<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
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, 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 0-20273
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1999 Broadway Associates Limited Partnership
--------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 04-6613783
- --------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142
- ------------------------------------------------ -------------------------
(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
----- -----
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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PART 1 - FINANCIAL INFORMATION
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT UNIT DATA) 1998 1997
----------------------
<S> <C> <C>
Assets
Real estate, at cost:
Land $ 1,700 $ 1,700
Buildings and improvements, net of accumulated
depreciation of $14,542 (1998) and $13,769 (1997) 31,713 31,952
-------- --------
33,413 33,652
Other Assets:
Cash and cash equivalents 3,767 11,116
Restricted cash 614 668
Other assets 544 431
Deferred rent receivable 551 252
Deferred costs, net of accumulated amortization
of $2,195 (1998) and $3,765 (1997) 2,394 2,408
-------- --------
Total assets $ 41,283 $ 48,527
======== ========
Liabilities and Partners' Capital
Liabilities:
Mortgage loan payable $ 25,771 $ 25,913
Distributions payable to partners -- 4,646
Accrued interest payable 202 205
Accounts payable and accrued expenses 984 3,464
Payable to related party 116 79
Security deposits 166 163
-------- --------
Total liabilities 27,239 34,470
-------- --------
Commitments
Partners' Capital:
Preferred unit holders' capital (460 units outstanding) 10,378 10,387
Investor limited partners' capital (460 units outstanding) 5,173 5,177
General partner's deficit (1,507) (1,507)
-------- --------
Total Partners' Capital 14,044 14,057
-------- --------
Total Liabilities and Partners' Capital $ 41,283 $ 48,527
======== ========
</TABLE>
See notes to consolidated financial statements.
2 of 12
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
(IN THOUSANDS, EXCEPT UNIT DATA) 1998 1997
----------- -----------
Revenues:
Rental $ 4,268 $ 2,515
Other 406 307
----------- -----------
Total revenues 4,674 2,822
----------- -----------
Expenses:
Real estate taxes 277 324
Payroll and payroll expense reimbursements 303 327
Operating expenses 308 246
Repairs and maintenance 414 354
Utilities 457 351
Management and other fees 297 278
General and administrative costs 179 145
Insurance 54 47
Depreciation 1,016 681
Amortization 277 189
----------- -----------
Total expenses 3,582 2,942
----------- -----------
Operating income (loss) 1,092 (120)
Non-operating income (expense):
Interest income 154 167
Interest expense (1,259) (1,304)
Reorganization item - professional fees - (58)
----------- -----------
Net loss $ (13) $ (1,315)
=========== ===========
Net loss allocated:
General Partners $ - $ (13)
Preferred Unit Holders (9) -
Investor Limited Partners (4) (1,302)
----------- -----------
$ (13) $ (1,315)
=========== ===========
Net loss allocated per unit:
Preferred Unit Holders $ (19.57) $ -
=========== ===========
Investor Limited Partners $ (8.70) $ (2,830.43)
=========== ===========
See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED
JUNE 30, JUNE 30,
(IN THOUSANDS, EXCEPT UNIT DATA) 1998 1997
----------- ------------
Revenues:
Rental $ 2,188 $ 1,324
Other 183 194
----------- ------------
Total revenues 2,371 1,518
----------- ------------
Expenses:
Real estate taxes 144 163
Payroll and payroll expense reimbursements 129 156
Operating expenses 158 131
Repairs and maintenance 208 178
Utilities 228 172
Management and other fees 155 139
General and administrative costs 127 62
Insurance 27 23
Depreciation 534 332
Amortization 152 101
----------- ------------
Total expenses 1,862 1,457
----------- ------------
Operating income 509 61
Non-operating income (expense):
Interest income 64 68
Interest expense (629) (613)
Reorganization item - professional fees - (4)
----------- ------------
Net loss $ (56) $ (488)
=========== ============
Net loss allocated:
General Partners $ (1) $ (5)
Preferred Unit Holders (37) -
Investor Limited Partners (18) (483)
----------- ------------
$ (56) $ (488)
=========== ============
Net loss allocated per unit:
Preferred Unit Holders $ (80.43) $ -
=========== ============
Investor Limited Partners $ (39.13) $ (1,050.00)
=========== ============
See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
PREFERRED
UNITS OF UNITS OF PREFERRED INVESTOR
LIMITED LIMITED UNIT LIMITED GENERAL
PARTNERSHIP PARTNERSHIP HOLDERS' PARTNERS' PARTNER'S
INTEREST INTEREST CAPITAL CAPITAL (DEFICIT) TOTAL
----------- ----------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1998 460 460 $ 10,387 $ 5,177 $ (1,507) $ 14,057
Net loss -- -- (9) (4) -- (13)
-------- -------- -------- -------- -------- --------
Balance - June 30, 1998 460 460 $ 10,378 $ 5,173 $ (1,507) $ 14,044
======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS) FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (13) $ (1,315)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,324 902
Deferred rent receivable (299) 156
Changes in assets and liabilities:
Other assets (113) (181)
Accrued interest payable (3) (46)
Accounts payable, accrued expenses, payable
to related party and security deposits (2,440) (134)
-------- --------
Net cash used in operating activities (1,544) (618)
-------- --------
Cash Flows from Investing Activities:
Additions to buildings and improvements (777) (1,115)
Decrease in restricted cash 54 201
Deferred lease costs (294) (416)
-------- --------
Net cash used in investing activities (1,017) (1,330)
-------- --------
Cash Flows from Financing Activities:
Principal payments on mortgage loan (142) (2,087)
Distributions to partners (4,646) -
-------- --------
Cash used in financing activities (4,788) (2,087)
-------- --------
Net decrease in cash and cash equivalents (7,349) (4,035)
Cash and cash equivalents, beginning of period 11,116 8,580
-------- --------
Cash and cash equivalents, end of period $ 3,767 $ 4,545
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 1,231 $ 1,318
======== ========
</TABLE>
See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. GENERAL
The accompanying financial statements reflect the accounts of 1999
Broadway Associates Limited Partnership (the "Investor Partnership")
and 1999 Broadway Partnership (the "Operating Partnership"). The
Investor Partnership and the Operating Partnership are collectively
referred to as the "Partnership". These consolidated financial
statements, footnotes and discussions should be read in conjunction
with the consolidated 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 June 30, 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 and six months ended June 30,
1998 and 1997, are not necessarily indicative of the results to be
expected for the full year.
2. RELATED PARTY TRANSACTIONS
The Partnership has incurred charges and made commitments to companies
affiliated by common ownership and management with Winthrop Financial
Associates, A Limited Partnership (the "General Partner" of the
Investor Partnership). Related party transactions with the General
Partner and its affiliates include the following:
a. The Operating Partnership accrues to an affiliate of the
General Partner an annual property management fee equal to
5% of cash receipts. For the six months ended June 30, 1998
and 1997, management fees of $213,000 and $126,000,
respectively, were incurred. In accordance with the Plan of
Reorganization, and commencing on the Plan's effective date,
property management fee payments were reduced to 4% of cash
receipts as long as the mortgage note is outstanding.
Management fees of $170,000 have been paid for the period
ended June 30, 1998.
b. The Partnership pays or accrues to the General Partner an
annual partnership administration and investor service fee
of $100,000, which, since 1990, has been increased annually
by 6% to its present level of approximately $169,000 per
annum. Fees of $84,000 and $80,000, were paid or accrued
during the periods ended June 30, 1998 and 1997,
respectively.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2. RELATED PARTY TRANSACTIONS (CONTINUED)
c. The Partnership pays or accrues to an affiliate of the
General Partner a construction management fee equal to 5% of
the aggregate cost of each construction project. Fees of
$35,000 and $14,000 were incurred during the six months
ended June 30, 1998 and 1997, respectively, and have been
capitalized to the cost of building and improvements.
d. In accordance with the partnership agreement, the General
Partner is entitled to receive 1% of aggregate cash
distributions. In January 1998, the General Partner received
a distribution of $46,000.
3. DISTRIBUTION
In January 1998, the Partnership distributed $4,600,000 ($10,000 per
unit) to Unitholders and $46,000 to the General Partner.
4. ALLOCATION OF INCOME (LOSS)
In accordance with the Partnership's Second Amended and Restated
Partnership Agreement, net loss is allocated 1% to the General Partner
and 99% to the limited partners in proportion to and to the extent of
the positive balances in the limited partners' capital accounts. Net
income is allocated, first, to the Preferred Unitholders, in an amount
equal to the excess of the cumulative distributions made or to be
made; second, to restore net loss previously allocated to the
Preferred Unitholders; and the balance to the Unitholders and to the
General Partner, to restore net loss previously allocated to them
during the period that the Preferred Units were outstanding.
5. LEGAL PROCEEDINGS
Equity Resources Pilgrim Limited Partnership v. 1999 Broadway Associates
Limited Partnership, Winthrop Financial Associates, Bronco L.L.C. and
The Second Guarantor, Delaware Chancery Court, New Castle County (Civil
Action No. 16325-NC).
A limited partner in the Partnership is alleging that the allocation
of the preferred units subject to the oversubscription privilege made
by the Partnership pursuant to the October 30, 1997 Proxy Statement
and Prospectus, as amended (the "Prospectus"), was incorrect. The
plaintiff alleges that it should have received 188.0526 preferred
units instead of the 56.2812 preferred units plaintiff received.
Plaintiff is presently seeking declaratory relief. The Partnership
believes its allocation was consistent with the terms of the
Prospectus and intends to defend this action. If the Plaintiff is
successful in its action, the Partnership will be forced to reallocate
the preferred units among all limited partners who exercised their
oversubscription privilege which would result in such limited partners
receiving less or more, depending on the circumstance, preferred
units. To the extent more preferred units are allocated to a limited
partner, such limited partner would be required to pay for such units.
To the extent that less preferred units are allocated to a limited
partner, such limited partner would receive a reimbursement of its
original purchase price for the preferred units. The ultimate outcome
of this litigation cannot presently be determined, however, the
General Partner does not believe that the litigation will have a
material adverse effect to the Partnership.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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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 consolidated
financial statements and other items contained elsewhere in the
report.
Liquidity and Capital Resources
The Registrant, through its 99.9% ownership interest in 1999
Broadway Partnership (the "Operating Partnership"), owns a 42-story
office tower located in Denver, Colorado together with a parking
garage located one and one-half blocks northeast of the office
tower (collectively, the "Property"). The Operating Partnership
generates rental revenue from the Property and is responsible for
the Property's operating expenses as well as its administrative
costs.
The Registrant's level of liquidity based on cash and cash
equivalents decreased by $7,349,000 during the six months ended
June 30, 1998, as compared to December 31, 1997. The decline is
attributable to $1,544,000 of cash used in operating activities,
$1,017,000 of cash used in investing activities and $4,788,000 of
cash used in financing activities. Cash from operations declined
during the period ended June 30, 1998, primarily as a result of the
timing of payments for tenant improvements and leasing costs. Cash
used in investing activities consisted of $777,000 of cash used for
improvements to real estate, primarily tenant improvements, and
$294,000 of cash expended on leasing costs and commissions, which
were slightly offset by a decline of $54,000 in restricted cash.
Cash used in financing activities consisted of the January 1998
distribution of $4,646,000 to partners in accordance with the
Rights Offering, and $142,000 of mortgage principal amortization.
The Property is 96% leased as of June 30, 1998. The Registrant has
budgeted to expend a portion of its working capital reserves for
tenant improvements and leasing commissions during the next twelve
months. The funding for expenditures for tenant improvements and
leasing commissions will be provided by the Registrant through
funds raised by the 1997 Rights Offering. At June 30, 1998, the
Registrant had approximately $3,767,000 in cash and cash
equivalents which has been invested primarily in a money market
account.
The Registrant's original business plan was to selectively
contribute its reserves to the Operating Partnership to enhance the
Property's value (through leasing the Property). The Registrant
hoped that the Denver market would improve so that the Property
could generate cash flow distributions and realize capital
appreciation above the first mortgage loan. The Denver market has
not yet achieved the fundamental rebound required for the
Registrant to achieve its long term investment objectives of
realizing capital appreciation.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources (Continued)
The Operating Partnership did not have sufficient cash flows to
meet a portion of its February 1998 debt service requirements
primarily due to the timing of payment of the semi-annual real
estate taxes. Accordingly, $67,000 of the February 1998 principal
and interest payment was funded from the reserve established at the
Initial Consummation Date.
At this time, it appears that the original investment objective of
capital growth from the inception of the Registrant will not be
attained and that the limited partners will not receive a complete
return of their invested capital. The extent to which invested
capital is refunded to the limited partners and preferred unit
holders is dependent upon the performance of the Property and the
market in which it is located. Subsequent to September 1999, the
ability to hold and operate the Property is dependent upon
Operating Partnership's ability to restructure or refinance the
first mortgage loan or sell the Property.
Results of Operations
Operating results, before non-operating income (expenses), for the
six months ended June 30, 1998, as compared to 1997, improved by
$1,212,000 due to increases in revenues of $1,852,000, and expenses
of $640,000. Operating results, before non-operating income
(expenses), for the three months ended June 30, 1998, as compared
to 1997, improved by $448,000.
Revenues, for the six months ended June 30, 1998, as compared to
1997, increased due to increases in rental income of $1,753,000 and
in other income of $99,000. Rental and other income increased due
to an increase in overall occupancy from 67% at June 30, 1997 to
96% at June 30, 1998, and an increase in rental rates.
Expenses increased by $640,000 for the six months ended June 30,
1998, as compared to 1997, primarily due to increases in
depreciation and amortization ($423,000), utilities ($106,000),
operating expenses ($62,000), repairs and maintenance ($60,000) and
general and administrative costs ($34,000). These increases were
partially offset by a decrease in real estate taxes ($47,000).
Depreciation and amortization expense increased due to expenditures
for tenant improvements and leasing commissions made in connection
with an increase in leasing activity. Utilities, operating expenses
and repairs and maintenance expenses also increased primarily as a
result of increased occupancy. General and administrative expenses
increased due to an increase in professional fees in the second
quarter of 1998 relating to the legal proceedings as described in
Item 1. Consolidated Financial Statements, Note 5. Real estate
taxes declined due to a reduction in the real estate tax rate and a
lower assessed value of the Property.
Interest expense decreased by $45,000 due to the payment of
$2,000,000 in mortgage principal in February 1997, as part of the
Plan of Reorganization and the amortization of mortgage principal.
All other income and expense items remained relatively constant.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
Equity Resources Pilgrim Limited Partnership v. 1999 Broadway
Associates Limited Partnership, Winthrop Financial Associates, Bronco
L.L.C. and The Second Guarantor, Delaware Chancery Court, New Castle
County (Civil Action No. 16325-NC).
A limited partner in 1999 Broadway Associates Limited Partnership
(the "Partnership") is alleging that the allocation of the preferred
units subject to the oversubscription privilege made by the
Partnership pursuant to the October 30, 1997 Proxy Statement and
Prospectus, as amended (the "Prospectus"), was incorrect. The
plaintiff alleges that it should have received 188.0526 preferred
units instead of the 56.2812 preferred units plaintiff received.
Plaintiff is presently seeking declaratory relief. The Partnership
believes its allocation was consistent with the terms of the
Prospectus and intends to defend this action. If the Plaintiff is
successful in its action, the Partnership will be forced to
reallocate the preferred units among all limited partners who
exercised their oversubscription privilege which would result in such
limited partners receiving less or more, depending on the
circumstance, preferred units. To the extent more preferred units are
allocated to a limited partner, such limited partner would be
required to pay for such units. To the extent that less preferred
units are allocated to a limited partner, such limited partner would
receive a reimbursement of its original purchase price for the
preferred units.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule, is filed as an Exhibit to this report.
(b) Reports on Form 8-K:
No report of Form 8-K was filed during the period.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
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FORM 10-QSB JUNE 30, 1998
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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.
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
BY: WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
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 14, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from 1999
Broadway 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,381,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 47,955,000
<DEPRECIATION> (14,542,000)
<TOTAL-ASSETS> 41,283,000
<CURRENT-LIABILITIES> 0
<BONDS> 25,771,000
<COMMON> 0
0
0
<OTHER-SE> 14,044,000
<TOTAL-LIABILITY-AND-EQUITY> 41,283,000
<SALES> 0
<TOTAL-REVENUES> 4,674,000
<CGS> 0
<TOTAL-COSTS> 3,403,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,259,000
<INCOME-PRETAX> (13,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,000)
<EPS-PRIMARY> (28.27) <F2>
<EPS-DILUTED> (28.27) <F2>
<FN>
<F1>
Includes $614,000 of restricted cash.
<F2>
Primary EPS and diluted EPS include ($19.57) per Preferred Unit of Limited
Partnership Interest.
</FN>
</TABLE>
