<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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)
Five Cambridge Center, Cambridge, MA 02142-1493
------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
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
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In thousands, except unit data)
March 31, December 31,
1998 1997
-------- --------
Assets
Cash and cash equivalents ............................... $ 175 $ 175
Restricted cash ......................................... 4,594 4,837
Accounts receivable less allowance for doubtful
accounts of $42 (1998 and 1997) ...................... 382 248
Inventories ............................................. 313 313
Prepaid expenses and other current assets ............... 294 414
-------- --------
Total current assets ............................... 5,758 5,987
Property held for sale, net of accumulated depreciation
of $16,961 .......................................... 32,266 --
Property and equipment, net of accumulated deprecation
of $6,454 (1998) and $23,269 (1997) .................. 18,930 50,883
Deferred rent receivable ................................ 302 386
Deferred costs, net of accumulated amortization of
$2,541 (1998) and $2,443 (1997) ...................... 1,684 1,782
Other assets ............................................ 415 564
-------- --------
Total assets ....................................... $ 59,355 $ 59,602
======== ========
Liabilities and Partners' Equity
Accounts payable and other liabilities .................. $ 2,836 $ 1,377
Current maturity of long-term debt ...................... 478 470
-------- --------
Total current liabilities .......................... 3,314 1,847
-------- --------
Long-term debt .......................................... 22,908 23,031
-------- --------
Total liabilities .................................. 26,222 24,878
-------- --------
Commitments
Partners' equity:
Limited partners equity, 785 units authorized,
issued, and outstanding ......................... 34,007 35,186
Preferred limited partners equity, 785 units
authorized, issued, and outstanding ............. 9,584 9,916
General partners' (deficit) ........................ (10,458) (10,378)
-------- --------
Total partners' equity ............................. 33,133 34,724
-------- --------
Total liabilities and partners' equity ............. $ 59,355 $ 59,602
======== ========
See notes to consolidated financial statements.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Operations (Unaudited)
(In thousands, except unit data) For the Three Months Ended
March 31, March 31,
1998 1997
-------- --------
Revenue:
Hotel operations .......................... $ -- $ --
Restaurant operations ..................... -- --
Commercial rental operations .............. 627 534
Boat basin operations ..................... 37 36
----------- ------------
Total revenue ......................... 664 570
----------- ------------
Operating expenses:
Hotel ..................................... 47 117
Restaurant ................................ 43 34
Commercial rental ......................... 56 57
Boat basin ................................ 43 60
Other ..................................... 65 53
Real estate taxes and insurance ........... 289 148
General and administrative ................ 304 318
Marketing and promotion ................... 104 120
Repairs and maintenance ................... 421 254
Utilities ................................. 92 95
Management fees ........................... 82 79
Amortization .............................. 61 49
Depreciation .............................. 146 575
----------- ------------
Total operating expenses .............. 1,753 1,959
----------- ------------
Loss from operations ........................... (1,089) (1,389)
----------- ------------
Other income (expense):
Interest income ........................... 57 92
Other income .............................. 27 26
Interest expense .......................... (586) (884)
----------- ------------
Total other (expense), net ............ (502) (766)
----------- ------------
Net loss ....................................... $ (1,591) $ (2,155)
=========== ============
Net loss allocated to general partners ......... $ (80) $ (108)
=========== ============
Net loss allocated to limited partners ......... $ (1,179) $ (1,597)
=========== ============
Net loss allocated to preferred limited partners $ (332) $ (450)
=========== ===========
Net Loss per Limited Partnership Unit .......... $ (1,501.91) (2,034.39)
=========== ===========
Net Loss per Limited Partnership Preferred Unit $ (422.93) $ (573.25)
=========== ===========
See notes to consolidated financial statements.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
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, 1998 ...... 785 785 $ 35,186 $ 9,916 $ (10,378) $ 34,724
Net loss ..................... - - (1,179) (332) (80) (1,591)
----------- ----------- ------------- ------------ ------------- ------------
Balance - March 31, 1998 ....... 785 785 $ 34,007 $ 9,584 $ (10,458) $ 33,133
=========== =========== ============= ============ ============= ============
</TABLE>
See notes to consolidated financial statements
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<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10-QSB MARCH 31, 1998
Consolidated Statements of Cash Flows (Unaudited)
(In thousands) For the Three Months Ended
March 31, March 31,
1998 1997
-------- --------
Cash Flows from Operating Activities:
Net loss ............................................... $ (1,591) $ (2,155)
Adjustments to reconcile net loss to net cash
provided by (used) in operating activities:
Depreciation and amortization ..................... 244 658
Provision for bad debts ........................... -- (2)
Changes in assets and liabilities:
Accounts receivable ............................... (134) 206
Inventories ....................................... -- 1
Prepaid expenses and other current assets ......... 120 117
Deferred rent receivable .......................... 84 (18)
Other assets ...................................... 149 (188)
Accounts payable and other liabilities ............ 1,459 1,094
-------- --------
Net cash provided by (used in) operating activities 331 (287)
-------- --------
Cash Flows from Investing Activities:
Expenditures for property and equipment ........... (459) (2,321)
Decrease (increase) in restricted cash reserves ... 243 (4,496)
-------- --------
Net cash used in investing activities ............. (216) (6,817)
-------- --------
Cash Flows from Financing Activities:
Satisfaction of mortgage .......................... -- (26,000)
Proceeds from mortgage refinancing ................ -- 23,600
Principal payments on long-term debt .............. (115) (19)
Deferred costs paid at refinancing ................ -- (698)
-------- --------
Net cash used in financing activities ............. (115) (3,117)
-------- --------
Net decrease in cash and cash equivalents .............. -- (10,221)
Cash and cash equivalents, beginning of period ......... 175 10,396
-------- --------
Cash and cash equivalents, end of period ............... $ 175 $ 175
======== ========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest ............................ $ 552 $ 864
======== ========
See notes to consolidated financial statements.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
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, 1997.
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, 1998 presentation. The balance sheet at December 31, 1997
was derived from audited financial statements at such date.
The results of operations for the three months ended March 31, 1998 and
1997, 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, 1998
and 1997:
For the Three Months Ended
March 31,
-------------------------
1998 1997
---------- ----------
Partnership administration fee $ 67,000 $ 63,000
Management fee 14,000 14,000
Reimbursement for administration expenses 10,000 16,000
The Partnership also rents certain facilities from affiliates of WFA.
These rents amounted to approximately $5,000 and $20,000, for each of the
periods ended March 31, 1998 and 1997.
3. Properties Held For Sale
In January 1998, the General Partner of the Partnership hired an
unaffiliated third party broker to market for sale all of the
Partnership's properties (the "Properties"), with the exception of the 48
retail buildings, as the General Partner believes that, as a result of
the recent renovation to the Properties, improvements in the hotel
industry and the recovery of the overall area economy, the Properties are
well positioned for sale. With the exception of the license agreement
between the Partnership and HyLine Island Tours, the rest of the
commercial rental properties owned by the Partnership are not being
marketed for sale, as the General Partner believes that the rental market
will continue to improve and that marketing the commercial rental
properties today would be premature. The Partnership has stopped
depreciating the assets held for sale.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to
time. The discussion of the Partnership's liquidity, capital resources
and results of operations, including forward-looking statements
pertaining to such matters, does not take into account the effects of any
changes to the Partnership's operations. Accordingly, actual results
could differ materially from those projected in the forward-looking
statements as a result of a number of factors, including those identified
herein.
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 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, second and fourth quarters of
each year.
In January 1998, the General Partner of the Registrant hired an
unaffiliated third party broker to market for sale all of the
Registrant's properties (the "Properties"), with the exception of the 48
retail buildings, as the General Partner believes that, as a result of
the recent renovation to the Properties, improvements in the hotel
industry and the recovery of the overall area economy, the Properties are
well positioned for sale. The General Partner is currently negotiating a
contract to sell the Properties. It is expected that the sale, if
consummated with the current prospective buyer, will close during the
second quarter of 1998. With the exception of the license agreement
between the Registrant and HyLine Island Tours, the rest of the
commercial rental properties owned by the Registrant are not being
marketed for sale, as the General Partner believes that the rental market
will continue to improve and that marketing the commercial rental
properties today would be premature. 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 from the sale of the Properties. Future
distributions to the Unitholders will be dependent on the commercial
properties rental operations.
The level of liquidity based upon the Registrant's cash and cash
equivalents experienced no change as compared to December 31, 1997, due
to restrictions imposed by the lender on the amount of unrestricted cash
available to the Registrant. The Registrant's restricted cash balance
declined by $243,000, during the three months ended March 31, 1998. The
Registrant's $216,000 of cash used in investing and $115,000 used in
financing activities, was partially offset by the $331,000 provided
7 of 11
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
Liquidity and Capital Resources (Continued)
by operations. Investing activities consisted of $459,000 of improvements
to property and equipment and the $243,000 decrease in the restricted
cash reserves used for major capital improvements and future operating
deficits. Financing activities consisted of principal payments of long
term debt. At March 31, 1998, the Registrant's unrestricted cash reserves
were $175,000 and the restricted cash balance was $4,594,000.
The Registrant expects to expend approximately $1,100,000 during 1998 for
capital improvements, including bulkhead replacement at the boat basin.
Some of these improvements will be financed from the balance of the 1996
Rights Offering.
The Registrant's $26,000,000 mortgage note matures in February 2000, with
a balloon payment of approximately $22,343,000. The Registrant has two
one year options to extend the debt. Pursuant to the terms of the 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.
Results of Operations
The Registrant's net loss decreased by $564,000 for the three months
ended March 31, 1998, as compared to 1997.
Total revenue increased by $94,000 for the three months ended March 31,
1998, as compared to 1997 due to an increase in commercial rental
operations. Boat basin operations remained relatively constant.
Commercial rental revenue increased due to increases in rental rates.
Occupancy remained constant. 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, 1998 and 1997.
Operating expenses decreased by $206,000 for the three months ended March
31, 1998, as compared to 1997, due to decreases in depreciation of
$429,000 and hotel expenses of $70,000, which were partly offset by
increases in repairs and maintenance of $167,000 and real estate taxes of
approximately $140,000. The increase in real estate taxes is primarily
due to an adjustment for an abatement received during the three months
ended March 31, 1997.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations (Continued)
Depreciation expense decreased, since the Registrant stopped depreciation
on the properties held for sale. Hotel expenses decreased, due to
decreases in labor and laundry expenses. Repairs and maintenance
increased primarily due to an increase in land fill removal expenses.
Real estate taxes and insurance increased due to a real estate tax
abatement received in 1997.
Interest expense decreased by $298,000, due to a $270,000 payment in 1997
of additional interest to a previous lender. Interest income decreased by
$35,000, due to less cash being available for investment.
The results of operations in future quarters will differ from the results
of operations for the quarter ended March 31, 1998, 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
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
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.
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NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP AND SUBSIDIARIES
FORM 10 - QSB MARCH 31, 1998
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 13, 1998
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<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,769,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 424,000
<ALLOWANCES> (42,000)
<INVENTORY> 0
<CURRENT-ASSETS> 5,758,000
<PP&E> 74,611,000 <F3>
<DEPRECIATION> (23,415,000) <F4>
<TOTAL-ASSETS> 59,355,000
<CURRENT-LIABILITIES> 3,314,000
<BONDS> 22,908,000
<COMMON> 0
0
0
<OTHER-SE> 33,133,000
<TOTAL-LIABILITY-AND-EQUITY> 59,355,000
<SALES> 0
<TOTAL-REVENUES> 664,000
<CGS> 0
<TOTAL-COSTS> 1,753,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 586,000
<INCOME-PRETAX> (1,591,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,591,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,591,000)
<EPS-PRIMARY> (1,501.91) <F2>
<EPS-DILUTED> (1,501.91) <F2>
<FN>
<F1> Cash includes $4,594,000 of restricted cash
<F2> Primary EPS and Diluted EPS are ($422.93) per Limited Partnership
Preferred Unit
<F3> Includes $49,227,000 of property held for sale
<F4> Includes $16,961,000 of property held for sale
</FN>
</TABLE>
