<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 0-16865
Nantucket Island Associates Limited Partnership
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2948435
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, MA 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
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 ___
1 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
June 30, December 31,
Assets 1996 1995
-------- ------------
<S> <C> <C>
Cash and cash equivalents $ 811 $ 279
Restricted cash 225 1,116
Accounts receivable less allowance for doubtful
accounts of $16 (1996) and $49 (1995) 613 359
Receivables from related parties 80 124
Inventories 380 373
Prepaid expenses and other current assets 98 336
-------- --------
Total current assets 2,207 2,587
Property and equipment, net of accumulated depreciaton
of $19,740 (1996) and $18,612 (1995) 48,534 49,450
Deferred rent receivable 390 346
Deferred costs, net of accumulated amortization of
$1,915 (1996) and $1,765 (1995) 1,607 1,757
Security deposits and other restricted cash 175 172
-------- --------
Total assets $ 52,913 $ 54,312
======== ========
Liabilities and Partners' Equity
Accounts payable $ 362 $ 271
Accrued expenses 600 811
Advance deposits 2,019 247
Current maturity of long-term debt 26,674 736
Payables to related parties 640 59
Accrued interest 432 446
-------- --------
Total current liabilities 30,727 2,570
Long-term debt 225 26,279
-------- --------
Total liabilities 30,952 28,849
-------- --------
Commitments and Contingency
Partners' equity:
Limited partners equity; 785 units authorized,
issued, and outstanding 32,501 35,828
General partners' (deficit) (10,540) (10,365)
-------- --------
Total partners' equity 21,961 25,463
-------- --------
Total liabilities and partners' equity $ 52,913 $ 54,312
======== ========
</TABLE>
See notes to consolidated financial statements.
2 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Revenue:
Hotel operations $ 1,443 $ 1,447
Restaurant operations 615 742
Commercial rental operations 1,319 1,114
Boat basin operations 365 355
---------- ----------
Total revenue 3,742 3,658
---------- ----------
Operating expenses:
Hotel 636 655
Restaurant 659 890
Commercial rental 144 69
Boat basin 219 141
Other 152 178
Real estate taxes and insurance 763 790
General and administrative 1,001 899
Marketing and promotion 402 417
Repairs and maintenance 561 549
Utilities 271 228
Management fees 198 191
Amortization 150 102
Depreciation 1,128 1,090
---------- ----------
Total operating expenses 6,284 6,199
---------- ----------
Loss from operations (2,542) (2,541)
---------- ----------
Other income (expense):
Interest income 19 43
Other income 226 212
Other expense -- (44)
Interest expense (1,205) (1,333)
---------- ----------
Total other income (expense), net (960) (1,122)
---------- ----------
Net loss $ (3,502) $ (3,663)
========== ==========
Net loss per limited partnership unit $(4,238.22) $(4,433.12)
========== ==========
See notes to consolidated financial statements.
3 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Three Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Revenue:
Hotel operations $ 1,443 $ 1,364
Restaurant operations 615 655
Commercial rental operations 749 641
Boat basin operations 328 315
---------- ----------
Total revenue 3,135 2,975
---------- ----------
Operating expenses:
Hotel 522 490
Restaurant 566 694
Commercial rental 86 38
Boat basin 172 93
Other 114 99
Real estate taxes and insurance 504 536
General and administrative 667 569
Marketing and promotion 253 285
Repairs and maintenance 333 361
Utilities 195 143
Management fees 126 119
Amortization 75 40
Depreciation 564 545
---------- ----------
Total operating expenses 4,177 4,012
---------- ----------
Loss from operations (1,042) (1,037)
---------- ----------
Other income (expense):
Interest income 7 20
Other income 192 173
Other expense -- (21)
Interest expense (612) (690)
---------- ----------
Total other income (expense), net (413) (518)
---------- ----------
Net loss $ (1,455) $ (1,555)
========== ==========
Net loss per limited partnership unit $(1,760.51) $(1,881.53)
========== ==========
See notes to consolidated financial statements.
4 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
Consolidated Statement of Partners' Equity (Deficit) (Unaudited)
(In Thousands, Except Unit Data)
Units of
Limited Limited General
Partnership Partners' Partners' Total
Interest Equity Deficit Equity
----------- --------- --------- ------
Balance - January 1, 1996 785 $35,828 $(10,365) $25,463
Net loss -- (3,327) (175) (3,502)
--- ------- -------- -------
Balance - June 30, 1996 785 $32,501 $(10,540) $21,961
=== ======= ======== =======
See notes to consolidated financial statements
5 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) For the Six Months Ended
June 30, June 30,
1996 1995
-------- --------
Cash Flows from Operating Activities:
Net loss $(3,502) $(3,663)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,278 1,193
Changes in assets and liabilities:
Restricted cash 891 --
Accounts receivable (221) (49)
Provision for doubtful accounts receivable (33) (40)
Receivable from related parties 44 174
Inventories (7) (165)
Prepaid expenses and other current assets 238 204
Deferred rent receivable (44) --
Security deposits and other restricted cash (3) 96
Accrued interest (14) (6)
Accounts payable 91 461
Accrued expenses (211) (489)
Advance deposits 1,772 1,798
Payable to related parties (19) (53)
------- -------
Net cash provided by (used in) operating activities 260 (539)
------- -------
Cash Flows from Investing Activities:
Expenditures for property and equipment (212) (627)
------- -------
Cash used in investing activities (212) (627)
------- -------
Cash Flows from Financing Activities:
Loan from related party 600 --
Principal payments on long-term debt (116) (39)
Refinancing costs -- (270)
------- -------
Cash used in financing activities 484 (309)
------- -------
Net increase (decrease) in cash and cash equivalents 532 (1,475)
Cash and cash equivalents, beginning of year 279 2,428
------- -------
Cash and cash equivalents, end of year $ 811 $ 953
======= =======
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 1,219 $ 1,333
======= =======
See notes to consolidated financial statements.
6 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Partnership's annual report for the year ended
December 31, 1995.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. Certain amounts have been reclassified to conform to the
June 30, 1996 presentation. The balance sheet at December 31, 1995 was
derived from audited financial statements at such date.
The results of operations for the six and three months ended June 30, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.
2. Related Party Transactions
The Partnership paid a partnership administration fee of $120,000, a
management fee of $25,000 and other administrative reimbursements of $50,000
to affiliates of the General Partner during the six months ended June 30,
1996.
The General Partner loaned $600,000 to the Partnership in the second quarter
of 1996. The demand note bears interest at prime plus 1% and is anticipated
to be repaid from proceeds of the rights offering (see Note 5).
3. Accounting Change
On January 1, 1996, the Partnership adopted Statement of Financial Accounting
Standards ("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 recognized for long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows are
not sufficient to recover the asset's carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying amount. The
adoption of the SFAS had no effect on the Partnership's financial statements.
7 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
4. Contingency
The Partnership's $26,600,000 mortgage loan which matures in February 1997
may be extended at the Partnership's option through October 1997 if there is
then no event of default under the note and a fee equal to .33% of the
outstanding loan balance is paid. The loan requires principal payments of
$600,000 in September 1996 and September 1997. Prior to maturity, the
Partnership will attempt to extend the due date of this loan or find
replacement financing. If the Partnership is unable to obtain adequate
refinancing, it could be forced to sell the Property (or a portion thereof)
at disadvantageous terms and conditions. The General Partner believes that,
in order to maximize the value of the property to the Partnership in
connection with a proposed sale, it is necessary to complete certain capital
improvements (see Item 2). If the Partnership is unable to refinance or sell
the property prior to maturity of the loan and is unable to meet its
obligations thereunder at maturity, the lender may foreclose its mortgage on
the properties.
5. Subsequent Event
In order to fund required capital improvements, reduce the Partnership's
indebtedness (including repayment of the outstanding loan to the General
Partner) and increase working capital, the General Partner has determined
that it is necessary to increase the Partnership's equity by means of an
offering of subscription rights (the "Rights") to holders of limited partner
interests (the "Unitholders") to purchase preferred partnership units. The
Partnership has filed preliminary offering materials with the Securities and
Exchange Commission and currently contemplates commencing the offering during
the third quarter of 1996. An affiliate of the General Partner has agreed to
subscribe for all preferred partnership units which are not subscribed for by
the Unitholders. Accordingly, if the offering is completed, the Partnership
will receive gross proceeds equal to approximately $10.5 million.
8 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation
This item should be read in conjunction with the financial statements and other
items contained elsewhere in the report.
Liquidity and Capital Resources
The Registrant requires cash to pay operating expenses, debt service payments
and capital improvements. The seasonal nature of the Registrant's business
results in the Registrant having to supplement deficiencies in its cash flows
with its reserves during the first and second quarters of each year.
The level of liquidity based upon the Registrant's cash and cash equivalents
experienced a $532,000 increase at June 30, 1996, as compared to December 31,
1995. The Registrant's $260,000 provided by operating activities, and $484,000
from financing activities was partially offset by $212,000 used for improvements
to property and equipment. The Registrant's financing activities consisted of a
$600,000 general partner loan and $116,000 of mortgage principal payments on
long term debt. At June 30, 1996, the Registrant's unrestricted cash reserves
were $811,000. The Registrant also has a restricted cash reserve account held by
its lender, Bankers Trust, to be used for debt service payments. At June 30,
1996, the balance in the account was $225,000. All other increases (decreases)
in certain assets and liabilities are the result of the timing of receipt and
payment of various operating activities.
Registrant's properties do not generate sufficient cash flow to pay for required
capital improvements and debt service payments. The General Partner loaned
$600,000 to the Registrant in the second quarter of 1996 to fund the payment of
real estate taxes and capital improvements. The demand note bears interest at
prime plus 1% and is to be repaid from proceeds of the Rights offering (see Item
I, Note 5). The Registrant expects to expend approximately $4,000,000 to
$5,000,000 for capital improvements in the near future. Approximately $2,500,000
to $3,000,000 relates to bulkhead replacement and dredging at the boat basin.
The Registrant's $26,600,000 mortgage loan matures in February 1997 and may be
extended, at the Registrant's option, through October 1997. The loan requires
principal payments of $600,000 in September 1996 and September 1997. Prior to
maturity, the Registrant will attempt to extend the due date of this loan or
find replacement financing. If the Registrant is unable to obtain adequate
refinancing, it could be forced to sell the Property (or a portion thereof) at
disadvantageous terms and conditions. The General Partner believes that, in
order to maximize the value of the property to the Registrant in connection with
a proposed sale, it is necessary to complete the above mentioned capital
improvements. If the Registrant is unable to refinance or sell the property
prior to maturity of the loan and is unable to meet its obligations thereunder
at maturity, the lender may foreclose its mortgage on the properties.
In order to fund required capital improvements, reduce the Registrant's
indebtedness (including repayment of the outstanding loan to the General
Partner) and increase working capital, the General Partner has determined that
it is necessary to increase the Registrant's equity by means of an offering of
subscription rights to the holders of limited partnership units to purchase
preferred partnership units. The Registrant has filed preliminary offering
materials with the Securities and Exchange Commission and currently contemplates
commencing the offering during the third quarter of 1996. An affiliate of the
General Partner has agreed to subscribe for all preferred partnership units
which are not subscribed for by the Unitholders. Accordingly, if the offering is
completed, the Registrant will receive gross proceeds from the offering equal to
approximately $10.5 million. However, there can be no assurance that the
offering will be completed and that the Registrant will receive the gross
proceeds.
9 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
The Registrant has obtained a current appraisal which values Registrant's hotel
properties at $9,850,000. In 1993, Registrant's commercial properties and the
boat basin had an appraised value of approximately $29 million. Although
Registrant has not obtained a more recent appraisal, it believes, based upon a
discounted cash flow analysis (the same methodology as that employed in 1993),
that the commercial properties have a current value of approximately $23.6
million and the boat basin has a current value of approximately $7 million.
Accordingly, the book value of Registrant's properties exceeds their current
value by approximately $8 million. However, based on the General Partner's
analysis of current and projected future operating results and the undiscounted
cash flows associated with Registrant's real estate assets, no write-down in
accordance with SFAS No. 121 (see Item 1, Note 3) is required at this time.
Results of Operations
Net loss declined by $161,000 for the six months ended June 30, 1996, as
compared to 1995, of which $100,000 relates to the three months ended June 30,
1996.
Revenues increased by $84,000 for the six months ended June 30, 1996 as compared
to 1995, primarily due to an increase in commercial rental operating revenue of
$205,000, which was partially offset by a decrease in restaurant operating
revenue of $127,000. Hotel and boat basin operating revenue remained relatively
constant. Commercial rental operating revenue increased due to an increase in
retail and storage rents. Restaurant operating revenues decreased as the
restaurants (and hotels) were closed during the quarter ended March 31, 1996.
The restaurants and hotels were in operation during the quarter ended March 31,
1995.
Operating expenses increased by $85,000 for the six months ended June 30, 1996,
as compared to 1995, due to increases in commercial rental operating expense of
$75,000, boat basin operating expense of $78,000, utility expense of $43,000,
depreciation expense of $38,000, and general and administrative expenses of
$102,000. Commercial rental operating expenses increased primarily due to an
increase in on-site administrative and building maintenance payroll. Boat basin
operating expense increased by $78,000 primarily due to an underaccrual of fuel
expense in the prior year comparative period. General and administrative
expenses increased primarily due to costs associated with the offering of
subscription rights to holders of limited partner interests. These increases
were partially offset by decreases in restaurant operating expenses of $231,000
and hotel operating expenses of $19,000. Restaurant and hotel operating expenses
declined because these businesses were closed for the quarter ended March 31,
1996.
Interest expense decreased by $128,000 for the six months ended June 30, 1996,
due to a decrease in average mortgage principal balance outstanding and a
reduction in interest rates.
10 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
The results of operations in future quarters will differ from the results of
operations for the quarter ended June 30, 1996, due to the seasonal nature of
the Registrant's business. Inflation and changing economic conditions, could
also affect occupancy levels, rental rates and operating expenses.
11 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
Part II - Other Information
Item 2 Changes in Securities
See Part I. Item 1, Financial Statements, Note 5, for information with
respect to the prospective offering by the Registrant of preferred
partnership units.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports of Form 8-K
No Reports of Form 8-K were filed during the three months ended
June 30, 1996.
12 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: THREE WINTHROP PROPERTIES, INC.
Managing General Partner
BY: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
Dated: August 9, 1996
13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Nantucket
Island Associates Limited Partnership and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,036,000<F1>
<SECURITIES> 0
<RECEIVABLES> 709,000<F2>
<ALLOWANCES> (16,000)
<INVENTORY> 380,000
<CURRENT-ASSETS> 2,207,000
<PP&E> 68,274,000
<DEPRECIATION> (19,740,000)
<TOTAL-ASSETS> 52,913,000
<CURRENT-LIABILITIES> 30,727,000
<BONDS> 225,000
<COMMON> 0
0
0
<OTHER-SE> 21,961,000
<TOTAL-LIABILITY-AND-EQUITY> 52,913,000
<SALES> 0
<TOTAL-REVENUES> 3,968,000
<CGS> 0
<TOTAL-COSTS> 6,284,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,205,000
<INCOME-PRETAX> (3,502,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,502,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,502,000)
<EPS-PRIMARY> (4,238.22)
<EPS-DILUTED> (4,238.22)
<FN>
<F1> Cash includes restricted cash of $225,000.
<F2> Receivables include receivables from related parties of $80,000.
</FN>
</TABLE>
