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 March 31, 1996
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
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Real estate, at cost:
Land $ 13,444,875 $ 13,444,875
Buildings and improvements 99,693,312 99,540,590
113,138,187 112,985,465
Accumulated depreciation 15,367,556 14,468,727
97,770,631 98,516,738
Investment in participating mortgage loan,
net of allowance of $14,570,278 19,974,382 19,974,382
Cash and cash equivalents 11,906,142 18,939,265
Deferred expenses, net 1,528,391 1,626,335
Other assets 3,027,445 2,697,256
$134,206,991 $141,753,976
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 19,958,736 $ 20,003,736
Accounts payable and other liabilities 4,270,154 4,249,284
Minority interest 19,291,410 19,566,955
43,520,300 43,819,975
Partners' capital (deficiency):
General partners (6,491,172) (6,407,938)
Limited partners ($20 per Unit,
8,909,969 Units issued) 97,177,863 104,341,939
Total partners' capital 90,686,691 97,934,001
$134,206,991 $141,753,976
See accompanying notes to consolidated financial statements.
/TABLE
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<CAPTION>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Revenues:
Rental $4,264,523 $6,551,837
Interest on participating mortgage loan 685,118 675,021
Interest on short-term investments 170,551 148,976
Other 144,753 237,000
5,264,945 7,612,834
Expenses:
Property operating 2,624,012 2,929,418
Interest 403,023 1,497,918
Depreciation 898,829 1,140,379
Amortization 127,709 105,335
General and administrative 297,538 164,835
4,351,111 5,837,885
Income before minority interests 913,834 1,774,949
Minority interests 261,189 185,811
Net income $ 652,645 $1,589,138
Net income allocated to:
Limited partners $ 587,380 $1,430,224
General partners 65,265 158,914
$ 652,645 $1,589,138
Net income per Unit of limited
partnership interest $.07 $ .16
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statement of Partners' Capital
Three months ended March 31, 1996
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at January 1, 1996 $104,341,939 $(6,407,938) $ 97,934,001
Net income 587,380 65,265 652,645
Cash distributions (7,751,456) (148,499) (7,899,955)
Partners' capital (deficiency)
at March 31, 1996 $ 97,177,863 $(6,491,172) $ 90,686,691
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 652,645 $ 1,589,138
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,026,538 1,245,714
Minority interests in earnings of
consolidated partnerships 261,189 185,811
Deferred expenses (29,765) (340,406)
(Increase) decrease in other assets (330,189) 328,436
Increase (decrease) in accounts payable and
other liabilities 20,870 (431,575)
Decrease in loan from affiliate - (12,916)
Net cash provided by operating activities 1,601,288 2,564,202
Cash flows from investing activities:
Additions to real estate (152,722) (298,540)
Investment in participating mortgage loan - (390,034)
Net cash used in investing activities (152,722) (688,574)
Cash flows from financing activities:
Repayments of mortgage note payable (45,000) -
Cash distributions (7,899,955) (1,484,994)
Contributions by minority interest to
consolidated partnership 74,242 219,730
Minority interest in distributions from
consolidated partnership (610,976) (287,630)
Net cash used in financing activities (8,481,689) (1,552,894)
(Decrease) increase in cash and cash equivalents (7,033,123) 322,734
Cash and cash equivalents at
beginning of period 18,939,265 4,772,726
Cash and cash equivalents at
end of period $ 11,906,142 $ 5,095,460
Supplemental disclosure of cash flow information:
Cash paid for interest $ 335,914 $ 1,509,527
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,
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 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.
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.
These financial statements should be read in conjunction with the annual
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
2. Real Estate
In December 1995, the Partnership sold the Hampton Village Centre,
Farmington Crossroads and Midway Crossing Shopping Centers (the "Sold
Shopping Centers").
3. Related Party Transactions
Realty and an affiliate of Realty provided property management services
for three properties at March 31, 1996 and four properties at March 31,
1995. The Partnership paid Realty and its affiliate management fees of
$51,073 and $80,916 for the three months ended March 31, 1996 and 1995,
respectively. These amounts are included in property operating expense.
Realty performs administrative functions, processes certain investor
transactions and prepares tax information for the Partnership. For each
of the three-month periods ended March 31, 1996 and 1995, the Partnership
incurred approximately $96,700 and $110,000, respectively for these
services. These amounts are included in general and administrative
expense.
As of March 31, 1996, Realty and its affiliate were owed a total of
approximately $56,000 for the above-mentioned services.
In 1991, the Partnership borrowed funds from an affiliate of Realty. The
loan was repaid in December 1995 out of the proceeds of the sale of the
Sold Shopping Centers. For the three months ended March 31, 1995,
interest on the loan totalled $36,574.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and, in certain cases, its Managing General Partner) are
defendants in five class action lawsuits pending in state and federal
courts. The complaints allege a variety of claims, including breach of
fiduciary duty, fraud, misrepresentation and related claims, and seek
compensatory and other damages and equitable relief. The defendants have
not yet responded to the complaints and intend to vigorously defend the
actions. It is impossible to predict the effect, if any, the outcome of
these actions might have on the Partnership's financial statements.
5. Cash Distributions
In January 1996, the Partnership distributed the net sales proceeds from
the Sold Shopping Centers. All of the net proceeds of $6,414,961 ($.72
per Unit) were distributed to the Limited Partners; the General Partner
deferred receipt of its share of proceeds. The Partnership also paid the
fourth quarter cash distribution of $.15 per unit to Limited Partners.
This distribution was $1,484,994, with $1,336,495 distributed to Limited
Partners and $148,499 distributed to the General Partner.
On April 29, 1996, the Partnership paid a cash distribution of $.13 per
Unit to Limited Partners. The cash distribution aggregated $1,286,959
with $1,158,263 distributed to Limited Partners and $128,696 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 originally invested in seven loans or land leases. 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,
prior to December 31, 1994, the Partnership acquired all but one of the
properties in which it originally invested. No additional investments
are planned.
Many real estate markets are stabilizing or improving, primarily due to
the continued absence of significant construction activity. The relative
absence of office construction as well as growth in demand from high
technology and professional service firms has recently resulted in
absorption of office space in Orange County, CA (the location of 2600
Michelson Drive). In contrast, office vacancy levels in Boston (the
location of One Congress Street) may be negatively impacted by corporate
and bank consolidations in the near term. In most markets, office
construction is limited to build-to-suit projects.
The Partnership's liquidity depends upon the cash flow from operations
of its real estate investments, interest on its participating mortgage
loan and expenditures for tenant improvements and leasing commissions in
connection with the leasing of space. For the three months ended March
31, 1996, all of the Partnership's properties generated positive cash
flow from operations, and it is anticipated that they will continue to
do so.
In addition, the Partnership's liquidity has been and will continue to
be affected by the sale of the Partnership's properties. Because the
Partnership has fewer income producing investments, the Partnership's
cash from operations available for distribution will decline in 1996 and
thereafter. The Partnership accordingly adjusted the quarterly
distribution rate to $.13 per Unit, beginning with the distribution for
the first quarter of 1996, which was paid in April 1996.
In the first quarter of 1996, the Partnership incurred approximately
$151,000 primarily for building improvements and tenant-related capital
expenditures at 2600 Michelson Drive. In addition, the Partnership
expended approximately $600,000 during the quarter in connection with
repairs at 401 East Ontario Street.
As of March 31, 1996, the Partnership has commitments to contribute
approximately $1 million to DW Michelson Associates, primarily for lease-
related capital expenditures, and expects to expend approximately $5.4
million to complete the repairs at 401 East Ontario Street. These
expenditures will be funded from cash reserves.
The Partnership's participating mortgage loan is secured by the One
Congress Street property. In March 1996, the General Services
Administration ("GSA"), which leases all of the office space at the
property, notified the owner/borrower of the One Congress Street property
that it will exercise its one-time cancellation option on a portion of
its lease and will vacate approximately 67,500 square feet (approximately
28%) in June 1996. The GSA's annual rent for this space approximates
$2.5 million. The owner is currently attempting to re-lease this space
and continues renewal discussions regarding the lease of GSA's remaining
space, which expires August 1997. Discussions regarding the pending
claim with GSA in connection with the original construction of its space
are also ongoing. The owner remains current on its first and second
mortgage loans secured by the property.
Current market rental rates are significantly less than in the early
1990's when the GSA lease was entered into. Therefore, the
owner/borrower may not receive sufficient rent from re-leasing the office
space at the property to fully fund all of its obligations, including the
total interest due on the Partnership's loan. In addition, substantial
funds may be required to re-lease the space. Notwithstanding, the cash
flow generated from the garage lease is projected to be sufficient to pay
the debt service due under the first mortgage loan on the property.
Except as discussed herein and in the consolidated financial statements,
the Managing General Partner is not aware of any trends or events,
commitments or uncertainties that will have a material impact on
liquidity.
The increase in other assets is primarily due to interest receivable on
the participating mortgage loan. The interest was received in April
1996.
In January 1996, the Partnership distributed the net sales proceeds from
the Sold Shopping Centers (see note 2 to the consolidated financial
statements). All of the net proceeds of $6,414,961 ($.72 per Unit) were
distributed to the Limited Partners; the General Partner deferred receipt
of proceeds. The Partnership also paid the fourth quarter cash
distribution of $.15 per Unit to Limited Partners. This distribution was
$1,484,994, with $1,336,495 distributed to Limited Partners and $148,499
distributed to the General Partner.
On April 29, 1996, the Partnership paid a cash distribution of $.13 per
Unit to Limited Partners. The cash distribution aggregated $1,286,959
with $1,158,263 distributed to Limited Partners and $128,696 distributed
to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the three-month
period ended March 31, 1996 compared to 1995 are primarily attributable
to the following:
Rental income for the three months ended March 31, 1996 decreased
primarily due to the absence of rental revenue from the Sold Shopping
Centers. This decrease was partially offset by an increase in rental
income at 2600 Michelson Drive due to a 14% increase in occupancy.
The decrease in other income for the period ended March 31, 1996 when
compared to 1995 is due to the receipt of a lease termination fee at the
Michelson property of $150,000 in 1995.
The decrease in property operating expenses is due to the absence of
expenses related to the Sold Shopping Centers, partially offset by the
costs of repair work performed at 401 East Ontario.
The decrease in interest expense is due to the absence of interest
related to the Sold Shopping Centers and the restructuring of the
Deptford Crossing mortgage loan in the fourth quarter of 1995.
The decrease in depreciation is due to the absence of depreciation
related to the Sold Shopping Centers.
The increase in amortization is due to increased leasing commissions at
Michelson and costs incurred as part of the Deptford loan restructuring.
The increase in general and administrative expenses is primarily due to
additional costs related to the sale of the Sold Shopping Centers.
A summary of the office, retail, residential and research and development
building market where the Partnership's properties are located, and the
performance of each property is as follows:
Greenway Pointe, located in Columbia, MD, remained 100% occupied during
the first quarter of 1996. The market for research and development
properties had a vacancy rate of 13% and suffers from an oversupply of
buildings which will take several years to work off. G Tech, which
occupies approximately 20% of the property's space will vacate when its
lease expires in September 1996. Caremark, which occupied approximately
11% of the properties' space under a lease expiring in 1999, vacated the
property but continues to pay rent. No significant leases, other than
the G Tech lease, expire prior to 1998.
The luxury residential sub-market in Chicago, IL, location of 401 East
Ontario property, continues to be strong. The property's average
occupancy was 93%, which is slightly below market. To maximize tenant
retention, the owner has given tenants temporary rent concessions during
the most disruptive phase of the repair program. The effect, if any, of
the repair program on near-term rents and occupancy cannot be determined
at this time.
Favorable lease rates are attracting tenants to the office market in
Irvine, California, the location of 2600 Michelson Drive, where the
market vacancy rate has decreased to approximately 14%. The steady
absorption of space and the lack of new construction are leading to a
tightening of available quality office space in this market. During the
first quarter of 1996, occupancy at the property decreased slightly to
91%. No other significant leases are scheduled to expire before 1998.
The retail market in Deptford, New Jersey, the location of Deptford
Crossing, has a high vacancy rate which has exerted downward pressure on
rents and has made leasing difficult. During the first quarter of 1996,
occupancy at the property remained at 80%. No significant leases are
scheduled to expire before 1997.
The vacancy level in the Boston office market, the location of One
Congress Street, has increased slightly to approximately 11% and, as
discussed above, may worsen in the near future. The property may be
affected by the worsening market because GSA has announced it will vacate
67,500 square feet of the property's space in June 1996, and its lease
on the remaining space terminates in August 1997. Also, the retail space
has been difficult to lease. During the first quarter of 1996, occupancy
at the office and garage space remained at 100% and the retail space,
which is not a significant portion of the overall space, remained
substantially vacant.
Flint, Michigan, the location of the Genesee Crossing shopping center,
is an active retail market with a recent increase in vacancy rates due
to several bankruptcy filings. The current vacancy rate is 8%. During
1996, occupancy at the property remained at 99%. No significant leases
are scheduled to expire prior to 1999. 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 1996 to move into a bigger location in the
area. Builder's Square has leased the space to two tenants which are
home entertainment and electronics retailers. The Partnership believes
that the new retailers will increase traffic at the property.
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 1. Legal Proceedings
On March 13, 1996, a class action lawsuit (the "Young Action") naming
Dean Witter Realty Income Partnership III, L.P., other unidentified
limited partnerships, Dean Witter, Discover & Co., Dean Witter Reynolds
Inc., and others as defendants was filed in the Circuit Court for
Baltimore City in Baltimore, Maryland. The defendants have removed the
case to the United States District Court for the District of Maryland.
The complaint alleges fraud, negligent misrepresentation, breach of
fiduciary duty, unjust enrichment and related claims and seeks an
accounting of records, compensatory and punitive damages in unspecified
amounts and other equitable relief. The defendants have not yet
responded to the complaint and intend to vigorously defend the action.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An exhibit index has been filed as part of this Report
on Page E1.
(b) Reports on Form 8-K - not applicable.
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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: May 15, 1996 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 15, 1996 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
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<TABLE>
<CAPTION>
Exhibit Index
Dean Witter Realty Yield Plus, L.P.
Quarter Ended March 31, 1996
Exhibit Sequentially
No. Description Numbered Page
<C> <S>
27 Financial Data Schedule
E1
</TABLE>
<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 financial statements.
</LEGEND>
<NAME> DEAN WITTER REALTY YIELD PLUS, LP
<CIK> 0000810116
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 11,906,142
<SECURITIES> 0
<RECEIVABLES> 1,025,982
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,206,991<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 90,686,691<F2>
<TOTAL-LIABILITY-AND-EQUITY> 134,206,991<F3>
<SALES> 0
<TOTAL-REVENUES> 5,264,945<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,209,277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403,023
<INCOME-PRETAX> 652,645
<INCOME-TAX> 0
<INCOME-CONTINUING> 652,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652,645
<EPS-PRIMARY> .07<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $97,770,631, net investments in participating mortgage loan
of $19,974,382, net deferred expenses of $1,528,391 and other assets of
$2,001,463.
<F2>Represents partners' capital.
<F3>Liabilities include mortgage notes payable of $19,958,736, minority
interest of $19,291,410, and accounts payable and other liabilities of
$4,270,154.
<F4>Total revenue includes rent of $4,264,523, interest on participating
mortgage loan of $685,118, interest on short-term investments of
$170,551 and other revenue of $144,753.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
