SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number: 0-18148
DEAN WITTER REALTY YIELD PLUS, L.P.
(Exact name of registrant as specified in governing instrument)
Delaware 13-3426531
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Real estate, at cost:
Land $ 31,695,941 $ 31,695,941
Buildings and improvements 143,581,374 142,956,910
175,277,315 174,652,851
Accumulated depreciation 14,387,853 12,098,192
160,889,462 162,554,659
Investment in participating mortgage loan,
net of allowance of $14,570,278 at
June 30, 1995 and December 31, 1994 19,974,382 19,584,348
Cash and cash equivalents, at cost
which approximates market 5,769,992 4,772,726
Cash in escrow 5,000,000 5,000,000
Deferred expenses, net 1,856,128 1,488,502
Other assets 2,478,408 2,410,682
$195,968,372 $195,810,917
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 57,641,998 $ 57,714,877
Accounts payable and other liabilities 5,579,384 4,615,541
Loan from affiliate 1,711,272 1,726,524
Loans payable to bank 9,350,557 9,350,557
Minority interests 19,925,873 19,873,023
94,209,084 93,280,522
Partners' capital (deficiency):
General partners (5,692,007) (5,614,897)
Limited partners ($20 per Unit,
8,909,969 Units issued) 107,451,295 108,145,292
Total partners' capital 101,759,288 102,530,395
$195,968,372 $195,810,917
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended June 30, 1995 and 1994
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental $6,737,359 $6,124,862 $13,289,196 $11,701,527
Interest on participating
mortgage loan 692,647 652,451 1,367,668 1,290,660
Interest on short-term investments 85,623 76,162 234,599 144,881
Other 204,987 336,501 441,987 779,696
7,720,616 7,189,976 15,333,450 13,916,764
Expenses:
Property operating 3,928,491 2,336,911 6,857,909 4,720,442
Interest 1,506,688 1,455,492 3,004,606 2,373,357
Depreciation 1,149,282 1,056,246 2,289,661 1,979,601
Amortization 127,498 63,880 232,833 131,112
General and administrative 279,509 322,470 444,344 604,143
6,991,468 5,234,999 12,829,353 9,808,655
Income before minority interests 729,148 1,954,977 2,504,097 4,108,109
Minority interests 119,405 161,103 305,216 413,266
Net income $ 609,743 $1,793,874 $2,198,881 $ 3,694,843
Net income per Unit of limited
partnership interest $.06 $.18 $.22 $.37
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statement of Partners' Capital
Six months ended June 30, 1995
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1995 $108,145,292 $(5,614,897) $102,530,395
Net income 1,978,993 219,888 2,198,881
Cash distributions (2,672,990) (296,998) (2,969,988)
Partners' capital (deficiency)
at June 30, 1995 $107,451,295 $(5,692,007) $101,759,288
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,198,881 $ 3,694,843
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,522,494 2,110,713
Minority interests in earnings of
consolidated partnerships 305,216 413,266
Increase in deferred expenses (600,459) (200,751)
(Increase) decrease in other assets (67,726) 975,868
Increase (decrease) in accounts payable and
other liabilities 963,843 (1,311,188)
Decrease in loan from affiliate (15,252) (229,744)
Net cash provided by operating activities 5,306,997 5,453,007
Cash flows from investing activities:
Investment in participating mortgage loan (390,034) -
Contributions by minority interest to
consolidated partnership 436,835 730,965
Minority interest in distributions from
consolidated partnership (689,201) (605,728)
Additions to real estate (624,464) (1,572,042)
Net cash used in investing activities (1,266,864) (1,446,805)
Cash flows from financing activities:
Cash distributions (2,969,988) (2,969,988)
Repayments of mortgage notes (72,879) (53,910)
Repayments of bank loan - (167,737)
Cash received from acquisition of partnerships - 253,660
Net cash used in financing activities (3,042,867) (2,937,975)
Increase in cash and cash equivalents 997,266 1,068,227
Cash and cash equivalents at
beginning of period 4,772,726 4,859,851
Cash and cash equivalents at
end of period $ 5,769,992 $ 5,928,078
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,016,215 $ 1,669,699
<FN>
See accompanying notes to consolidated financial statements.
</table<PAGE>
</TABLE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994
(Cont'd)
<CAPTION>
1995 1994
Supplemental disclosure of non-cash investing activities:
<S> <C> <C>
Assets acquired and liabilities assumed on receipt
of partnership interests in lieu of foreclosure of
secured loan:
Real estate $ - $(25,731,946)
Other assets $ - $ (95,541)
Mortgage notes $ - $ 25,598,317
Accounts payable and accrued liabilities $ - $ 482,830
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Notes to Consolidated Financial Statements
1. The Partnership
Dean Witter Realty Yield Plus, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of Delaware in 1987.
The Managing General Partner of the Partnership is Dean Witter Realty
Yield Plus Inc., which is wholly-owned by Dean Witter Realty Inc.
("Realty").
The financial statements include the accounts of the Partnership, DW
Columbia Gateway Associates, DW Michelson Associates, DW Lakeshore
Associates, Deptford Crossing Associates, Hampton Crossing Associates,
and, effective April 4, 1994, DW Community Centers Limited Partnership
and DW Maplewood Inc. on a consolidated basis. All significant
intercompany accounts and transactions have been eliminated.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax reporting purposes.
Net income per Unit amounts are calculated by dividing net income
allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of Units outstanding.
Certain 1994 amounts have been reclassified to conform to 1995
presentation.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
2. Real Estate
In late February 1995, cracks and spalling were observed on certain
portions of the concrete exterior at the 401 East Ontario Street
property. The worst spalls have been removed and temporary repairs have
been partially completed. The Partnership retained the services of three
independent engineering firms to evaluate the cause and severity of the
problems. Their reports confirm that cracking and spalling of this
nature is unusual for a building only five years old, and attribute the
problems to defective design and construction. They have recommended
extensive permanent repairs to the exterior concrete. The Partnership
has also retained an architectural firm to work with the engineers to
develop specifications and to obtain bids from contractors to accomplish
the necessary repairs. The Partnership expects to commence the repairs
this Fall, and hopes they will be completed prior to the end of 1996.
The cost of the testing and engineering analysis, and the temporary
repairs to date is estimated to be approximately $1.1 million (of which
approximately $1,000,000 has been incurred through June 30, 1995). The
costs of permanent repairs and other costs (increased maintenance, lost
rent, etc) are still being developed, but are believed to be material.
The Partnership has notified its insurance carrier of these occurrences
and its remedial activities to date; the carrier has not indicated
whether or to what extent it will assume responsibility for testing
and/or remediation costs. The Partnership has also initiated litigation
against the architect, structural engineer and general contractor who
designed and built the property.
The extent to which the above-described costs may be recoverable through
insurance or litigation proceeds cannot be determined at this time.
3. Investment in Participating Mortgage Loan
In January 1995, the Partnership funded $390,034, the remaining portion
of its loan commitment to the borrower at the One Congress Street
property. As a result of these advances, the Partnership has fully
funded its loan commitment.
4. Related Party Transactions
Realty and an affiliate of Realty provided property management services
for four properties at June 30, 1995 and five properties at June 30,
1994. The Partnership paid Realty and its affiliate management fees of
$159,322 and $163,795 for the six months ended June 30, 1995 and 1994,
respectively.
Realty performs administrative functions, processes certain investor
transactions and prepares tax information for the Partnership. For each
of the six-month periods ended June 30, 1995 and 1994, the Partnership
incurred approximately $219,000 for these services.
As of June 30, 1995, Realty and its affiliate were owed a total of
approximately $50,000 for the above-mentioned services.
The Partnership borrowed funds from an affiliate of Realty. Interest
expense, which was calculated at the prime rate, amounted to
approximately $76,000 and $56,000 for the six months ended June 30, 1995
and 1994, respectively.
5. Subsequent Event
On July 28, 1995, the Partnership paid a cash distribution of $.15 per
Unit to Limited Partners. The cash distribution aggregated $1,484,994
with $1,336,495 distributed to Limited Partners and $148,499 distributed
to the General Partners.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership raised $178,199,380 through a public offering which
terminated in 1987. The Partnership has no plans to raise additional
capital.
The Partnership had originally committed the proceeds raised in the
offering to seven investments in loans or land leases, which provided for
a fixed current return and participation in the long-term appreciation
and/or revenue from operation of the properties involved in such
investments. Due to the weakness in real estate markets, most of the
properties did not generate sufficient cash flow to fully service their
debt. As a result, the Partnership acquired, through foreclosure, or
through transfers of ownership interests in lieu of foreclosure, all but
one of the properties in which it originally invested. The resulting
foreclosures have effectively changed the Partnership from a
participating lender to an equity owner of real estate. As a result, the
Partnership receives all cash flow from the properties it owns, and will
be required to expend funds for tenant improvements and leasing
commissions in connection with the leasing of vacant space as is
customary in most real estate markets.
Many real estate markets are stabilizing primarily due to the continued
absence of significant construction activity. However, the recovery of
the office market has been and may continue to be slow because tenant
demand is weak as a result of slow job growth. Retail sales have
improved recently causing a steady demand for retail space.
Because the market for retail properties has improved, the Managing
General Partner hopes it will be able to sell some of the Partnership's
retail properties in the next twelve to eighteen months; there can be no
assurances, however, that any sales will be consummated.
Real estate markets are generally divided into sub-markets by geographic
location and property type. Not all sub-markets have been affected
equally by the above factors.
The Partnership's liquidity depends in part upon cash flow from
operations of its properties, expenditures for tenant improvements and
leasing commissions in connection with the leasing of vacant space.
During the three and six month periods ended June 30, 1995, all of the
Partnership's properties generated positive cash flow from operations,
and it is expected that they will continue to do so. Also, in these
periods, Partnership cash flow from operations exceeded distributions to
investors, capital expenditures and investments in participating mortgage
loans.
During the six months ended June 30, 1995, the Partnership incurred
approximately $788,000 of tenant improvements and leasing commissions
(net of capital contributions from the minority interest), primarily in
the Michelson joint venture.
As of June 30, 1995, the Partnership has commitments to fund
approximately $1,560,000 of tenant improvements and leasing commissions
(net of capital contributions due from the minority interest), primarily
at the Michelson and Greenway Pointe properties.
The Partnership's participating mortgage loan is secured by the One
Congress Street property. The office space there is 100% leased to a
federal agency, the General Services Administration ("GSA") under a lease
that is cancelable by the GSA for some or all of their space in August
1995 or thereafter and terminates in 1997. If GSA exercises its option
to terminate some or all of its space, property cash flow will be
reduced, and the owner may not be able to meet its minimum debt service
obligation.
The borrower has made a claim against GSA of approximately $3.3 million
for the costs incurred in connection with the GSA tenant improvements;
GSA has responded by disputing the amount claimed. The borrower and GSA
are continuing negotiations to resolve this matter.
The Partnership has borrowed approximately $1.7 million from an affiliate
of Realty. The loan bears interest at the prime rate.
The Partnership has borrowed approximately $9,350,000 under two bank
lines of credit which total $11,000,000. The loans bear interest,
payable monthly, and are repayable in thirty-one installments beginning
March 1, 1996. Effective March 17, 1995, the Partnership changed the
interest rate on all of the loans to a fixed rate based on the LIBOR rate
plus 1.75%. The Partnership can choose a period of one, two, three or
six months during which the fixed rate will apply. The loans are secured
by a first mortgage on the Greenway Pointe and Midway Crossing properties
and an assignment of distributions from the Michelson property.
The Partnership provided a $5 million letter of credit, secured by the
Partnership's cash reserves, to the first mortgage lender at the Deptford
Crossing property to secure repayment. The letter of credit will be
reduced to $3 million if the property achieves certain debt service
coverage levels and meets other conditions of the first mortgage loan.
On July 28, 1995, the Partnership paid the second quarter cash
distribution of $.15 per unit to Limited Partners. The total cash
distribution was $1,484,994 with $1,336,495 distributed to Limited
Partners and $148,499 distributed to the General Partner.
Further information relating to the Partnership's liquidity and capital
resources is included in footnotes 2 and 3 to the consolidated financial
statements in Item 1 above.
Operations
Fluctuations in the Partnership's operating results for the three and
six-month periods ended June 30, 1995 compared to 1994 are primarily
attributable to the following:
Rental income increased primarily because of higher occupancy and rental
rates at 401 East Ontario Street and the inclusion of the operations of
the Farmington, Genesee and Midway shopping centers for six months in
1995 versus three months in 1994.
Other income in 1995 includes a first quarter receipt of a $150,000 lease
termination fee at the Michelson property. Other income in 1994 included
the following non-recurring items: a first quarter receipt of $350,000
from the developer of the 401 East Ontario Street property and a second
quarter receipt of approximately $211,000 from the partnerships which
owned the four community shopping centers that were lost through
foreclosure.
The increases in property operating expenses are primarily due to
increased costs incurred at the 401 East Ontario Street property, and the
inclusion of the operations of the Farmington, Midway and Genesee
Crossing shopping centers for six months in 1995 versus three months in
1994.
The increases in interest expense represent additional interest on the
Partnership's loan payable to bank which increased by approximately
$8,456,000 in August 1994, increased interest rates and the inclusion of
the operations of the Farmington and Genesee shopping centers for six
months in 1995 versus three months in 1994. These increases were
partially offset by interest reductions because of the repayment of the
Midway shopping center mortgage and foreclosure on the Hickory Ridge
shopping center, both of which occurred in the latter half of 1994.
The increases in depreciation and amortization primarily resulted from
increased capital expenditures for the Partnership's properties and the
inclusion of the operations of the Farmington, Midway and Genesee
Crossing shopping centers for six months in 1995 versus three months in
1994.
The decreases in general and administrative expenses primarily results
from decreased legal fees.
A summary of the office, retail, residential and research and development
building markets where the Partnership's properties are located, and the
performance of each property is as follows:
Greenway Pointe, located in Columbia, Maryland has been affected by an
oversupply of research and development buildings in its market area.
Current vacancy levels in the Columbia research and development market
are approximately 18%. During the second quarter of 1995, occupancy at
the property remained at 99%. Leases totaling 25% of the property's
space are scheduled to expire in 1996.
401 East Ontario Street is located in a strong residential sub-market in
Chicago, Illinois in which the market vacancy rate is very low. There
is no new construction in this market and many competing area properties
have converted to condominiums. During the second quarter of 1995,
occupancy at the property remained at 94%.
Favorable lease rates are attracting tenants to the office market in
Irvine, California, the location of 2600 Michelson Drive, where the
market vacancy rate is approximately 15%. The steady absorption of space
and the lack of new construction are leading to a tightening of available
quality office space in this sub-market. During the second quarter of
1995, occupancy at the property increased to 92% (including the lease of
a tenant which moved into its space in the third quarter). Leases for
approximately 10% of the property's space are scheduled to expire during
the remainder of 1995 and 1996.
Deptford Crossing, located in Deptford, New Jersey, has been affected by
a combination of the recession in real estate and retailer reluctance to
expand, which has exerted downward pressure on rents and has made further
leasing difficult. During the second quarter of 1995, occupancy at the
property increased from 82% to 84%. No significant leases are scheduled
to expire before 1997.
In contrast, Rochester Hills, Michigan, the location of Hampton Village
Centre, has remained a relatively stable and strong retail market.
During the second quarter of 1995, occupancy at the property remained at
96%. Leases for approximately 10% of the property's space are scheduled
to expire in 1996.
The office space at One Congress Street, located in Boston, Massachusetts
has not been affected by the recent strengthening in the Boston office
market. However, some or all of the space covered by the GSA lease is
cancelable beginning in August 1995 and terminates in 1997.
Additionally, the retail space, which is a small portion of the property,
has been difficult to lease due to reduced demand for retail space.
During the second quarter of 1995, occupancy at the office and garage
space remained at 100%, and the retail space which is not a significant
portion of the overall space is substantially vacant.
Flint, Michigan, the location of the Genesee Crossing shopping center,
is an active retail market with a relatively low vacancy rate. During
the second quarter of 1995, occupancy at the property remained at 99%.
No significant leases are scheduled to expire in the near future.
Builder's Square, which owns an 80,000 square foot store at the center,
has announced it will leave its building at the end of the year and move
into a bigger location in the area. Builder's Square has leased the
space to two new tenants which are home entertainment and electronics
retailers. The Partnership believes that the new retailers will increase
traffic at the property.
Elyria, Ohio, the location of the Midway Crossing shopping center, is a
relatively stable retail market, with little vacancy in the vicinity.
The property is located across from a successful regional mall. During
the second quarter of 1995, the property remained fully occupied. Leases
totaling 12% of the property's space are scheduled to expire in 1996.
Farmington Crossroads shopping center is located in the affluent suburban
community of Farmington, Michigan. Farmington's retail market has a
relatively low vacancy rate. During the second quarter of 1995,
occupancy at the property remained at 93%. No significant leases are
scheduled to expire in the near future.
Inflation
Inflation has been consistently low during the periods presented in
the financial statements and, as a result, has not had a significant
effect on the operations of the Partnership or its properties.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits - not applicable.
b) Reports on Form 8-K -
Report dated May 30, 1995 of the Valuation per Unit of
Limited Partnership Interest at December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEAN WITTER REALTY YIELD PLUS, L.P.
By: Dean Witter Realty Yield Plus Inc.
Managing General Partner
Date: August 14, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: August 14, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate,
participating mortgage loans,and real estate joint ventures. In accordance
with industry practice, its balance sheet is unclassified. For full
information, refer to the accompanying unaudited financial statements.
</LEGEND>
<CIK> 0000810116
<NAME> DEAN WITTER REALTY YIELD PLUS, LP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 10,769,992
<SECURITIES> 0
<RECEIVABLES> 990,222
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 195,968,372<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 101,759,288<F2>
<TOTAL-LIABILITY-AND-EQUITY> 195,968,372<F3>
<SALES> 0
<TOTAL-REVENUES> 15,333,450<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,129,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,004,606
<INCOME-PRETAX> 2,198,881
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,198,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,198,881
<EPS-PRIMARY> .22<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $160,889,462, net investments in participating mortgage
loan of $19,974,382, net deferred expenses of $1,856,128 and other assets
of $1,488,186.
<F2>Represents partners' capital.
<F3>Liabilities include mortgage notes payable of $57,641,998, minority
interests of $19,925,873, loans payable to bank of $9,350,557 and accounts
payable and other liabilities of $7,290,656.
<F4>Total revenue includes rent of $13,289,196, interest on participating
mortgage loans of $1,367,668, interest on short-term investments of
$234,599 and other revenue of $441,987.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
