UNITED STATES
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, 1997
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 1 of 14<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1997 1996
ASSETS
<S> <C> <C>
Real estate:
Land $ 13,444,875 $ 13,444,875
Buildings and improvements 102,631,750 102,237,481
116,076,625 115,682,356
Accumulated depreciation 19,356,068 18,386,846
96,720,557 97,295,510
Investment in participating mortgage loan, net of
allowance of $15,549,278 18,995,382 18,995,382
Cash and cash equivalents 5,327,553 6,799,320
Deferred expenses, net 1,431,039 1,419,805
Other assets 1,944,500 2,242,810
$124,419,031 $126,752,827
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 19,650,572 $ 19,726,496
Accounts payable and other liabilities 3,351,020 3,472,149
Minority interest 18,982,370 19,166,086
41,983,962 42,364,731
Partners' capital (deficiency):
General partners (7,316,335) (7,121,032)
Limited partners ($20 per Unit, 8,909,969 Units
issued) 89,751,404 91,509,128
Total partners' capital 82,435,069 84,388,096
$124,419,031 $126,752,827
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Revenues:
Rental $4,216,005 $4,264,523
Interest on participating mortgage loan 28,140 685,118
Interest on short-term investments 59,209 170,551
Other 108,781 144,753
4,412,135 5,264,945
Expenses:
Property operating 3,158,597 2,624,012
Interest 394,506 403,023
Depreciation 969,222 898,829
Amortization 95,700 127,709
General and administrative 235,680 297,538
4,853,705 4,351,111
(Loss) income before minority interests (441,570) 913,834
Minority interests 224,461 261,189
Net (loss) income $ (666,031) $ 652,645
Net (loss) income allocated to:
Limited partners $ (599,428) $ 587,380
General partners (66,603) 65,265
$ (666,031) $ 652,645
Net (loss) income per Unit of limited partnership interest $(.07) $ .07
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statement of Partners' Capital
Three months ended March 31, 1997
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency) at January 1, 1997 $91,509,128 $(7,121,032) $84,388,096
Net loss (599,428) (66,603) (666,031)
Cash distributions (1,158,296) (128,700) (1,286,996)
Partners' capital (deficiency) at March 31, 1997 $89,751,404 $(7,316,335) $82,435,069
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY YIELD PLUS, L.P.
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (666,031) $ 652,645
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 1,064,922 1,026,538
Minority interests in earnings of consolidated
partnerships 224,461 261,189
Deferred expenses (106,934) (29,765)
Decrease (increase) in other assets 298,310 (330,189)
(Decrease) increase in accounts payable and other
liabilities (121,129) 20,870
Net cash provided by operating activities 693,599 1,601,288
Cash flows from investing activities:
Additions to real estate (394,269) (152,722)
Cash flows from financing activities:
Repayments of mortgage note payable (75,924) (45,000)
Cash distributions (1,286,996) (7,899,955)
Contributions by minority interest to consolidated
partnership 132,173 74,242
Minority interest in distributions from consolidated
partnership (540,350) (610,976)
Net cash used in financiing activities (1,771,097) (8,481,689)
Decrease in cash and cash equivalents (1,471,767) (7,033,123)
Cash and cash equivalents at beginning of period 6,799,320 18,939,265
Cash and cash equivalents at end of period $ 5,327,553 $11,906,142
Supplemental disclosure of cash flow information:
Cash paid for interest $ 327,397 $ 335,914
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, 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 (loss) per Unit amounts are calculated by dividing net
income (loss) 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 necessary to
present fairly the results for the interim periods. Except for
reserves of uncollected interest relating to the participating
mortgage loan, such adjustments consist only of normal recurring
accruals.
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, 1996.
Operating results of interim periods may not be indicative of the
operating results for the entire year.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" in
February 1997. This pronouncement establishes standards for
computing and presenting earnings per share, and is effective for
the Partnership's 1997 year-end financial statements. The
Partnership's management has determined that this standard will have
no impact on the Partnership's computation or presentation of net
income (loss) per unit of limited partnership interest.
2. Investment in Participating Mortgage Loan
The borrower on the participating mortgage loan is operating under
Chapter 11 of the U.S. Bankruptcy Code. During the first quarter of
1997, the owner/borrower paid to the Partnership $28,140 of $677,590
total interest due. The Partnership reserved the remaining accrued
but unpaid interest. As of March 31, 1997, the Partnership's total
reserves of accrued but unpaid interest approximate $1,310,000. The
ultimate outcome of the bankruptcy proceedings is uncertain at this
time.
3. Related Party Transactions
Realty and an affiliate of Realty provided property management
services for four and three of the Partnership's properties during
the three-month periods ended March 31, 1997 and 1996, respectively.
The Partnership paid Realty and its affiliate management fees of
approximately $62,000 and $51,000 for the three months ended March
31, 1997 and 1996, respectively. These amounts are included in
property operating expenses.
Realty performs administrative functions, processes certain investor
transactions and prepares tax information for the Partnership. For
the three-month periods ended March 31, 1997 and 1996, the
Partnership incurred approximately $99,000 and $97,000,
respectively, for these services. These amounts are included in
general and administrative expenses.
As of March 31, 1997, Realty and its affiliate were owed a total of
approximately $53,000 for the above-mentioned services.
4. Litigation
Various public partnerships sponsored by Realty (including the
Partnership and its Managing General Partner) are defendants in
purported class action lawsuits pending in state and federal court.
The complaints allege a number of claims, including breach of
fiduciary duty, fraud and misrepresentation, and seek an accounting
of profits, compensatory and other damages in an unspecified amount,
possible liquidation of the Partnership under a receiver's
supervision and other equitable relief. The defendants are
vigorously defending these 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
On April 28, 1997, the Partnership paid a cash distribution of $.13
per Unit to Limited Partners. The cash distribution aggregated
$1,286,996 with $1,158,296 distributed to Limited Partners and
$128,700 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 past 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.
In many regions of the country, continued restraint of new office
construction and steady leasing have reduced supply in office
markets and, in certain areas, property values and rental rates are
rising. Generally, suburban office markets are faring better than
downtown markets in major cities. Generally, new construction
remains low by historic standards, and is primarily on a build-to-
suit basis. Currently, the office vacancy level in Boston (the
location of One Congress Street) is approximately 9%. The relative
absence of office construction and growth in demand from high
technology and professional service firms has recently resulted in
an absorption of office space and an increase in rental rates in the
class A office market in Orange County, CA (the location of 2600
Michelson Drive). Vacancies at many office/research and development
properties, such as Greenway Pointe, are declining as
communications, computer and software companies demand additional
space. In the retail sector, continued construction remains brisk
but is primarily limited to bigger "super" stores. A changing
tenant base caused by the domination of certain power center tenants
coupled with bankruptcies and major restructurings of other tenants
and reduced consumer spending is resulting in higher vacancies and
stagnant rents.
The Managing General Partner is currently marketing the 2600
Michelson Drive and Greenway Pointe properties for sale, and expects
to market for sale its remaining investments over the next two
years. However, there is no assurance that the Partnership will be
able to achieve its objectives.
The Partnership's liquidity depends upon the cash flow from
operations of its real estate investments, interest received on its
participating mortgage loan and expenditures for building
improvements and tenant improvements and leasing commissions in
connection with the leasing of space. During the quarter ended
March 31, 1997, all of the Partnership's properties, except for 401
East Ontario Street, generated positive cash flow from operations,
and it is anticipated that they will continue to do so during the
remainder of 1997. Significant repair costs at 401 East Ontario
Street caused property operating expenses there to exceed rental
income by approximately $580,000. Also, as described below, the
borrower on the One Congress Street property is in Chapter 11
bankruptcy proceedings and did not pay approximately $650,000 of its
minimum debt service during the first quarter of 1997.
The Partnership's liquidity also has been and will continue to be
affected by the sale of Partnership properties; as properties are
sold, Partnership cash from operations available for distribution
decreases.
During the quarter ended March 31, 1997, the Partnership incurred
approximately $370,000 (net of contributions by the minority
interest) primarily for tenant-related capital expenditures at
Greenway Pointe ($152,000) and 2600 Michelson Drive ($136,000).
Also, in 1997, the Partnership incurred approximately $1.0 million
for repairs on the fire and life safety systems at 401 East Ontario
Street; the total cost of this project is expected to be
approximately $3.9 million, of which approximately $1.9 million has
been incurred to date. The Partnership has also incurred
approximately $50,000 of legal costs in 1997 in connection with its
lawsuits to recover its costs to repair the concrete exterior walls
(completed 1996) and the fire and life safety systems. During the
remainder of 1997, the Partnership expects to expend approximately
$2 million to complete the repairs of the fire and life safety
systems.
As of December 31, 1996, the Partnership has commitments to
contribute approximately $450,000, primarily for lease-related
capital expenditures at the Greenway Pointe ($270,000) and Michelson
($143,000, net of minority interest share) properties.
The Partnership's participating mortgage loan is secured by the One
Congress Street property. The General Services Administration
("GSA"), the sole tenant of the office space at the property,
vacated approximately 30% of the space at the property in August
1996, and the lease on its remaining space expires in August 1997.
On October 15, 1996, the owner/borrower filed a voluntary petition
under Chapter 11 of the U.S. bankruptcy code. Since the bankruptcy
filing, the owner/borrower has failed to pay interest on the loan
totaling approximately $2,251,000, of which the Partnership's share
is $1,310,000.
The cash flow generated from the lease of the garage at the One
Congress Street property is projected to be sufficient to pay the
debt service due under the first mortgage loan on the property.
However, current market rental rates in Boston are significantly
less than in the early 1990's when the GSA lease was entered into.
Therefore, the Partnership believes that the rent to be received by
the owner/borrower after re-leasing the office space at the property
and, as a result, the Partnership's cash flow from the property,
will significantly decrease. Currently, the owner/borrower is
negotiating a new lease covering the space under the lease scheduled
to expire in August 1997 and a portion of the space given up by GSA
in August 1996. If the negotiations with GSA are not successful,
there may be a significant amount of time before a new tenant is
found for this space, and substantial funds may be required to re-
lease the space.
The Partnership believes that during the period of the bankruptcy it
will be unable to collect its interest on the loan in full and that
the bankruptcy may adversely impact future leasing at the property.
The Partnership's note payable secured by the Genessee Crossing
shopping center for $8,590,000 matures in May 1997, and the note
payable secured by the Deptford Crossing shopping center, for
approximately $11,400,000, matures in September 1997. The
Partnership is currently attempting to discuss refinancing
alternatives on these properties with its lenders; however, neither
lender is being responsive to the Partnership. If the Partnership
is unable to refinance one or both of these loans, the Partnership
may lose one or both of the properties through foreclosure.
During the first quarter of 1997, cash flow from operations of real
estate owned (net of minority interest share), except for repair
costs at 401 East Ontario Street, exceeded distributions to
investors. The Partnership funded the repair costs and capital
expenditures from cash flow from operations in excess of
distributions and cash reserves. The Partnership expects this trend
to continue during the remainder of 1997. The extent to which
Partnership cash flow from the One Congress Street property and the
properties subject to mortgages maturing in 1997 will be reduced
during the remainder of 1997 can not be determined at this time. It
is possible that the cash from One Congress Street along with
Partnership cash flow from operations will be insufficient to fund
Partnership cash needs. If this were to occur, the Partnership
might need to fund a portion of distributions to investors, capital
expenditures and contributions to its joint ventures from cash
reserves, or to reduce cash distributions.
Except as discussed above and in the consolidated financial
statements, the Managing General Partner is not aware of any trends
or events, commitments or uncertainties that may have a material
impact on liquidity.
On April 28, 1997, the Partnership paid a cash distribution of $.13
per Unit to Limited Partners. The cash distribution aggregated
$1,286,996 with $1,158,296 distributed to Limited Partners and
$128,700 distributed to the General Partners.
Operations
Fluctuations in the Partnership's operating results for the three-
month period ended March 31, 1997 compared to 1996 are primarily
attributable to the following:
No individual factors accounted for a significant change in rental
income, other income, interest expense, depreciation, amortization
and general and administrative expense from 1996 to 1997.
Interest on the participating mortgage loan decreased in 1997
compared to 1996 due to reserves of accrued but uncollected interest
as described above in "Liquidity and Capital Resources".
Interest income from short-term investments was higher in 1996 than
1997 because of interest earned on the cash proceeds from the sale
of three shopping centers in December 1995 until such cash was used
for distributions to Limited Partners at the end of January 1996 and
to fund significant repairs at 401 East Ontario Street during 1996.
Property operating expenses increased in 1997 compared to 1996
primarily as a result of higher expenditures for repairs at 401 East
Ontario Street. As discussed above, in 1997, the Partnership
incurred approximately $1,055,000 of costs compared to approximately
$605,000 in 1996.
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:
The market for research and development properties in Columbia, MD,
the location of Greenway Pointe, currently has a vacancy rate of 7%
and rental rates are increasing. During the first quarter of 1997,
occupancy at the property remained at 83%. All the vacant space has
been leased to Green Springs Health Services Inc., a current tenant,
which will occupy approximately 42% of the property's space when
fully moved in. Other leases totalling 31% of the property's space
are scheduled to expire in 1998.
The luxury residential sub-market in Chicago, IL, location of the
401 East Ontario property, continues to be strong. It has a current
vacancy rate of approximately 4%, and rental rates are increasing.
During the first quarter of 1997, occupancy at the property
decreased slightly to 82%. Occupancy at the property has been
adversely affected by the repair programs at the property. The
Partnership expects that the above-described repairs on the fire and
life systems (which began during the third quarter of 1996) will be
intrusive upon residents as work will be needed to be performed
inside each rental unit for up to twelve days. To maximize tenant
retention while these repairs are being performed, the Partnership
has given tenants a temporary rent concession, and each tenant's
rent will be abated while work is being performed inside their unit.
The effect, if any, of this repair program on rents and occupancy in
the future cannot be determined at this time.
During the first quarter of 1997, the market vacancy rate for Class
A office space in Irvine, California, the location of 2600 Michelson
Drive, decreased from 16% to 15% because of the continued strong
demand for quality Class A space and the lack of new construction.
Rental rates have also continued to increase in this market. During
the first quarter of 1997, occupancy at the property remained at
93%. Leases on approximately 25% and 22% of the space at the
property expire in 1998 and 1999, respectively.
During the first quarter of 1997, the office vacancy level in the
Boston office market, the location of One Congress Street, was 9%.
Although this market continues to improve, rental rates have not
increased significantly. As discussed above, GSA vacated
approximately 70,000 square feet of the property's office space in
August 1996 and its lease on the remaining space terminates in
August 1997. As a result of GSA's partial vacancy, occupancy at the
office space is 70% at March 31, 1997. Also, in 1997, the retail
space, which is not a significant portion of the overall space,
remained substantially vacant.
The retail market in Deptford, New Jersey, the location of Deptford
Crossing, currently has a vacancy rate of 9%. There are two retail
developments scheduled to open in the second quarter of 1997 and two
retail developments planned for construction in the near future.
This space will be occupied by power retailers, traditional anchor
tenants and small tenants. The sales of tenants in the Deptford
Crossing property may be negatively affected by competition from the
new centers, and the centers will compete with the Deptford Crossing
property as the Partnership tries to lease its vacant space. During
the first quarter of 1997, occupancy at the property decreased from
83% to 77%. No significant amount of leases expire before 2001.
During the first quarter of 1997, the vacancy rate in Flint,
Michigan, the location of the Genesee Crossing shopping center,
decreased from approximately 17% to 10% as a result of the
absorption of space which became vacant as the result of bankruptcy
of several stores. Occupancy at the property during the first
quarter of 1997 remained at 99%. The lease of the Burlington Coat
Factory, for approximately 42% of the property's space, is scheduled
to expire in 2009. Burlington has a "kick-out" option to terminate
the lease at any time if sales are below a threshold amount; sales
are currently below this threshold, but Burlington has not indicated
an interest in vacating its space early. Other leases totaling
approximately 10% and 14% of the property's space are scheduled to
expire in 1998 and 1999, respectively.
A 100,000 square foot Home Depot store will be opening on a site
near Genessee Crossing. Traffic at Genessee Crossing may be
adversely affected by this new store because it will compete with
Builder's Square which owns its 80,000 square foot store at Genessee
Crossing. Also, a branch of a national home electronics store and
a branch of a national pet store will be opening on a site adjacent
to the property. The Partnership believes that these new retailers
may 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An exhibit index has been filed as part of this Report on
Page E1.
<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: May 14, 1997 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: May 14, 1997 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
Dean Witter Realty Yield Plus, L.P.
Quarter Ended March 31, 1997
Exhibit Index
Exhibit
No. Description
27 Financial Data Schedule
E1
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,327,553
<SECURITIES> 0
<RECEIVABLES> 227,398
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 124,419,031<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 82,435,069<F2>
<TOTAL-LIABILITY-AND-EQUITY> 124,419,031<F3>
<SALES> 0
<TOTAL-REVENUES> 4,412,135<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,683,660
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,506
<INCOME-PRETAX> (666,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> (666,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (666,031)
<EPS-PRIMARY> (.07)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $96,720,557, net investments in participating mortgage
loans of $18,995,382, net deferred expenses of $1,431,039 and other assets
of $1,717,102.
<F2>Represents partners' capital.
<F3>Liabilities include mortgage notes payable of $19,650,572, minority
interest of $18,982,370, and accounts payable and other liabilities of
$3,351,020.
<F4>Total revenue includes rent of $4,216,005, interest on participating
mortgage loan of $28,140, interest on short-term investments of
$59,209 and other revenue of $108,781.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
