996 and to perform tenant improvements therein
costing $36,000.
In connection with the transaction described above, the Registrant and
WFA agreed to indemnify Crow Irvine for any liability it may incur, on a going
forward basis, as a result of it remaining a general partner of the Operating
Partnership. In addition, Crow Irvine gave up its right of first offer in the
event of a sale of the Headquarters Facility, and the buy-sell arrangement
originally included in the partnership agreement as a mechanism to resolve
disputes was eliminated. The amendment to the partnership agreement for the
Development Partnership eliminated the Registrant's right of first offer in the
event of a sale of the land. In addition, the provisions in the partnership
agreement of the Operating Partnership which restricted the ability of the
principals of Crow Irvine to transfer their interests were amended. As amended,
the principals may transfer their interests so long as there is no change in
control. Transfers which would cause a change in control require the prior
consent of the Registrant, which consent will not be unreasonably withheld. Such
consent will be given so long as the transferee has net worth and experience
comparable to the present principals and the transferee is of sound moral
character (i.e., not known to engage in criminal conduct) and has a good
business reputation.
Employees
The Registrant does not have any employees. Services are performed for
the Registrant by the General Partners and agents retained by them.
Property Management
Winthrop Management LLC, an affiliate of WFA, has, since 1992, been
retained by WC Management to actually perform management and leasing functions
at the Headquarters Facility. Winthrop Management LLC is reimbursed at cost by
WC Management for the compensation paid by Winthrop Management LLC to certain
senior level on-site employees as well as for accounting and other support
functions performed off-site by Winthrop Management LLC. The compensation paid
to other Winthrop Management LLC employees as well as the costs associated with
the office space occupied by Winthrop Management and other administrative
expenses are reimbursed to Winthrop Management LLC, at cost, by the Operating
Partnership. WC Management and Winthrop Management LLC occupy approximately
13,000 and 2,000 square feet of space, respectively, at the Headquarters
Facility. Under the terms of its Management Agreement, WC Management was, until
the March 1997 loan restructuring, entitled to a fee of 5% of gross receipts
from the Headquarters Facility. As a result of, and as a condition to, the Plan,
WC Management's fee has been reduced to 2% of gross receipts. Additionally, WC
Management will receive certain incentive fees based on reductions it is able to
achieve, if any, in certain operating and other expenses. Leasing commission
payments, consistent with prevailing market rates, will be paid to WC Management
for all third-party leases it procures for the Headquarters Facility. All
payments under the Management Agreement will be paid to WC Management and the
Registrant will have no rights to any payments thereunder.
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Partnership Agreement Amendment
In August 1995, the General Partner amended the Registrant's
partnership agreement to clarify and remove certain ambiguities pertaining to
the requirements for calling and voting at a meeting of limited partners, or
taking action by written consent of partners in lieu thereof. Such requirements
include, among other matters, that any action by written consent may be
initiated only by the General Partner or by one or more Limited Partners holding
not less than 10% of the outstanding Units.
Tender Offer
On November 24, 1999, Sutter/Jamboree Acquisition Fund, LLC
("Sutter/Jamboree") purportedly commenced a tender offer to purchase up to 1,000
Units at a purchase price of $1,500 per Unit, pursuant to the terms and
conditions of an Offer to Purchase dated November 24, 1999, and the related
Letter of Transmittal (together, the "Sutter Offer"). On November 30, 1999, the
Registrant received a letter from counsel to Sutter/Jamboree in the Sutter Offer
notifying it of the Sutter Offer and providing a copy of the offering materials
related thereto. The letter also contained a request that the Registrant comply
with certain provisions of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act") by either providing Sutter/Jamboree with a list of the name
and address of, and the number of units held by, each limited partner of your
partnership, or agreeing to mail the Sutter Offer offering materials to limited
partners.
On December 2, 1999, a representative of the Registrant telephoned a
representative of Sutter/Jamboree and stated that the Registrant would neither
provide the requested list of limited partner information nor agree to mail the
Sutter Offer offering materials, and that a letter from the Registrant's legal
counsel would be forthcoming.
On December 2, 1999, the Registrant's legal counsel mailed a letter
written on behalf of the Registrant to counsel for Sutter/Jamboree. In the
letter counsel indicated that (i) the Registrant's agreement of limited
partnership required (A) the prior written consent of WFA to any assignment or
transfer of units and (B) that any transfer of units comply with applicable
Federal securities laws, (ii) as a result of the absence of current financial
information with respect to the Registrant, WFA will not consent to any transfer
of units made pursuant to the Sutter Offer, and (iii) the Sutter Offer does not
comply with the disclosure requirements of the Exchange Act applicable to tender
offers for limited partnership units, and, accordingly, the Registrant is not
required to comply with the request received on November 30.
On December 7, 1999, a representative of Sutter Opportunity Fund, LLC,
an affiliate of Sutter/Jamboree, appeared at the Registrant's office and
delivered a letter demanding that they be permitted to inspect and copy the
register of holders of units pursuant to the provisions of the Registrant's
limited partnership agreement and Delaware law. A representative of the
Registrant advised them that counsel needed to be consulted with before
responding to the request.
On December 8, 1999, Sutter Opportunity Fund, LLC commenced an action
in the Delaware Chancery Court against the Registrant and WFA to obtain a list
of the limited partners of your partnership. In a letter to limited partners
dated December 9, 1999, the Registrant
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indicated that, in accordance with the provisions of the Registrant's
partnership agreement, it had decided to restrict transfers of units under the
Sutter Offer based on its belief that the Sutter Offer violates certain
provisions of applicable securities laws and the absence of current financial
information on the Registrant sufficient to enable limited partners to make an
informed decision as to whether to sell units. The Registrant also recommended
that limited partners reject the Sutter Offer and disclosed that an affiliate of
WFA may be making an offer to purchase units at a price substantially above the
price provided for in the Sutter Offer.
On December 14, 1999, the Registrant sent a letter to counsel for
Sutter Opportunity Fund, LLC rejecting the request to provide a list of limited
partners.
On December 21, 1999, a representative of the Registrant contacted a
representative of Sutter/Jamboree to inform them that in light of the
anticipated filing of this Annual Report on Form 10-K, the Registrant would mail
Sutter/Jamboree's offering materials. However, the Registrant's representative
further stated that no transfers of Units would be affected until the
Registrant's audited financial statements for the year ended December 31, 1998
is made available to the Limited Partners. A letter was sent from counsel to the
Registrant to Sutter/Jamboree to this effect on December 21, 1999.
On December 21, 1999, the Registrant's legal counsel informed Sutter
that (i) in view of the anticipated filing of the Registrant's Form 10-K for
1998, the Registrant had agreed to mail the Sutter Offer offering materials to
Limited Partners and (ii) the Registrant will not consent to any transfer of
Units unless Limited Partners have previously received the 1998 audited
financial statements of the Registrant.
On December 22, 1999, the Registrant agreed to provide Sutter
Opportunity Fund, LLC with a list of the Registrant's limited partners and the
Registrant and Sutter Opportunity Fund, LLC agreed to file a stipulation (the
"Stipulation") with the Delaware Chancery Court dismissing with prejudice the
action which Sutter Opportunity Fund, LLC had commenced. On December 23, 1999,
the Registrant forwarded the list to Sutter Opportunity Fund, LLC.
On January 3, 2000, Quadrangle Associates II L.L.C. ("Quadrangle"), an
affiliate of the General Partners, commenced a tender offer to acquire up to
1,384 (39.5%) of the total outstanding units of the Registrant for a purchase
price of $2,000 per unit. Quadrangle's offer is currently scheduled to expire on
February 8, 2000.
On January 6, 2000, Sutter/Jamboree filed Amendment No. 2 to its
Schedule 14D-1 which amendment contained a letter, dated January 6, 2000, to
Limited Partners. Pursuant to this amendment, Sutter/Jamboree increased the
number of units being sought in their offer to all outstanding units. Due to
limitations in the Registrants Agreement of Limited Partnership, no more than
49% of the total outstanding units in the Registrant can be transferred in any
twelve month period.
As of January 27, 2000, after a number of price increases, Quadrangle
had increased its
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offer price to $3,100 per unit and Sutter/Jamboree had increased its offer price
to $3,000 per unit.
Item 2. Properties.
The Registrant owns no property other than its interests in the
Operating Partnership, the Development Partnership and WC Management.
The Operating Partnership
The Operating Partnership's sole asset is its 10% ownership interest in
Jamboree LLC. Jamboree LLC, in turn, owns title in fee simple to the
Headquarters Facility. The Headquarters Facility consists of eight buildings; a
10-story tower, a single story concourse and six four-story buildings;
containing, in the aggregate, approximately 1,692,219 rentable square feet of
space and approximately 15 acres of land. The property is located in the Greater
Airport area of Irvine, California and is used principally as various tenants'
corporate headquarters.
The following table sets forth those tenant's at the Headquarters
Facility that occupy 10% or more of the rentable square footage, business
conducted by the tenant, expiration date of the lease term, renewal options and
the 1999 annual rent for the leases:
<TABLE>
<CAPTION>
Lease Renewal 1999 Monthly
Tenant/Business Square Footage (%) Expiration Option (1) Base Rent
- --------------- ------------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
ConAgra, Inc.(2) 384,117 (22.7%) 8/31/10 2-5 yr. (3)
Air Touch Cellular 189,265 (11.18%) 11/30/00 2-5 yr.(4) $246,045
Communication
Services
Denny's Inc. 158,362 (9.36%) 7/24/04 3-5 yr. $214,841
Food service company(5)
Waban, Inc.(6) 57,208 (3.39%) 7/24/04 3-5 yr. $62,035
Home improvement
retailer
</TABLE>
(1) The first number represents the number of renewal options. The second
number represents the length of each option.
(2) According to tenant's Annual Report on Form 10-K, ConAgra is a
diversified food company that operates across the food chain, from
basic agricultural inputs to production and sale of branded consumer
products. Tenant entered into lease on November 19, 1999.
(3) Tenant improvements are now under construction. Tenant 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. Lease provides for the following rental payments
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<TABLE>
<CAPTION>
262,648 Square Feet 121,469 Square Feet
------------------- -------------------
Rent Dates Monthly Rate Rent Dates Monthly Rate
---------- ------------ ---------- ------------
<S> <C> <C> <C>
9/1/00 to 8/31/01 $422,863 12/1/00 to 8/31/03 $176,130
9/1/01 to 2/28/03 $467,513 9/1/03 to 8/31/05 $193,136
3/1/03 to 8/31/05 $491,152 9/1/05 to 2/29/08 $202,853
9/1/05 to 2/29/08 $514,790 3/1/08 to 8/31/10 $213,785
3/1/08 to 8/31/10 $541,055
</TABLE>
(4) Tenant has advised WC Management that it does not intend to exercise its
renewal option.
(5) Tenant has subleased 106,676 square feet of space to Waban's and the
remainder of the space to one of its affiliates. Parent company of Denny's,
which filed for bankruptcy, guaranteed the lease.
(6) The space listed is in addition to the space subleased from Denny's Inc.
The following table sets forth the occupancy rates for the last five
years and the associated gross rental per square foot amount, as footnoted. At
November 30, 1999, 92% (including the ConAgra lease) at the Headquarters
Facility was leased under leases with an average rental rate (exclusive of
ConAgra) of $21.00 per square foot.
Percentage Average Annual Total
Occupancy Gross Rental Per SF
Year Rate(1) of Occupied Space (2)
---- ------- ---------------------
1994 99.5% 23.59
1995 95.0% 23.08
1996 91.5% 23.34
1997 97.5% 20.51
1998 88.0% 21.33
(1) Occupancy rates are based on December 31 of indicated year and are not
yearly averages.
(2) Calculated using operating revenues, including rent escalations and
other revenues, for the entire year divided by the total square footage of
occupied space (based on the occupancy rates reported in this table).
(3) Occupancy Rate and Average Rental Rate are for eleven months ended 11/30/99.
11
<PAGE>
The following table sets forth certain information concerning lease
expirations as of January 1, 1999 (assuming no renewals for this property for
the period from January 1, 1999 through December 31, 2008). The leases which
were scheduled to expire in 1999 have not been renewed.
<TABLE>
<CAPTION>
Number of Tenants Aggregate SF Covered Annualized Rentals for Percentage of Total
Whose Leases Expire By Expiring Leases Leases Expiring($) Annualized Rental
------------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
1999 2 558,625 4,636,913 18.78
2000 12 254,762 3,251,518 15.31
2001 7 62,787 496,091 2.83
2002 11 70,882 590,059 3.66
2003 6 136,214 1,615,262 11.20
2004 5 311,887 3,765,864 36.13
2005 4 133,167 2,485,124 41.23
2006 0 0 0 0
2007 0 0 0 0
2008 0 0 0 0
</TABLE>
In the opinion of the General Partners, as of October 1, 1999 the
properties comprising the Headquarters Facility are adequately covered by
insurance.
The Development Partnership.
The following information relating to the Development Partnership is
based solely on information provided to the Partnership by the general partner
of the Development Partnership. As stated earlier, due to disputes with the
general partner of the Development Partnership, the Partnership makes no
representation or warranty as to the accuracy thereof.
The Development Partnership was formed in 1985 for the purpose of
acquiring, owning and developing approximately 120 acres of land in Orange
County, California. The general partner is Crow Irvine #2, a California limited
partnership and the limited partner is your partnership.
The Development Partnership sold 32 acres of the Excess Land in 1989.
In accordance with the sale of that parcel of land, there were certain
requirements of the purchase concerning land-use, which were not met. As such,
ownership of that 32 acres reverted back to the Development Partnership. As
discussed below, in 1998 the Development Partnership again sold this 32-acre
parcel of land owned by the Development Partnership.
In 1994, a 36,400 square foot parcel of land was sold to Edwards
Theaters Circuit, Inc. for $3,500,000. The Registrant did not receive any
proceeds from the sale of the land. The Registrant was informed by the general
partner of the Development Partnership that such proceeds were used to pay
certain debts and obligations of the Development Partnership, pursuant to the
Development Partnership's partnership agreement.
12
<PAGE>
During 1997, the Development Partnership formed Shops at Park Place LLC
for the purpose of owning and operating a retail center. The Development
Partnership is the managing and sole member of Shops at Park Place LLC. During
1998, the Development Partnership formed Park Place Residential Realty LLC and
Park Place Residential Realty-Land LLC, for the purpose of reacquiring and
reselling the approximately 32 acres of residential property originally sold in
1989. The 32 acres were sold in 1998 for a gross sales price of $50,000,000. In
addition, during 1998, the Development Partnership formed 3121 Michelson Drive
LLC and Park Place Hotel Company LLC and, in January 1998 formed Park Place
Parking Company LLC for the purposes of developing, owning and operating a
150,000 square foot Class A office building, a luxury hotel and parking
structures, respectively. In 1999, Park Place Hotel signed a 20-year operating
agreement with a hotel operator. The Development Partnership is the managing and
sole member of each of these limited liability companies.
Item 3. 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
13
<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
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.
6. See Item 1. Business-Tender Offer for information regarding the
action commenced in Delaware Chancery Court against Registrant and WFA to obtain
a list of limited partners.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
16
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
There is no established public trading market for the Units in the
Registrant. Trading in the Units is sporadic and occurs solely through private
transactions. In addition, transfers of Units are subject to limitations set
forth in the Registrant's partnership agreement which require the prior written
consent of WFA of any such transfer, which consent may be granted or denied in
WFA's sole discretion. As of December 1, 1999, there were 1,665 holders of 3,500
Units.
The Registrant's partnership agreement requires that Cash Flow (as
defined therein) be distributed to the partners in specified proportions at
reasonable intervals during the fiscal year and in any event no later than 60
days after the close of each fiscal year. The Registrant's ability to make
distributions of Cash Flow is limited by the extent to which (i) it receives
distributions of Cash Flow from the Operating Partnership, the Development
Partnership and, from WC Management, (ii) it earns income from other sources and
(iii) its receipts of Cash Flow and income are not sufficient to meet its
expenses and current obligations including fees payable to the General Partners.
In addition, the General Partners have the right to establish, maintain and
replenish reserves from available cash prior to making distributions to
partners.
No cash distributions were paid or accrued to the Limited Partners for
the years ended December 31, 1996, 1997 or 1998. Although the Registrant
received distributions from WC Management in 1996, 1997 and 1998, these
distributions have been applied to replenish unrestricted reserves previously
held by the Registrant and to pay certain accrued but unpaid fees to WFA. It is
not anticipated that that there will be any additional distributions from
operations in the near future.
17
<PAGE>
Item 6. Selected Financial Data.
(a) The following represents selected financial data for the Registrant
for the years ended December 31, 1998, 1997, 1996, 1995 and 1994 The data should
be read in conjunction with the financial statements included elsewhere herein.
This data is not covered by the independent auditors' report.
<TABLE>
<CAPTION>
Operating Statement Data:
For the Year Ended December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(Amounts in thousands, except per unit data)
<S> <C> <C> <C> <C> <C>
Total Revenues.................................. $1,741 $27,650 $ 35,191 $ 36,023 $ 38,403
Total Expenses.................................. 1,599 26,013 72,745(3) 101,592(1) 52,565
Equity in Income of Jamboree LLC................ 844 206 -- -- --
Equity in Income (Loss) of Development
Partnership................................... 11,168 (264) (531) (794) (101)
Net Income (Loss) Before Minority Interest...... 12.154 (12,013) (38,085) (66,363) (14,263)
Minority Interest in Income of the Operating
Partnership(2)................................ (9) (2) 327 152 134
Minority Interest in Income of the Management
Partnership................................... (14) (15) (13) (17) (15)
Net Income (Loss)............................... $12,131 $89,465 $(37,771) $(66,228) $(14,144)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net Income (Loss) Per Unit Outstanding.......... $3.40 $25.05 $ (10,576) $ (18,544) $ (3,961)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash Distributions Paid or Accrued Per
Unit Outstanding.............................. $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------
<CAPTION>
Balance Sheet Data:
At December 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Total Assets.................................... $35.744 $23,574 $142,599 $180,373 $246,755
Mortgage Loans.................................. -- -- 197,712 198,650 199,925
Total Liabilities............................... 50 11 208,501 208,504 208,658
--------- --------- --------- --------- ---------
Total Capital................................... $(65,902) $(28,131) $ 38,097
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(1) Includes reduction in carrying value of income-producing properties of
$50,000,000.
(2) Minority interest represents the 1% interest of Crow Irvine in the
Operating Partnership.
18
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The matters discussed in this Form 10-K 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-K 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. 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 Jamboree LLC,
by the Certificateholders of approximately $93 million of the debt
19
<PAGE>
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 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
20
<PAGE>
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
1998 as compared to 1997
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.
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
21
<PAGE>
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.
1997 as compared to 1996
The Registrant recognized net income before reorganization items,
minority interest and extraordinary items of $1,579,000 for the year ended
December 31, 1997 as compared to a net loss before reorganization items,
minority interest and extraordinary items of $38,085,000 for the year ended
December 31, 1996. This increase is due to a decrease in expenses of $46,732,000
which more than offset a $7,541,000 decrease in income. The decrease in expenses
was primarily due to a reduction in carrying value of income producing
properties in 1996 of $23,261,000. No corresponding reduction was recognized in
1997. Also contributing to the reduction in expenses were decreases in repairs,
maintenance and security, interest expense, insurance expense and depreciation
and amortization expense primarily due to the change in accounting method in
October 1997 as a result of the bankruptcy of the Operating Partnership. Income
decreased primarily due to a decrease in rental income and common area
reimbursements which was partially offset by other income. The decreases in
rental income and common area expense reimbursements was due to the change in
accounting method. The Registrant incurred
22
<PAGE>
$13,592,000 in reorganization items in 1997 as a result of the bankruptcy of the
Operating Partnership.
Item 7A. 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
December , 1998, the Registrant had no significant concentrations of market
risk.
23
<PAGE>
Item 8. Financial Statements.
The most significant asset of the Registrant is its 25% limited
partnership interest in the Development Partnership. Although the Registrant has
been provided with audited financial statements for the Development Partnership,
due to a dispute with the general partner of the Development Partnership (see
Note 7), the general partner of the Development Partnership has obstructed the
Registrant's ability to rely on the audited financial statements of the
Development Partnership and 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 financial statements.
Accordingly, the financial statements contained in this Item 8 hereto are
unaudited in reliance on Rule 12b-21 promulgated under the Securities Exchange
Act of 1934.
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-1
<PAGE>
Winthrop California Investors Limited Partnership
Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
(Amounts in Thousands, Except Per Unit Data)
Income:
<S> <C> <C> <C>
Rental income $ -- $ 18,363 $ 24,376
Common area expense reimbursements -- 7,886 9,906
Property management fees 943 185 --
Leasing commissions 653 90 --
Interest income 145 248 441
Other -- 878 468
--------- --------- ---------
Total income 1,741 27,650 35,191
--------- --------- ---------
Expenses:
Utilities -- 2,632 2,758
Repairs, maintenance and security -- 3,004 6,329
Real estate taxes -- 1,717 2,680
Insurance -- 267 357
General and administrative 849 3,261 2,417
Asset management fees 750 750 750
Interest expense -- 6,007 23,660
Depreciation and amortization -- 8,375 10,533
Unrealized loss on investments -- -- --
Reduction in carrying value of income-producing properties -- -- 23,261
--------- --------- ---------
Total expenses 1,599 26,013 72,745
--------- --------- ---------
Equity in income of Jamboree LLC 844 206 --
Equity in income (loss) of Development Partnership 11,168 (264) (531)
--------- --------- ---------
Income (loss) before reorganization items, minority interest
and extraordinary items 12,154 1,579 (38,085)
--------- --------- ---------
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) (38,085)
Minority interest in income of: --
Operating partnership (9) (2) 327
Management partnership (14) (15) (13)
--------- --------- ---------
Income (loss) before extraordinary item 12,131 (12,030) (37,771)
Extraordinary item due to forgiveness of debt -- 101,495 --
Net income (loss) $ 12,131 $ 89,465 $ (37,771)
--------- --------- ---------
Net income (loss) allocated to General Partners $ 243 $ 1,789 $ (755)
--------- --------- ---------
Net income (loss) allocated to Investor Limited Partners $ 11,888 $ 87,676 $ (37,016)
--------- --------- ---------
Net income (loss) per unit of limited partnership interest $ 3.40 $ 25.05 $ (10.58)
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<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 Thousands) (Amounts in Thousands) (Amounts in Thousands)
<S> <C> <C> <C> <C>
Balances, December 31, 1995 3,500 $ (7,557) $(20,574) $(28,131)
Net income -- (64,903) (1,325) (66,228)
-------- -------- -------- --------
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-3
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ----------------- ----------------
(Amounts in Thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 12,131 $ 89,465 $ (37,771)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization - 8,375 9,948
Minority interest in income of operating partnership and
management partnership 23 17 (314)
Equity in income of Jamboree LLC (844) (206) -
Equity in income (loss) of Development Partnership (11,168) 264 531
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) (20)
Decrease (increase) in prepaid expenses and other assets (81) 5,031 (1,648)
Increase in accounts payable, accrued expenses and other 27 4,601 923
Increase in deferred costs related to operating activities - (1,963) (111)
---------------- ----------------- -----------------
Net cash provided by operating activities 88 12,042 (5,201)
---------------- ----------------- -----------------
Cash flows from investing activities:
Proceeds from sales of investment securities held for trading,
net of purchases - - 2,383
Capital expenditures - (1,371) (125)
Distribution from Development Partnership 308 - -
Distribution from Jamboree LLC 231 - -
---------------- ----------------- -----------------
Net cash provided by (used in) investing activities 539 (1,371) 2,258
---------------- ----------------- -----------------
Cash flows from financing activities:
Principal payments on mortgage loans - - (938)
Decrease in investment securities - - 1,289
Distribution to minority interest (12) (15) -
Cash distributions in conjunction with the reorganization - (12,378) -
Decrease in mortgage escrow - (1,006) (1,289)
---------------- ----------------- -----------------
Net cash used in financing activities (12) (13,399) (938)
---------------- ----------------- -----------------
Increase (decrease) in cash and cash equivalents 615 (2,728) (3,881)
Cash and cash equivalents, beginning of year 2,607 5,335 9,216
---------------- ----------------- -----------------
Cash and cash equivalents, end of year $ 3,222 $ 2,607 $ 5,335
---------------- ----------------- -----------------
</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-4
<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-7
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. Significant Accounting Policies
Basis of Consolidation
For the period prior to reorganization, the accompanying consolidated
financial statements include the accounts of the Partnership, the
Operating Partnership and the Management Partnership. The Partnership
is the 99% General Partner of the Operating Partnership and the 99%
Limited Partner of the Management Partnership. The remaining 1%
ownership interests of an unaffiliated partner of the Operating
Partnership ("Crow Irvine #2") and of an affiliated partner of the
Management Partnership ("First Winthrop Properties, Inc.") have been
included in other assets in the accompanying consolidated balance
sheets. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The Partnership owns a 25% Limited 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-8
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (Continued)
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-9
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (Continued)
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.
During 1996, as a result of the Operating Partnership's default on the
mortgage loan (Note 4) and the subsequent notification by Fluor that it
would not renew its lease upon expiration in July 1998, management
updated its assessment of potential impairment of the Properties. Based
on a valuation prepared by an outside party, the Partnership, in
conjunction with the Agreement of Understanding with the Mortgage
Lender, determined that an additional impairment in value that was
considered to be other than temporary needed to be recognized, and
further reduced the carrying value of its investment in the Properties
by $23,261,000 to its estimated fair value as of December 31, 1996.
Additionally, the Partnership reduced the carrying value of its
investment in the Development Partnership as discussed in Note 3.
Accounting for Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying amount.
SFAS No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. As required, the Partnership adopted
SFAS No. 121 in the first quarter of 1997. Management believes adoption
did not have any effect on the financial position of the Partnership.
F-10
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
2. Significant Accounting Policies (Continued)
Disclosures About Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires that disclosure be made of estimates of the fair value of each
class of financial instrument. Financial instruments held by the
Partnership as of December 31, 1998 and 1997 consist primarily of
short-term trade receivables and payables, for which the carrying
amounts approximate fair values.
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>
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.
F-11
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
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
================= =================
Condensed balance sheets of the Development Partnership are as follows
(unaudited):
<CAPTION>
December 31,
-----------------------------------------
1998 1997
------------------ -------------------
(Amounts in Thousands)
Assets
<S> <C> <C>
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-12
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
3. Equity Investment in Development Partnership (Continued)
<TABLE>
<CAPTION>
1996
1998 1997 (Restated)
------------- -------------- --------------
(Amounts in Thousands)
--------------
<S> <C> <C> <C>
Operating revenues $ 9,501 5,124 3,063
Gain on sale of property 42,952 - -
Costs and expenses 7,781 6,428 5,185
------------- -------------- -----------------
Net income (loss) $ 44,672 $ (1,304) $ (2,122)
============= ============== =================
Net income (loss) allocated to Crow Irvine $ 33,504 $ (978) $ (1,591)
============= ============== =================
Net income (loss) allocated to Winthrop California
Investors Limited Partnership $ 11,168 $ (326) $ $ (531)
============= ============== =================
</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-13
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
4. Reorganization of the Operating Partnership (Continued)
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-14
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
4. Reorganization of the Operating Partnership (Continued)
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-15
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
4. Reorganization of the Operating Partnership (Continued)
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
------------- --------- ----------- ----------- --------------
Assets
<S> <C> <C> <C> <C> <C>
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-16
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
4. Reorganization of the Operating Partnership (Continued)
<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
------------ --------- ------------ ----------- --------------
Liabilities and
Members' Equity
<S> <C> <C> <C> <C> <C>
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-17
<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, 1997 or 1996.
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, 1997 and 1996, 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 and 1996, the Management Partnership reimbursed
approximately $12,850 and $145,000, respectively, 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 and
$15,100 in 1997 and 1996, respectively. No amount was charged in 1998.
F-18
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
6. Real Estate Tax Abatement
In March 1997, the Operating Partnership received a real estate tax
abatement related to 1996. Of the total rebate of approximately
$1,560,000, approximately $1,068,000 is payable to certain tenants. The
remaining $492,000 is included in other income.
During 1996, the Operating Partnership received an abatement of real
estate taxes related to fiscal years 1991 through 1995. Of the total
rebate of approximately $150,000, approximately $127,000 is payable to
certain tenants and $23,000 is included in other income.
7. 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.
F-19
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Commitments and Contingencies (Continued)
Litigation (Continued)
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 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.
F-20
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Commitments and Contingencies (Continued)
Litigation (Continued)
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
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.
F-21
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Commitments and Contingencies (Continued)
Litigation (Continued)
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.
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.
F-22
<PAGE>
Winthrop California Investors Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
7. Commitments and Contingencies (Continued)
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.
8. Tax Income (Loss)
The Partnership's income (loss) 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 1996
---- ---- ----
(Amounts in Thousands)
<S> <C> <C> <C>
Income (loss) for financial reporting purposes $12,131 $89,465 $(37,771)
Reduction in carrying value of property -- -- 23,261
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 (1,746)
Meals and entertainment 3 13 --
Prepaid rent -- (88) 71
Deferred rental income -- 786 (252)
Bad debt reserve -- (60) --
Other 49 (289) 550
Legal fees related to bankruptcy -- -- 350
Cancellation of debt income -- 13,129 --
Special tax loss allocation to Partnership -- -- (326)
Difference in income from Jamboree LLC (3,284) (825) --
Difference in income from Development
Partnership (5,629) (79)
Development Partnership interest expense
capitalized for tax loss -- -- (274)
Contingent liability - (783) --
------ ------- ---------
Income (loss) for federal income tax
reporting purposes $3,253 $104,622 $(16,137)
------- --------- ---------
</TABLE>
Allocations of the net income to Investor Limited Partners for
financial statement and tax purposes are computed in accordance with
the Partnership Agreements.
F-23
<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) -
<CAPTION>
Gross Amount At Which Carried
At Close of Period
-----------------------------
Building Impairment of
and Land and Accumulated Date of Depreciable
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, 1995 256,525,242 Balance as of December 31, 1995 122,065,059
Additions during 1996 125,287 Depreciation expense during 1996 9,196,371
Retirements during 1996 - Retirements during 1996 (1,258,975)
-----------
Loss due to permanent impairment
Land (3,417,500) Balance as of December 31, 1996 130,004,458
Building (18,557,500)
----------
Depreciation expense during 1997 6,569,918
Balance as of December 31, 1996 234,680,529 Retirements during 1997 -
Bankruptcy restructuring of real estate 136,574,374)
-----------
Additions during 1997 1,424,678
Retirements during 1997 - Balance as of December 31, 1997 -
Bankruptcy restructuring of real estate:
Land (22,756,500) Depreciation expense during 1998 -
Building (213,348,707) Retirements during 1998 -
------------- ------------
Balance as of December 31, 1997 $ -
Balance as of December 31, 1998 ============
Additions during 1998 -
Retirement during 1998 -
-------------
Balance as of December 31, 1998 $ -
=============
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
26
<PAGE>
PART III
Item 10. Directors and Executive Officers.
The Registrant has no directors or executive officers. The managing
general partner of the Registrant is WFA. WFA manages and controls substantially
all of Registrant's affairs and has general responsibility and ultimate
authority in all matters affecting its business. As of October 1, 1999, the
names of the executive officers of WFA and the position held by each of them,
are as follows:
<TABLE>
<CAPTION>
Position Held with the Has Served as a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
<S> <C> <C>
Michael L. Ashner Chief Executive Officer and Director 1-96
Thomas C. Staples Chief Financial Officer 1-99
Peter Braverman Executive Vice President and Director 1-96
Carolyn Tiffany Chief Operating Officer and Clerk 10-95
</TABLE>
Michael L. Ashner, age 47, has been the Chief Executive Officer of WFA
since January 15, 1996. From June 1994 until January 1996, Mr. Ashner was a
Director, President and Co-chairman of National Property Investors, Inc., a real
estate investment company ("NPI"). Mr. Ashner was also a Director and executive
officer of NPI Property Management Corporation ("NPI Management") from April
1984 until January 1996. In addition, since 1981 Mr. Ashner has been President
of Exeter Capital Corporation, a firm which has organized and administered real
estate limited partnerships.
Thomas C. Staples, age 43, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.
Peter Braverman, age 47, has been a Vice President of WFA since January
1996. From June 1995 until January 1996, Mr. Braverman was a Vice President of
NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was a Vice President and Assistant Secretary of Fischbach Corporation,
a publicly traded, international real estate and construction firm.
27
<PAGE>
Carolyn Tiffany, age 32, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop
Residential Associates I, A Limited Partnership; Winthrop Residential Associates
II, A Limited Partnership; Winthrop Residential Associates III, A Limited
Partnership; 1626 New York Associates Limited Partnership; 1999 Broadway
Associates Limited Partnership; Riverside Park Associates Limited Partnership;
Springhill Lake Investors Limited Partnership; Twelve AMH Associates Limited
Partnership; Winthrop Growth Investors I Limited Partnership; and Winthrop
Interim Partners I, A Limited Partnership;.
Except as indicated above, neither the Registrant nor the General
Partner has any significant employees within the meaning of Item 401(b) of
Regulation S-K. There are no family relationships among the officers and
directors of WFA.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Registrant under Rule 16a-3(e) during the Registrant's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Registrant with respect to its most recent fiscal year, the Registrant is not
aware of any director, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in the Registrant that failed to file
on a timely basis, as disclosed in the above Forms, reports required by section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
(f) Involvement in Certain Legal Proceedings. None.
Item 11. Executive Compensation.
Registrant is not required to and did not pay any compensation to the
officers or partners of the General Partner. The General Partner does not
presently pay any compensation to any of its officers or partners (See "Item 13,
Certain Relationships and Related Transactions").
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security Ownership of Certain Beneficial Owners.
WFA and Three Winthrop own all the outstanding general partnership
interests in the Registrant. The following table sets forth certain information
regarding Units of the Registrant owned by each person who is known by the
Registrant to own beneficially or exercise voting or dispositive control over
more than 5% of the Registrant's limited partnership assignee units, by each
28
<PAGE>
of the directors of the General Partners of the Registrant and by all
directors and executive officers of the General Partners as a group as of
December 1, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Name and address of Beneficial Owner Amount and nature of % of Class
Beneficial Owner
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WILCAP Limited Partnership (1) (2) 1,000 28.6
- ------------------------------------------------------------------------------------------------------------------
WILCAP Holdings Co., Inc. (1)(2)(3) 18 *
- ------------------------------------------------------------------------------------------------------------------
Winthrop Financial Associates, A Limited 5 *
Partnership (1) (2)
- ------------------------------------------------------------------------------------------------------------------
All directors and executive officers as a group -- --
(five persons)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent
(1) The business address for WILCAP Limited Partnership WILCAP Holdings Co.,
Inc. and WFA is Five Cambridge Center, 9th Floor, Cambridge,
Massachusetts 02142.
(2) Based upon information supplied to the Registrant by WILCAP Limited
Partnership.
(3) WILCAP Holdings Co., Inc. is the general partner of WILCAP Limited
Partnership.
There exists no arrangements known to the Registrant the operation of
which may at a subsequent date result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others.
The directors, officers and general partners of the General Partners
and their affiliates receive no remuneration or other compensation from the
Registrants.
Under the terms of the Partnership Agreement, the General Partners and
their affiliates are entitled to receive certain cash distributions from, and
allocations of taxable profits and losses from the Registrant. In addition, the
General Partners and their affiliates receive certain fees and compensation paid
by the Partnership for services rendered in connection with the operations of
the Partnership.
The only fees, commissions and cash distributions which the Registrant
paid or accrued for the account of the General Partners and their affiliates for
the years ended December 31, 1998, 1997 and 1996 is an annual asset management
fee payable to WFA of $750,000 per annum. The Registrant paid to the General
Partners $750,000 during each of the years ended December 31, 1998 and 1997. In
August 1996, the Registrant paid the General Partners $4,875,000 as payment of
current and accrued annual asset management fees. At December 1, 1999, the
Registrant had paid to the General Partners $562,500 on account of the annual
asset management fee for the year ended December 31, 1999.
There were no other material transactions between the General Partners
or their affiliates and the Registrant during 1996, 1997 or 1998, except as
follows:
29
<PAGE>
In February 1992, WC Management was organized for the purpose of buying
out Crow Management's interest in the Management Contract. A wholly-owned
subsidiary of WFA contributed $100 to the capital of this partnership in
exchange for a 1% general partnership interest. The Registrant contributed
approximately $4 million to the capital of WC Management in exchange for a 99%
limited partnership interest. In 1996, 1997 and 1998, the WFA affiliate which is
the general partner of WC Management received a distribution of $14,384, $16,076
and $12,380, respectively, in respect of its 1.0% interest. Others than the
distribution in respect of its 1% interest, the general partner of WC Management
received no compensation for its services as general partner.
WC Management has engaged Winthrop Management LLC, an affiliate of WFA,
to perform the services required under the Management Contract. Winthrop
Management LLC is reimbursed for payroll and other expenses associated with
discharging these duties. Winthrop Management LLC also occupies approximately
2,000 square feet of office space in the Headquarters Facility and receives
reimbursement from the Operating Partnership for the expenses associated with
this space. Other than these reimbursements, Winthrop Management LLC receives no
fees for the services it performs for WC Management.
(b) Certain Business Relationships.
The Registrant's response to Item 13(a) hereof is incorporated herein
by this reference. The Registrant has no other business relationship with
entities of which the officers, directors or general partners of the General
Partners or its affiliates are officers, directors or 10 percent shareholders
other than as discussed in "Item 12(a), Security Ownership of Certain Beneficial
Owners".
(c) Indebtedness of the Management.
There is no indebtedness to the Registrant by the General Partners or
their affiliates, or any of their officers, directors or general partners.
(d) Transactions with Promoters. None.
30
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this Report:
1. The exhibits listed in the accompanying Index to Exhibits
are filed as part of this Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter
covered by this report.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
By: WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP,
Managing General Partner
By: /s/Michael L. Ashner
----------------------------------
Michael L. Ashner
Chief Executive Officer
Date: January 27, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
- -------------- ----- ----
/s/ Michael Ashner Chief Executive Officer January 27, 2000
- ------------------ and Director
Michael Ashner
/s/ Thomas Staples Chief Financial Officer January 27, 2000
- -------------------
Thomas Staples
32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document
------ --------
<S> <C> <C>
3,4 Limited Partnership Agreement of Winthrop California Investors Limited Partnership, (1)
dated October 16, 1988, Agreement of Merger, dated October 16, 1985
3,4 Amendment to Limited Partnership Agreement of Winthrop California Investors Limited (2)
Partnership, dated November 15, 1995
10 (a) Form of Amended and Restated Partnership Agreement of Crow Winthrop Operating (3)
Partnership
(b) Form of Limited Partnership Agreement and Certificate of Amendment of Crow Winthrop (3)
Development Limited Partnership
(c) Amended and Restated Agreement of Purchase and Sale, dated October 31, 1984, by and (3)
among Fluor Corporation, as Seller, and Crow Irvine #1, as Buyer
(d) Assignment of Amended and Restated Agreement of Purchase and Sale, dated as of May (3)
24, 1985, by and among Fluor Corporation and Crow Irvine #1, as Assignors, and Crow
Winthrop Operating Partnership and Crow Winthrop Development Limited Partnership, as
Assignees
(e) Management and Leasing Agreement, dated as of May 24, 1985,
between Crow Winthrop (3) Operating Partnership, as Owner
and Crow Orange County Management Company, as Manager
(f) First Amendment to Limited Partnership Agreement and Certificate of Amendment of Crow (3)
Winthrop Development Limited Partnership, dated as of July 26, 1985, by and between
Crow Irvine #2, as General Partner, and Winthrop California Investors Limited
Partnership, as Limited Partner
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C>
(g) First Amendment to Amended and Restated Agreement of Purchase and Sale, dated as of (3)
July 26, 1985, by and among Fluor Corporation, as Seller, and Crow Winthrop Operating
Partnership and Crow Winthrop Development Limited Partnership, as Buyer
(h) Contingent Purchase Price Agreement, dated as of July 26, 1985, by and between Fluor (3)
Corporation, as Seller, and Crow Winthrop Development Limited Partnership, as Buyer
(i) Subordinated Short Form Deed of Trust and Assignment of Rents, dated as of July 26, (3)
1985, by and among Crow Winthrop\Development Limited Partnership, as Trustor, Ticor
Title Insurance Company of California, as Trustee, and Fluor Corporation, as
Beneficiary
(j) Security Agreement, dated as of July 30, 1985, by and between Crow Winthrop (3)
Development Limited Partnership, as Secured Party, and Winthrop California Investors
Limited Partnership, as Debtor
(k) Assignment of Master Leases, executed as of July 26, 1985, by and between Fluor (3)
Corporation, as Assignor, and Crow Winthrop Operating Partnership, as Assignee, and
Consent, dated as of July 26, 1985, by Crow Winthrop Development Limited Partnership,
covering the following leases between Fluor Corporation, as Landlord, and Fluor
Engineers, Inc., as Tenant
(k)(i) Corporate Tower Lease (3)
(k)(ii) Concourse Lease (3)
(k)(iii) Building Pod Lease (3)
(l) Guaranty of Leases, dated as of July 26, 1985 by and among Fluor Corporation, as (3)
Guarantor, Crow Winthrop Operating Partnership, as Landlord, and Crow Winthrop
Development Limited Partnership, as Developer
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<S> <C> <C>
(m) Concourse Management Agreement, dated as of July 26, 1985, by and between Fluor (3)
Engineers, Inc., as Manager, and Crow Winthrop Operating Partnership, as Owner
(n) License Agreement dated as of July 26, 1985, by and between Crow Winthrop Development (3)
Limited Partnership, as Licensor, and Fluor Engineers, Inc., as Licensee to Exhibit
10(n) to the Registration Statement)
(o) Construction, Operation and Reciprocal Easement Agreement, dated as of July 26, 1985, (3)
by and between Crow Winthrop Development Limited Partnership
(p) Amendment to Management and Leasing Agreement, dated as of July 26, 1985, by and (3)
between Crow Winthrop Operating Partnership, as Owner, and Crow Orange County
Management Company, as Manager
(q) Air Space Lease, dated as of July 26, 1985, by and between
Crow Winthrop Operating (3) Partnership, as Lessor, and
Crow Winthrop Development Limited Partnership, as Lessee
(r) Air Space Easement Agreement, dated as of July 26, 1985, by and between Crow Winthrop (3)
Operating Partnership, as Grantor, and Crow Winthrop Development Limited Partnership,
as Grantee
(s) Amended and Restated Development Agreement, dated as of February 28, 1992, by and (1)
among Crow Winthrop Operating Partnership, Crow Winthrop Development Limited
Partnership, Winthrop California Investors Limited Partnership and Crow Irvine #2
(t) Management Agreement, dated as of July 26, 1985, by and among Crow Winthrop Operating (3)
Partnership and Crow Winthrop Development Limited Partnership, as Owners, and Crow
Orange County Management Company, as Manager
(u) Bank Loan Agreement, dated as of September 19, 1986, by and
between Winthrop (4) California Investors Limited
Partnership, as Borrower, and Mellon Bank, N.A.
(v) Pledge and Security Agreement, dated as of September 19,
1986, by and between (4) Winthrop California Investors
Limited Partnership, as Debtor, and Mellon Bank, N.A.
(w) Revolving Credit Note, dated September 19, 1986, by Winthrop California Investors (4)
Limited Partnership in favor of Mellon Bank, N.A. (incorporated by reference to
Exhibit 10(w) to
(x) Lease between Crow Winthrop Operating Partnership and Denny's Inc., dated December (5)
30, 1988
(y) Sublease between Crow Winthrop Operating Partnership and AT&T dated December 20, 1988 (5)
(z) Assignment and Assumption of Management Agreement, dated February 28, 1992, by and (1)
between Crow Orange County Management Company, Inc. and Winthrop California
Management Limited Partnership
(aa) Second Amendment to Partnership Agreement, dated February 28, 1992, by and between (1)
Crow Irvine #2 and Winthrop California Investors Limited Partnership
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(bb) Fourth Amendment to Limited Partnership Agreement and Certificate of Amendment, dated (1)
February 28, 1992, by and between Crow Irvine #2 and Winthrop California Investors
Limited Partnership
99 Audited Financial Statements of Crow Winthrop Development Limited Partnership for the (6)
years ended December 31, 1998 and 1997
</TABLE>
(1) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended 1991, filed on August 28, 1992
(2) Incorporated by reference to the Registrant's Current Report on Form
8-K filed November 15, 1995
(3) Incorporated by reference to Registrant's Registration Statement
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year 1986, filed on March 31, 1987
(5) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year 1988, filed on March 31, 1989
(6) Incorporated by reference to the Registrant's Current Report on Form
8-K filed January 10, 2000.
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