1999 Broadway Associates LTD Partnership Inactive
Filed: 13 Aug 04, 12:00am
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, 2004 ------------- 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 ------- 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 incorporation or organization) Identification No.) 7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts 02114-9507 --------------------------------------- ----------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (617) 570-4600 --------------- 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 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 PART 1 - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (UNAUDITED) JUNE 30, DECEMBER 31, (IN THOUSANDS, EXCEPT UNIT DATA) 2004 2003 -------- ------------ Assets Real estate, at cost: Land $ 1,700 $ 1,700 Buildings and improvements, net of accumulated depreciation of $29,032 (2004) and $28,019 (2003) 26,056 26,828 -------- -------- 27,756 28,528 Other Assets: Cash and cash equivalents 1,725 1,619 Restricted cash 2,575 2,840 Other assets 444 531 Deferred rent receivable 2,953 2,749 Deferred costs, net of accumulated amortization of $3,172 (2004) and $2,952 (2003) 2,126 2,345 -------- -------- Total Assets $ 37,579 $ 38,612 ======== ======== Liabilities and Partners' Deficit Liabilities: Mortgage loan payable $ 48,551 $ 48,774 Accrued interest payable 322 335 Accounts payable and accrued expenses 686 1,449 Deferred lease termination fee 248 413 Payable to related party 238 301 Security deposits 118 110 -------- -------- Total Liabilities 50,163 51,382 -------- -------- Partners' Deficit: Investor limited partners' deficit (460 units outstanding) (10,906) (11,086) General partner's deficit (1,678) (1,684) -------- -------- Total Partners' Deficit (12,584) (12,770) -------- -------- Total Liabilities and Partners' Deficit $ 37,579 $ 38,612 ======== ======== See notes to consolidated financial statements. 2 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, (IN THOUSANDS, EXCEPT UNIT DATA) 2004 2003 ------- ------- Revenues: Rental $ 6,032 $ 5,721 Other 106 156 ------- ------- Total revenues 6,138 5,877 ------- ------- Expenses: Real estate taxes 439 420 Payroll and payroll expense reimbursements 361 350 Operating expenses 336 312 Repairs and maintenance 562 540 Utilities 439 414 Management and other fees 413 402 General and administrative costs 101 65 Insurance 117 136 Depreciation 1,013 1,050 Amortization 203 184 ------- ------- Total expenses 3,984 3,873 ------- ------- Operating income 2,154 2,004 Non-operating income (expense): Interest income 9 14 Interest expense (1,977) (1,984) ------- ------- Net income $ 186 $ 34 ======= ======= Net income allocated: General Partner $ 6 $ 1 Investor Limited Partners 180 33 ------- ------- $ 186 $ 34 ======= ======= Net income allocated per unit: Investor Limited Partners $391.30 $ 71.74 ======= ======= See notes to consolidated financial statements. 3 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, JUNE 30, (IN THOUSANDS, EXCEPT UNIT DATA) 2004 2003 ------- ------- Revenues: Rental $ 3,118 $ 2,874 Other 43 88 ------- ------- Total revenues 3,161 2,962 ------- ------- Expenses: Real estate taxes 220 210 Payroll and payroll expense reimbursements 187 179 Operating expenses 164 160 Repairs and maintenance 259 260 Utilities 194 185 Management and other fees 208 198 General and administrative costs 52 41 Insurance 59 68 Depreciation 505 533 Amortization 108 94 ------- ------- Total expenses 1,956 1,928 ------- ------- Operating income 1,205 1,034 Non-operating income (expense): Interest income 5 7 Interest expense (987) (996) ------- ------- Net income $ 223 $ 45 ======= ======= Net income allocated: General Partners $ 7 $ 1 Investor Limited Partners 216 44 ------- ------- $ 223 $ 45 ======= ======= Net income allocated per unit: Investor Limited Partners $469.57 $ 95.65 ======= ======= See notes to consolidated financial statements. 4 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT (UNAUDITED) (IN THOUSANDS, EXCEPT UNIT DATA) UNITS OF INVESTOR LIMITED LIMITED GENERAL PARTNERSHIP PARTNERS' PARTNER'S INTEREST DEFICIT DEFICIT TOTAL -------- -------- -------- -------- Balance - December 31, 2003 460 $(11,086) $ (1,684) $(12,770) Net income -- 180 6 186 -------- -------- -------- -------- Balance - June 30, 2004 460 $(10,906) $ (1,678) $(12,584) ======== ======== ======== ======== See notes to consolidated financial statements. 5 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, 2004 2003 ------- ------- Cash Flows from Operating Activities: Net income $ 186 $ 34 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,233 1,251 Amortization of deferred lease termination fee (165) (164) Deferred rent receivable (204) (143) Changes in assets and liabilities: Other assets 87 110 Accrued interest payable (13) (13) Accounts payable, accrued expenses, payable to related party and security deposits (818) (369) ------- ------- Net cash provided by operating activities 306 706 ------- ------- Cash Flows from Investing Activities: Additions to buildings and improvements (241) (429) Additions to restricted cash (1,234) (1,132) Restricted cash release 1,499 1,905 Deferred costs (1) (49) ------- ------- Net cash provided by investing activities 23 295 ------- ------- Cash Flows from Financing Activities: Principal payments on mortgage loan (223) (217) ------- ------- Cash used in financing activities (223) (217) ------- ------- Net increase in Cash and Cash Equivalents 106 784 Cash and Cash Equivalents, Beginning of Period 1,619 2,292 ------- ------- Cash and Cash Equivalents, End of Period $ 1,725 $ 3,076 ======= ======= Supplemental Disclosure of Cash Flow Information: Cash Paid For Interest $ 1,973 $ 1,980 ======= ======= See notes to consolidated financial statements. 6 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL The accompanying financial statements reflect the accounts of 1999 Broadway Associates Limited Partnership (the "Investor Partnership"), 1999 Broadway Partnership (the "Operating Partnership") and 1999 Broadway LLC (the "Operating Company"). The Investor Partnership, the Operating Partnership and the Operating Company are collectively referred to as the "Partnerships". These consolidated financial statements, footnotes and discussions should be read in conjunction with the consolidated financial statements, related footnotes and discussions contained in the Investor Partnership's Annual Report on Form 10-KSB for the year ended December 31, 2003. 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. The balance sheet at December 31, 2003 was derived from audited financial statements at such date. The results of operations for the six and three months ended June 30, 2004 and 2003 are not necessarily indicative of the results to be expected for the full year. Reclassification Certain reclassifications have been made to the 2003 balances to conform to the 2004 presentation. 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 managing general partner of the Investor Partnership (the "General Partner"). Related party transactions with the General Partner and its affiliates include the following: a. The 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, 2004 and 2003, management fees of $293,000 and $289,000, respectively, were incurred. b. The Partnership pays or accrues to the General Partner an annual partnership administration and investor service fee, as provided for in the partnership agreement, of $100,000, which, since 1990, has been increased annually by 6% to its present level of approximately $240,000 per annum. Fees of $120,000 and $113,000 were paid or accrued during the periods ended June 30, 2004 and 2003, respectively. 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 applicable construction project. Fees of $12,000 and $21,000 were incurred during the six months ended June 30, 2004 and 2003, respectively, and have been capitalized to the cost of buildings and improvements. 7 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. ALLOCATION OF LOSS AND DISTRIBUTION OF CASH FLOW In accordance with the partnership agreement losses are allocated 1% to the General Partner and 99% to the limited partners. Net income is allocated 3% to the General Partner and 97% to the limited partners. Cash flow is distributed 99% to the limited partners and 1% to the General Partner until the limited partners have received an amount equal to an annual 6% per annum noncumulative, noncompounded return on their invested capital and the balance, if any, 97% to the limited partners, and 3% to the General Partner. 4. SEGMENT INFORMATION The Partnership has two reportable segments, the Office Tower and the Garage. The Partnership evaluates performance based on net operating income, which is income before depreciation, amortization, interest and non-operating items. Segment information for the six months ended June 30, 2004 and 2003 is shown in the tables below (in thousands). The "Other" column includes partnership administrative items and income and expense not allocated to a reportable segment. Office Parking Tower Garage Other Total 2004 Rental income $ 6,032 $ -- $ -- $ 6,032 Other income 11 95 -- 106 Interest income 9 -- -- 9 Interest expense 1,916 61 -- 1,977 Depreciation and amortization 1,193 23 -- 1,216 Segment profit (loss) 314 11 (139) 186 Total assets 36,687 892 -- 37,579 Capital expenditures 241 -- -- 241 2003 Rental income $ 5,721 $ -- $ -- $ 5,721 Other income 16 140 -- 156 Interest income 12 -- 2 14 Interest expense 1,921 63 -- 1,984 Depreciation and amortization 1,211 23 -- 1,234 Segment profit (loss) 109 54 (129) 34 Total assets 36,636 938 1,087 38,661 Capital expenditures 429 -- -- 429 8 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 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 disclosures contained in this Form 10-QSB and other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant'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 Registrant'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. Liquidity and Capital Resources The Registrant, through its effectively 99.9% ownership interest in 1999 Broadway LLC (the "Operating Company"), 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 Company 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 increased by $106,000 for the six months ended June 30, 2004, as compared to December 31, 2003. The increase is due to $306,000 of net cash provided by operating activities and $23,000 of cash provided by investing activities, which were partially offset by $223,000 of cash used for principal payments on mortgage loan (financing activities). Net cash provided by investing activities consisted of a net refund of $265,000 from the restricted cash account, partially offset by $241,000 of cash used for improvements to real estate, primarily tenant improvements, and $1,000 of cash expended on leasing costs and commissions. The Property is 92% leased as of June 30, 2004 as compared to 87% at June 30, 2003. At June 30, 2004, the Registrant had $1,725,000 in cash and cash equivalents, which was invested primarily in money market mutual funds. The Property has a heavy concentration of tenants in the technology and telecommunications industries, both of which have been experiencing severe decline. Notably, Lucent Technologies, which leases in excess of 10% of the Property, has vacated its space and is marketing it for sublease. Lucent's lease expires on December 31, 2005 and Lucent continues to make required lease payments. Lucent has been experiencing financial difficulties for the past few years and it is possible that if these financial difficulties continue Lucent could stop making lease payments. Further, Encoda (formerly JDS Columbine) has placed five floors of its space in the sublease market, which accounts for approximately 14% of the property. Encoda's lease expires in 2008 and Encoda continues to make required lease payments. Because of the recent decline in the Denver real estate market, the Registrant may be unable to find a new tenant or tenants at rental rates sufficient to generate cash flow in excess of its debt service obligations. The Registrant's only significant critical accounting policy relates to the evaluation of the fair value of real estate. The Registrant evaluates the need for an impairment loss on its real estate assets 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 evaluation of the fair value of real estate is an estimate that is susceptible to change and actual results could differ from those estimates. 9 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) Liquidity and Capital Resources (Continued) The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the Property to adequately maintain the physical assets and the other operating needs of the Operating Company. Such assets are currently thought to be sufficient for any near-term needs of the Operating Company. The Registrant anticipates spending an additional $1,800,000 for capital and tenant improvements to the Property for the remainder of the year. As of June 30, 2004, the Registrant made no distributions to the partners. The Registrant could be affected by declining economic conditions as a result of various factors that affect the real estate business including the financial condition of tenants, competition, and increased operating costs, including insurance costs. 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 is dependent upon the performance of the Property and the market in which it is located. None of the recently issued accounting standards had an effect on the Registrant's consolidated financial statements. Results of Operations Net income for the six months ended June 30, 2004 was $186,000 as compared to a net income of $34,000 for the six months ended June 30, 2003. The increase in net income was primarily due to an increase in operating income. Operating results, before non-operating income (expense) increased by $150,000 for the six months ended June 30, 2004, as compared to 2003, due to an increase in revenue of $261,000, which was partially offset by an increase in expenses of $111,000. Operating results, before non-operating income (expense) increased by $171,000 for the three months ended June 30, 2004 as compared to 2003. Revenue increased by $261,000 for the six months ended June 30, 2004, as compared to 2003, due to an increase in rental income of $311,000, which was partially offset by a decrease in other income of $50,000. Rental income increased due to an increase in occupancy. Other income decreased due to a decrease in volume of other billable services provided by the Property, including the Garage operation. Expenses increased by $111,000 for the six months ended June 30, 2004, as compared to 2003, primarily due to increases in all expenses other than insurance and depreciation. 10 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) Quantitative and Qualitative Disclosures of Market Risk The Registrant does not have any financial instruments that would expose it to market risk associated with the risk of loss arising from adverse changes in market rates and prices. The Registrant's mortgage note payable at June 30, 2004 is at a fixed rate of interest. ITEM 3. CONTROLS AND PROCEDURES The Registrant's management, with the participation of the Registrant's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Registrant's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, the Registrant's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Registrant's disclosure controls and procedures are effective. There have not been any changes in the Registrant's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. 11 of 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibits required by Item 601 of Regulation S-B are filed herewith and are listed in the attached Exhibit Index. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the period ended June 30, 2004. 12 OF 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 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/ Thomas Staples -------------------------------------- Thomas Staples Chief Financial Officer DATED: August 13, 2004 13 OF 19 1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP FORM 10-QSB JUNE 30, 2004 Exhibit Index Exhibit Page No. - ------- -------- 31.1 Chief Executive Officer's Certification, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 15 - 16 31.2 Chief Financial Officer's Certification, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 17 - 18 32 Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 19 14 of 19