<PAGE>
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 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 0-16865
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 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1997
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In thousands, except unit data)
March 31, December 31,
Assets 1997 1996
--------- ------------
Cash and cash equivalents $ 175 $ 10,396
Restricted cash 5,238 742
Accounts receivable less allowance for doubtful
accounts of $21 (1997) and $23 (1996) 292 496
Inventories 271 272
Prepaid expenses and other current assets 352 469
------ ------
Total current assets 6,328 12,375
Property and equipment, net of accumulated deprecation
of $21,481 (1997) and $20,906 (1996) 49,861 48,115
Deferred rent receivable 410 392
Deferred costs, net of accumulated amortization of
$2,148 (1997) and $2,065 (1996) 2,072 1,457
Deposits and other restricted cash 367 179
------ ------
Total assets $ 59,038 $ 62,518
======== ========
Liabilities and Partners' Equity
Accounts payable $ 302 $ 146
Accrued expenses 412 796
Advance deposits 1,476 150
Current maturity of long-term debt 421 26,053
Accrued interest 414 428
Other liabilities 10 --
------ ------
Total current liabilities 3,035 27,573
------ ------
Long-term debt 23,415 202
------ ------
Total liabilities 26,450 27,775
------ ------
Commitments
Partners' equity:
Limited partners equity, 785 units authorized,
issued, and outstanding 33,602 35,199
Preferred limited partners equity, 785 units
authorized, issued, and outstanding 9,471 9,921
General partners' (deficit) (10,485) (10,377)
------ ------
Total partners' equity 32,588 34,743
------ ------
Total liabilities and partners' equity $ 59,038 $ 62,518
======== ========
See notes to consolidated financial statements.
2 of 10
<PAGE>
NANTUCKET ISLAND
ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1997
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
Revenue:
Hotel operations $ - $ -
Restaurant operations - -
Commercial rental operations 561 570
Boat basin operations 36 37
---------- ----------
Total revenue 597 607
---------- ----------
Operating expenses:
Hotel 117 114
Restaurant 34 93
Commercial rental 57 58
Boat basin 60 47
Other 53 38
Real estate taxes and insurance 175 259
General and administrative 318 334
Marketing and promotion 120 149
Repairs and maintenance 254 228
Utilities 95 76
Management fees 79 72
Amortization 83 75
Depreciation 575 564
---------- ----------
Total operating expenses $ 2,020 $ 2,107
---------- ----------
Loss from operations (1,423) (1,500)
---------- ----------
Other income (expense):
Interest income 92 12
Other income 26 34
Interest expense (850) (593)
----------- ----------
Total other (expense), net (732) (547)
---------- ----------
Net loss $ (2,155) $ (2,047)
========== ==========
Net loss allocated to general partners $ (108) $ (102)
========== ==========
Net loss allocated to limited partners $ (1,597) $ (1,945)
========== ==========
Net loss allocated to preferred limited partners $ (450) $ 0
========== ==========
Net Loss per Limited Partnership Unit $(2,034.39) $(2,477.71)
========== ==========
Net Loss per Limited Partnership Preferred Unit $ (573.25) $ 0.00
========== ==========
See notes to consolidated financial statements.
3 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATED LIMITED PARTNERSHIP AND SUBSIDARIES
FORM 10 - QSB MARCH 31,1997
Consolidated Statement of Changes in Partnership Equity (Deficit)(Unaudited)
(In thousands, except unit data)
<TABLE>
<CAPTION>
Preferred
Units of Preferred Units Investor Investor
Limited of Limited Limited Limited General Total
Partnership Partnership Partners' Partners' Partners' Partners'
Interest Interest Equity Equity Deficit Equity
-------- -------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1997 785 785 $ 35,199 $ 9,921 $(10,377) $ 34,743
Net Loss -- -- (1,597) (450) (108) (2,155)
--- --- -------- -------- -------- --------
Balance - March 31, 1997 785 785 $ 33,602 $ 9,471 $(10,485) $ 32,588
=== === ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
4 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1997
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(In thousands) For the Three Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (2,155) $ (2,047)
Adjustments to reconcile net loss to net cash
provided by (used) in operating activities:
Depreciation 575 564
Amortization 83 75
Provision for bad debts (2) (8)
Changes in assets and liabilities:
Accounts receivable 206 32
Receivable from related parties -- 10
Inventories 1 (8)
Prepaid expenses and other current assets 117 92
Deferred rent receivable (18) (19)
Deposits and other restricted cash (188) (2)
Accrued interest (14) --
Accounts payable 156 176
Accrued expenses (384) (411)
Advance deposits 1,326 1,063
Payable to related parties -- (59)
Other liabilities 10 --
-------- --------
Net cash used in operating activities (287) (542)
-------- --------
Cash Flows from Investing Activities:
Expenditures for property and equipment (2,321) (20)
(Increase) decrease in restricted cash reserves (4,496) 637
-------- --------
Net cash (used in) provided by investing activities (6,817) 617
-------- --------
Cash Flows from Financing Activities:
Satisfaction of mortgage (26,000) --
Proceeds from mortgage refinancing 23,600 --
Principal payments on long-term debt (19) (21)
Deferred costs paid at refinancing (698) --
-------- --------
Net cash used in financing activities (3,117) (21)
-------- --------
Net (decrease) increase in cash and cash equivalents (10,221) 54
Cash and cash equivalents, beginning of period 10,396 279
-------- --------
Cash and cash equivalents, end of period $ 175 $ 333
======== ========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 864 $ 593
======== ========
</TABLE>
See notes to consolidated financial statements.
5 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1997
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 on Form 10-KSB for
the year ended December 31, 1996.
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
March 31, 1997 presentation. The balance sheet at December 31, 1996 was
derived from audited financial statements at such date.
The results of operations for the three months ended March 31, 1997 and
1996 are not indicative of the results to be expected for the full year,
due to the seasonal nature of the Partnership's business.
2. Related Party Transactions
The following transactions with affiliates of the General Partner were
charged to expense during the three month periods ended March 31, 1997 and
1996:
For the Three Months Ended
March 31,
-----------------------------
1997 1996
------- ---------
Partnership administration fee $63,000 $ 60,000
Management fee 14,000 11,000
Reimbursement for administration expenses 16,000 6,000
The Partnership also rents certain facilities from affiliates of WFA. These
rents amounted to approximately $20,000 for each of the periods ended March
31, 1997 and 1996.
3. Mortgage Refinancing
The mortgage loan encumbering the property was refinanced in February 1997.
The new $23,600,000 floating rate note adjusts annually, depending on debt
service coverage, to a rate between LIBOR plus 3.25% and LIBOR plus 3.75%.
The current rate is approximately 9% (LIBOR plus 3.5%). The loan requires
monthly payments of interest and principal based on a twenty year
amortization schedule and matures in February 2000 with a balloon payment
of approximately $22,343,000. The Partnership has two one year options to
extend the debt. The Partnership paid approximately $698,000 in fees and
expenses, including the purchase of an interest rate collar. The loan
agreement also provides for an additional $600,000 draw down to be used for
the construction of four cottages at the Properties.
6 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1997
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 $10,221,000 decrease at March 31, 1997 as compared to December 31,
1996. The decrease primarily was due to $6,817,000 used in investing activities
and $3,117,000 used in financing activities. Investing activities consisted of
$2,321,000 of expenditures for property and equipment and $4,496,000 of cash
transferred to restricted reserve accounts to be used for major capital
improvements. Financing activities consisted of the satisfaction of the mortgage
of $26,000,000 and payment of deferred costs, associated with the mortgage
refinancing, of $698,000, which were partially offset by $23,600,000 of proceeds
from the mortgage refinancing. At March 31, 1997, the Registrant's unrestricted
cash reserves were $175,000 and the restricted cash balance was $5,238,000.
Included in cash used in operating activities is $270,000 of additional interest
paid to the previous lender upon satisfaction of the mortgage in accordance with
the loan agreement.
In 1996, the Registrant initiated an extensive capital improvements program.
This program includes bulkhead improvements, refurbishing hotel guest rooms at
the White Elephant, Breakers and the Wharf Cottages; exterior painting of the
Wharf Cottages; employee housing roof repairs; awning replacement; renovations
of the hotel restaurants, lounges and meeting rooms; minor improvements to the
commercial properties and construction of four new
cottages containing twelve guest rooms, (if the permission is received from
regulatory authorities). It is anticipated that $6,000,000 will be incurred
during 1997 in connection with this program. For the first quarter of 1997,
$2,321,000 was spent on construction and capital improvements. The costs of
these capital improvements are being financed from the proceeds from the
offering of subscription rights completed in 1996.
The Registrant's $26,000,000 mortgage note, which was scheduled to mature on
February 28, 1997, was refinanced in February 1997. The new $23,600,000 floating
rate note adjusts annually, depending on debt service coverage, to a rate
between LIBOR plus 3.25% and LIBOR plus 3.75%. The current rate is approximately
9% (LIBOR plus 3.5%). The loan requires monthly payments of interest and
principal based on a twenty year amortization schedule and matures in February
2000 with a balloon payment of approximately $22,343,000. The Registrant has two
one year options to extend the debt. The Registrant paid approximately $698,000
in fees and expenses, including the purchase of an interest rate collar. The
loan agreement also provides for an additional $600,000 draw down to be used for
the construction of new cottages.
7 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1997
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Pursuant to the terms of the new loan, Sherburne is prohibited from making any
distributions to its partners (including the Registrant) except for
distributions by Sherburne to the Registrant from funds from operations of such
amounts necessary to pay the Registrant's administrative fees, expenses and
reimbursements as well as the General Partner's legal fees associated with
Sherburne's properties. Upon a sale of a property which is approved by the
lender, Sherburne is permitted to distribute to its partners a portion of the
net proceeds of such sale so long as certain loan to value ratio's and other
conditions are satisfied. As a result of the restrictions set forth in the loan
agreement, the expansive capital improvement program instituted at the
properties and the preferred return to be paid to the Preferred Unitholders, it
is not expected that any distributions will be made to unitholders in the
foreseeable future.
Results of Operations
Although loss from operations decreased by $77,000 for the three months ended
March 31, 1997, as compared to 1996, the Partnership's total net loss increased
by $108,000 for such periods. The overall increase in net loss is primarily
attributable to an increase in interest expense of $257,000, which was due to
the payment of $270,000 of additional interest to the previous lender.
Revenues from commercial rental and boat basin operations remained relatively
constant. Interest income increased by $80,000 due to an increase in cash
available for investment from the Rights offering. No income was generated from
hotel and restaurant operations (as all hotel and related restaurant operations
were closed for business due to their seasonal nature) during the three months
ended March 31, 1997 and 1996.
Operating expenses decreased by $87,000 for the three months ended March 31,
1997, as compared to 1996, primarily due to decreases in restaurant expense of
$59,000 and real estate taxes and insurance of $84,000. All other items of
operating expense remained relatively constant.
The results of operations in future quarters will differ from the results of
operations for the quarter ended March 31, 1997, 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.
8 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1997
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8K: No report on Form 8-K was filed during the period.
9 of 10
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1997
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
-------------------------
Chief Executive Officer
BY: /S/ Edward V. Williams
-------------------------
Chief Financial Officer
Dated: May 14, 1997
10 of 10
<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 finaancial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,413,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 313,000
<ALLOWANCES> (21,000)
<INVENTORY> 271,000
<CURRENT-ASSETS> 6,328,000
<PP&E> 71,342,000
<DEPRECIATION> (21,481,000)
<TOTAL-ASSETS> 59,038,000
<CURRENT-LIABILITIES> 3,035,000
<BONDS> 23,836,000
0
0
<COMMON> 0
<OTHER-SE> 32,588,000
<TOTAL-LIABILITY-AND-EQUITY> 59,038,000
<SALES> 0
<TOTAL-REVENUES> 623,000
<CGS> 0
<TOTAL-COSTS> 2,020,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 850,000
<INCOME-PRETAX> (2,155,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,155,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,155,000)
<EPS-PRIMARY> (2,034.39) <F2>
<EPS-DILUTED> (2,034.39) <F2>
<FN>
<F1> Cash includes $5,238,000 of restricted cash
<F2> Primary EPS and Diluted EPS are ($573.25) per Limited Partnership Preferred
Unit
</FN>
</TABLE>
