<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 September 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 SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
September 30, December 31,
Assets 1996 1995
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 853 $ 279
Restricted cash 2,326 1,116
Accounts receivable less allowance for doubtful
accounts of $13 (1996) and $49 (1995) 675 359
Receivables from related parties 74 124
Inventories 304 373
Prepaid expenses and other current assets 517 336
----------- -----------
Total current assets 4,749 2,587
Property and equipment, net of accumulated depreciaton
of $20,304 (1996) and $18,612 (1995) 48,210 49,450
Deferred rent receivable 389 346
Deferred costs, net of accumulated amortization of
$1,990 (1996) and $1,765 (1995) 1,532 1,757
Security deposits and other restricted cash 177 172
----------- -----------
Total assets $ 55,057 $ 54,312
=========== ===========
Liabilities and Partners' Equity
Accounts payable $ 280 $ 271
Accrued expenses 694 811
Advance deposits 346 247
Current maturity of long-term debt 26,668 736
Payables to related parties 624 59
Accrued interest 429 446
----------- -----------
Total current liabilities 29,041 2,570
Long-term debt 209 26,279
----------- -----------
Total liabilities 29,250 28,849
----------- -----------
Commitments and Contingency
Partners' equity:
Limited partners equity; 785 units authorized,
issued, and outstanding 36,155 35,828
General partners' (deficit) (10,348) (10,365)
----------- -----------
Total partners' equity 25,807 25,463
----------- -----------
Total liabilities and partners' equity $ 55,057 $ 54,312
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Nine Months Ended
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Revenue:
Hotel operations $ 5,772 $ 5,831
Restaurant operations 1,724 2,003
Commercial rental operations 3,109 2,819
Boat basin operations 2,387 2,519
----------- -----------
Total revenue 12,992 13,172
----------- -----------
Operating expenses:
Hotel 1,480 1,468
Restaurant 1,560 2,093
Commercial rental 244 112
Boat basin 817 843
Other 311 389
Real estate taxes and insurance 1,031 1,044
General and administrative 1,667 1,660
Marketing and promotion 564 689
Repairs and maintenance 828 871
Utilities 466 435
Management fees 452 450
Amortization 225 183
Depreciation 1,692 1,636
----------- -----------
Total operating expenses 11,337 11,873
----------- -----------
Income from operations 1,655 1,299
----------- -----------
Other income (expense):
Interest income 44 70
Other income 674 687
Other expense (182) (51)
Interest expense (1,847) (1,964)
----------- -----------
Total other income (expense), net (1,311) (1,258)
----------- -----------
Net income $ 344 $ 41
=========== ===========
Net income allocated to general partner $ 17 $ 2
Net income allocated to limited partners 327 39
----------- -----------
$ 344 $ 41
=========== ===========
Net income per limited partnership unit $ 416.56 $ 49.68
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Three Months Ended
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Revenue:
Hotel operations $ 4,329 $ 4,384
Restaurant operations 1,109 1,261
Commercial rental operations 1,790 1,705
Boat basin operations 2,022 2,164
----------- -----------
Total revenue 9,250 9,514
----------- -----------
Operating expenses:
Hotel 844 813
Restaurant 901 1,203
Commercial rental 100 43
Boat basin 598 702
Other 159 211
Real estate taxes and insurance 268 254
General and administrative 666 761
Marketing and promotion 162 272
Repairs and maintenance 267 322
Utilities 195 207
Management fees 254 259
Amortization 75 81
Depreciation 564 546
----------- -----------
Total operating expenses 5,053 5,674
----------- -----------
Income from operations 4,197 3,840
----------- -----------
Other income (expense):
Interest income 25 27
Other income 448 475
Other expense (182) (7)
Interest expense (642) (631)
----------- -----------
Total other income (expense), net (351) (136)
----------- -----------
Net income $ 3,846 $ 3,704
=========== ===========
Net income allocated to general partner $ 192 $ 185
Net income allocated to limited partner 3,654 3,519
----------- -----------
$ 3,846 $ 3,704
=========== ===========
Net income per limited partnership unit $ 4,654.78 $ 4,482.80
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
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
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance - January 1, 1996 785 $ 35,828 $ (10,365) $ 25,463
Net income -- 327 17 344
--------- --------- --------- ---------
Balance - September 30, 1996 785 $ 36,155 $ (10,348) $ 25,807
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
5 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
For the Nine Months Ended
September 30, September 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 344 $ 41
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,917 1,818
Changes in assets and liabilities:
Restricted cash (1,210) (1,861)
Accounts receivable (280) (184)
Provision for doubtful accounts receivable (36) (35)
Receivable from related parties 50 213
Inventories 69 (168)
Prepaid expenses and other current assets (181) (169)
Deferred rent receivable (43) 99
Security deposits and other restricted cash (5) (6)
Accrued interest (17) 191
Accounts payable 9 (152)
Accrued expenses (117) (621)
Advance deposits 99 284
Payable to related parties (35) (53)
--------- ---------
Net cash provided by (used in) operating activities 564 (603)
--------- ---------
Cash Flows from Investing Activities:
Expenditures for property and equipment (452) (881)
--------- ---------
Cash used in investing activities (452) (881)
--------- ---------
Cash Flows from Financing Activities:
Loan from related party 600 --
Principal payments on long-term debt (138) (59)
Refinancing costs -- (270)
--------- ---------
Net cash provided by (used in) financing activities 462 (329)
--------- ---------
Net increase (decrease) in cash and cash equivalents 574 (1,813)
Cash and cash equivalents, beginning of period 279 2,428
--------- ---------
Cash and cash equivalents, end of period $ 853 $ 615
========= =========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 1,838 $ 1,773
========= =========
</TABLE>
See notes to consolidated financial statements.
6 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 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 September 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 nine and three months ended
September 30, 1996 and 1995 are not indicative of the results to be
expected for the full year.
2. Related Party Transactions
The Partnership paid a partnership administration fee of $179,000, a
management fee of $62,000 and other administrative reimbursements of
$96,000 to affiliates of the General Partner during the nine months
ended September 30, 1996.
The Partnership has accrued approximately $24,000 in interest expense
on the $600,000 loan the General Partner made in the second quarter of
1996. The loan bears interest at prime plus 1%. 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 SEPTEMBER 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 a
principal payment of $600,000 in 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, or extent the existing loan, it could be forced
to sell the Property (or a portion thereof) at disadvantageous terms
and conditions. There can be no assurance, however, that the
properties could be sold; in which case, the lender could foreclose
its mortgage on the properties.
5. Partners Equity
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 determined that it was 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 filed offering
materials with the Securities and Exchange Commission and commenced
the offering during the third quarter of 1996. An affiliate of the
General Partner (the "Affiliate") has agreed to subscribe for all
preferred partnership units which are not subscribed for by the
Unitholders. The Partnership expects to receive gross proceeds equal
to approximately $10.5 million from this offering. As of November 8,
1996, the expiration date of the offering, 84.5 Rights (at a cost of
$13,333 per Right) had been subscribed by the Unitholders, (other than
the Affiliate). In addition, Unitholders agreed to acquire an
additional 48.25 unsubscribed for Rights. Accordingly, pursuant to the
terms of the offer, the Affiliate will acquire 652.25 Rights.
8 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 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 $574,000 increase at September 30, 1996, as compared to December
31, 1995. The Registrant's $564,000 provided by operating activities and
$462,000 provided by financing activities was partially offset by $452,000 used
for improvements to property and equipment. The Registrant's financing
activities consisted of the receipt of a $600,000 general partner loan and
$138,000 of mortgage principal payments on long term debt. At September 30,
1996, the Registrant's unrestricted cash reserves were $853,000. The Registrant
also has a restricted cash reserve account held by its lender, Bankers Trust,
to be used for debt service payments. At September 30, 1996, the balance in the
account was $2,326,000. 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 offering
(see Item I, Note 5). The Registrant expects to expend approximately $4,000,000
to $5,000,000 of the offering proceeds 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 a
principal payment of $600,000 in 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, or
extend the existing loan, it could be forced to sell the property (or a portion
thereof) at disadvantageous terms and conditions. There can be no assurance,
however, that the properties could be sold, in which case, the lender may
foreclose its mortgage on the properties.
9 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
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 determined that it
was 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 filed offering materials with the
Securities and Exchange Commission and commenced the offering during the third
quarter of 1996. An Affiliate has agreed to subscribe for all preferred
partnership units which are not subscribed for by the Unitholders. The
Registrant expects to receive gross proceeds of approximately $10.5 million
from this offering. As of November 8, 1996, the expiration date of the
offering, 84.5 Rights (at a cost of $13,333 per Right) had been subscribed by
the Unitholders (other than the Affiliate). In addition, Unitholders agreed to
acquire an additional 48.25 unsubscribed for Rights. Accordingly, pursuant to
the terms of the offer, the Affiliate will acquire 652.25 Rights.
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 the 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 income increased by $303,000 for the nine months ended September 30, 1996,
as compared to 1995, of which $142,000 relates to the three months ended
September 30, 1996.
Revenues decreased by $180,000 for the nine months ended September 30, 1996, as
compared to 1995, due to decreases in restaurant operations of $279,000, boat
basin operations of $132,000 and hotel operations of $59,000, which were
partially offset by an increase in commercial rental operations of $290,000.
Restaurant and hotel operating revenues decreased as the restaurants and hotels
were closed during the quarter ended March 31, 1996 and were in operation
during the quarter ended March 31, 1995. Boat basin operating revenue decreased
due to the inclement weather during the summer of 1996. Commercial rental
operating revenue increased due to an increase in retail and storage rents.
10 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Operating expenses decreased by $536,000 for the nine months ended September
30, 1996, as compared to 1995, due to decreases in restaurant operating
expenses of $533,000, other expense of $78,000 and marketing and promotion
expense of $125,000, which were partially offset by an increase in commercial
rental operating expense of $132,000. Restaurant operating expense declined due
to the restaurants being closed for the quarter ended March 31, 1996 in
addition to decreases in payroll and related costs. Other operating expense
declined primarily due to the closing of the gift shop and a delicatessen.
Marketing and promotion expenses decreased due to a change in the managing
agent's reservation fee structure. Commercial rental operating expenses
increased primarily due to an increase in on-site administrative and building
maintenance payroll.
Other non-operating expense increased by $131,000 due to costs associated with
the offering of subscription rights to holders of limited partner interests.
Interest expense decreased by $117,000 for the nine months ended September 30,
1996, due to a decrease in average mortgage principal balance outstanding and a
reduction in interest rates.
The results of operations in future quarters will differ from the results of
operations for the quarter ended September 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 SEPTEMBER 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 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 nine
months ended September 30, 1996, however, on October 4,
1996, a current report on Form 8-K was filed with
respect to the Registrant's change of independent
auditors.
12 of 13
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB SEPTEMBER 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: November 14, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,579,000<F1>
<SECURITIES> 0
<RECEIVABLES> 762,000<F2>
<ALLOWANCES> (13,000)
<INVENTORY> 304,000
<CURRENT-ASSETS> 4,149,000
<PP&E> 68,514,000
<DEPRECIATION> (20,304,000)
<TOTAL-ASSETS> 54,457,000
<CURRENT-LIABILITIES> 28,441,000
<BONDS> 209,000
<COMMON> 0
0
0
<OTHER-SE> 25,807,000
<TOTAL-LIABILITY-AND-EQUITY> 54,457,000
<SALES> 0
<TOTAL-REVENUES> 13,666,000
<CGS> 0
<TOTAL-COSTS> 11,519,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,847,000
<INCOME-PRETAX> 344,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 344,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 344,000
<EPS-PRIMARY> 416.56
<EPS-DILUTED> 416.56
<FN>
<F1>Cash includes restricted cash of $1,726,000.
<F2>Receivables include receivables from related parties of $74,000.
</FN>
</TABLE>
