<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 June 30, 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 11
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1997
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In thousands, except unit data)
June 30, December 31,
Assets 1997 1996
------------- ------------
Cash and cash equivalents $ 175 $ 10,396
Restricted cash 2,419 742
Accounts receivable less allowance for doubtful
accounts of $23 (1997) and (1996) 990 496
Inventory 346 272
Prepaid expenses and other current assets 250 469
------------- ------------
Total current assets 4,180 12,375
Property and equipment, net of accumulated deprecation
of $22,056 (1997) and $20,906 (1996) 51,734 48,115
Deferred rent receivable 409 392
Deferred costs, net of accumulated amortization of
$2,246 (1997) and $2,065 (1996) 1,978 1,457
Deposits and other restricted cash 252 179
------------- ------------
Total assets $ 58,553 $ 62,518
============= ============
Liabilities and Partners' Equity
Accounts payable $ 268 $ 146
Accrued expenses 567 796
Advance deposits 2,128 150
Current maturity of long-term debt 453 26,053
Accrued interest 401 428
------------- ------------
Total current liabilities 3,817 27,573
Long-term debt 23,272 202
------------- ------------
Total liabilities 27,089 27,775
------------- ------------
Commitments
Partners' equity:
Limited partners equity, 785 units authorized, issued,
and outstanding 32,769 35,199
Preferred limited partners equity, 785 units
authorized, issued, and outstanding 9,236 9,921
General partners' (deficit) (10,541) (10,377)
------------- ------------
Total partners' equity 31,464 34,743
------------- ------------
Total liabilities and partners' equity $ 58,553 $ 62,518
============= ============
See notes to consolidated financial statements.
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1997
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
Revenue:
Hotel operations $ 1,472 $ 1,443
Restaurant operations 654 615
Commercial rental operations 1,317 1,319
Boat basin operations 323 365
------------- -------------
Total revenue 3,766 3,742
------------- -------------
Operating expenses:
Hotel 599 636
Restaurant 740 659
Commercial rental 151 144
Boat basin 213 219
Other 168 152
Real estate taxes and insurance 614 763
General and administrative 794 1,001
Marketing and promotion 290 402
Repairs and maintenance 662 561
Utilities 288 271
Management fees 210 198
Amortization 181 150
Depreciation 1,150 1,128
------------- -------------
Total operating expenses 6,060 6,284
------------- -------------
Loss from operations (2,294) (2,542)
------------- -------------
Other income (expense):
Interest income 132 19
Other income 277 226
Interest expense (1,394) (1,205)
------------- -------------
Total other (expense), net (985) (960)
------------- -------------
Net loss $ (3,279) $ (3,502)
============= =============
Net loss allocated to general partners $ (164) $ (175)
============= =============
Net loss allocated to limited partners $ (2,430) $ (3,327)
============= =============
Net loss allocated to preferred limited partners $ (685) $ -
============= =============
Net Loss per Limited Partnership Unit $ (3,095.54) $ (4,238.22)
============= =============
Net Loss per Limited Partnership Preferred Unit $ (872.61) $ -
============= =============
See notes to consolidated financial statements.
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1997
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Three Months Ended
June 30, 1997 June 30, 1996
------------- -------------
Revenue:
Hotel operations $ 1,472 $ 1,443
Restaurant operations 654 615
Commercial rental operations 756 749
Boat basin operations 287 328
------------- -------------
Total revenue 3,169 3,135
------------- -------------
Operating expenses:
Hotel 482 522
Restaurant 706 566
Commercial rental 94 86
Boat basin 153 172
Other 115 114
Real estate taxes and insurance 439 504
General and administrative 476 667
Marketing and promotion 170 253
Repairs and maintenance 408 333
Utilities 193 195
Management fees 131 126
Amortization 98 75
Depreciation 575 564
------------- -------------
Total operating expenses 4,040 4,177
------------- -------------
Loss from operations (871) (1,042)
------------- -------------
Other income (expense):
Interest income 40 7
Other income 251 192
Interest expense (544) (612)
------------- -------------
Total other (expense), net (253) (413)
------------- -------------
Net loss $ (1,124) $ (1,455)
============= =============
Net loss allocated to general partners $ (56) $ (73)
============= =============
Net loss allocated to limited partners $ (833) $ (1,382)
============= =============
Net loss allocated to preferred limited partners $ (235) $ -
============= =============
Net Loss per Limited Partnership Unit $ (1,061.15) $ (1,760.51)
============= =============
Net Loss per Limited Partnership Preferred Unit $ (299.36) $ -
============= =============
See notes to consolidated financial statements.
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 1997
Consolidated Statement of Changes in Partners 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 - - (2,430) (685) (164) (3,279)
----------- ----------- --------- --------- --------- ---------
Balance - June 30, 1997 785 785 $ 32,769 $ 9,236 $ (10,541) $ 31,464
=========== =========== ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB JUNE 30, 1997
Consolidated Statements of Cash Flows (Unaudited)
(In thousands) For the Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
Cash Flows from Operating Activities:
Net loss $ (3,279) $ (3,502)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,150 1,128
Amortization 181 150
Changes in assets and liabilities:
Accounts receivable (494) (221)
Provision for doubtful accounts (33)
Receivable from related parties 44
Inventory (74) (7)
Prepaid expenses and other current assets 219 238
Deferred rent receivable (17) (44)
Deposits and other restricted cash (73) (3)
Accrued interest (27) (14)
Accounts payable 122 91
Accrued expenses (229) (211)
Advance deposits 1,978 1,772
Payable to related parties (19)
----------- ------------
Net cash used in operating activities (543) (631)
----------- ------------
Cash Flows from Investing Activities:
Expenditures for property and equipment (4,769) (212)
(Increase) decrease in restricted cash reserves (1,677) 891
----------- ------------
Net cash (used in) provided by investing
activities (6,446) 679
----------- ------------
Cash Flows from Financing Activities:
Loan from related party - 600
Satisfaction of mortgage (26,000) -
Proceeds from mortgage refinancing 23,600 -
Principal payments on long-term debt (130) (116)
Deferred costs paid at refinancing (702) -
----------- ------------
Net cash (used in) provided by financing
activities (3,232) 484
----------- ------------
Net (decrease) increase in cash and cash equivalents (10,221) 532
Cash and cash equivalents, beginning of period 10,396 279
----------- ------------
Cash and cash equivalents, end of period $ 175 $ 811
=========== ============
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 1,421 $ 1,219
=========== ============
See notes to consolidated financial statements.
6 of 11
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 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 June 30, 1997 presentation. The balance sheet at
December 31, 1996 was derived from audited financial statements at such
date.
The results of operations for the six months ended June 30, 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 six month periods ended June 30, 1997 and
1996:
For the Six Months Ended
June 30,
-------------------------
1997 1996
---- ----
Partnership administration fee $127,000 $120,000
Management fee 29,000 25,000
Reimbursement for administration expenses 30,000 50,000
The Partnership also rents certain facilities from affiliates of the
general partner. These rents amounted to approximately $40,000 for each
of the periods ended June 30, 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 rate at June 30, 1997 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 $702,000 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.
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 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 June 30, 1997, as compared to December 31,
1996. The decrease was primarily due to $6,446,000 used in investing activities
and $3,232,000 used in financing activities. Investing activities consisted of
$4,769,000 of improvements to property and equipment and $1,677,000 of cash
transferred to restricted reserve accounts to be used for major capital
improvements and to fund future operating deficits. Financing activities
consisted of the satisfaction of the mortgage of $26,000,000 and payment of
deferred costs, associated with the mortgage refinancing, of $702,000, which
were partially offset by $23,600,000 of proceeds from the mortgage refinancing.
At June 30, 1997, the Registrant's unrestricted cash reserves were $175,000 and
the restricted cash balance was $2,419,000. 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 permission is received from regulatory authorities). It is
anticipated that $6,000,000 will be incurred during 1997 in connection with this
program. As of June 30, 1997 the renovation of the restaurant and the common
areas at the White Elephant and Breakers has been completed, together with the
refurbishment of the guestrooms. For the six months ended June 30, 1997,
$4,769,000 was spent on construction and capital improvements. The costs of
these capital improvements are being financed from the net proceeds of
approximately $6,300,000 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 rate at June 30, 1997 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 $702,000 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.
8 of 11
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 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 ratios 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 the Unitholders in the
foreseeable future.
Results of Operations
The Partnerships total net loss decreased by $223,000 for the six months ended
June 30, 1997, as compared to 1996.
Total revenue increased by $24,000 for the six months ended June 30, 1997, as
compared to 1996, due to increases in hotel and restaurant operations of
$68,000, which were partially offset by a decrease in boat basin operations of
$42,000. Commercial rental operations remained relatively constant. Hotel
operations increased due to an overall increase in the average room rate, while
occupancy remained relatively constant. Restaurant revenue increased due to
increased food and beverage prices following the renovation of the restaurant
facilities. Boat basin operations declined due to decreased slip occupancy as a
result of inclement weather in June 1997.
Operating expenses decreased by $224,000 for the six months ended June 30, 1997,
as compared to 1996, primarily due to decreases in general and administrative of
$207,000, marketing and promotion of $112,000 and real estate taxes and
insurance of $149,000 which were partially offset by increases in restaurant
expenses of $81,000 and repairs and maintenance of $101,000. All other items
remained relatively constant.
General and administrative expenses decreased primarily due to decreases in
labor costs and professional fees. Marketing and promotion decreased due to
decreases in payroll costs and an overall decrease in the managing agent's
reservation fee structure. Real estate taxes decreased due to a tax abatement
which resulted in a lower tax assessment compared to last year. Restaurant
expenses increased primarily due to an increase in labor and associated costs.
Repairs and maintenance increased due to an increase in painting and general
maintenance expenses.
The increase of $25,000 in total other expenses was due to an increase in
interest expense of $189,000 which was partially offset by an increase in
interest income of $113,000 and other income of $51,000. Interest expense
increased due to a payment of additional interest of $270,000 made to the
previous lender in accordance with the loan agreement which was partially offset
by a reduction in mortgage principal balance. Interest income increased due to
an increase in restricted cash reserves available for investment.
The results of operations in future periods will differ from the results of
operations for the period ended June 30, 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.
9 of 11
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 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.
10 of 11
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB JUNE 30, 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: August 6, 1997
11 of 11
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,594,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 1,013,000
<ALLOWANCES> (23,000)
<INVENTORY> 346,000
<CURRENT-ASSETS> 4,180,000
<PP&E> 73,790,000
<DEPRECIATION> (22,056,000)
<TOTAL-ASSETS> 58,553,000
<CURRENT-LIABILITIES> 3,817,000
<BONDS> 23,272,000
<COMMON> 0
0
0
<OTHER-SE> 31,464,000
<TOTAL-LIABILITY-AND-EQUITY> 58,553,000
<SALES> 0
<TOTAL-REVENUES> 4,043,000
<CGS> 0
<TOTAL-COSTS> 6,060,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,394,000
<INCOME-PRETAX> (3,279,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,279,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,279,000)
<EPS-PRIMARY> (3,095.54)<F2>
<EPS-DILUTED> (3,095.54)<F2>
<FN>
<F1>Cash includes $2,419,000 of restricted cash
<F2>Primary EPS and Diluted EPS are ($872.61) per Limited Partnership Preferred Unit
</FN>
</TABLE>
