FORM 10-QSB.--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. 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 2-84760
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2839837
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
(Unaudited)
March 31, 1998
Assets
Cash and cash equivalents $ 1,708
Receivables and deposits 658
Restricted escrows 1,140
Other assets 1,226
Investment properties:
Land $ 4,015
Buildings and related personal property 39,527
43,542
Less accumulated depreciation (22,093) 21,449
$ 26,181
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 123
Tenant security deposit liabilities 153
Other liabilities 461
Mortgage notes payable 21,270
Partners' (Deficit) Capital
General Partners' $ (1,262)
Limited Partners' (23,139 units
issued and outstanding) 5,436 4,174
$ 26,181
See Accompanying Notes to Consolidated Financial Statements
b)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
(Unaudited)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $1,712 $1,692
Other income 64 85
Total revenues 1,776 1,777
Expenses:
Operating 728 797
General and administrative 42 73
Depreciation 444 396
Interest 469 457
Property taxes 137 138
Total expenses 1,820 1,861
Net loss $ (44) $ (84)
Net loss allocated to general partners (10%) $ (4) $ (8)
Net loss allocated to limited partners (90%) (40) (76)
$ (44) $ (84)
Net loss per limited partnership unit $(1.71) $(3.28)
Distributions per limited partnership unit $ -- $ 2.16
See Accompanying Notes to Consolidated Financial Statements
c)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
(Unaudited)
Limited
Partnership General Limited
Units Partners' Partners' Total
Original capital contributions 23,149 $ 2,000 $ 23,149 $ 25,149
Partners' (deficit) capital at
December 31, 1997 23,139 $ (1,258) $ 5,476 $ 4,218
Net loss for the three months
ended March 31, 1998 -- (4) (40) (44)
Partners' (deficit) capital at
March 31, 1998 23,139 $ (1,262) $ 5,436 $ 4,174
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
d)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net loss $ (44) $ (84)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 444 396
Amortization of loan costs and deferred costs 33 30
Change in accounts:
Receivables and deposits (65) (282)
Other assets 34 19
Accounts payable (26) (119)
Tenant security deposit liabilities 6 (1)
Other liabilities 19 116
Net cash provided by operating activities 401 75
Cash flows from investing activities:
Property improvements and replacements (68) (143)
Net (deposits to) withdrawals from
restricted escrows (72) 18
Net cash used in investing activities (140) (125)
Cash flows from financing activities:
Payments on mortgage notes payable (61) (56)
Distributions to partners -- (50)
Net cash used in financing activities (61) (106)
Net increase (decrease) in cash and cash equivalents 200 (156)
Cash and cash equivalents at beginning of period 1,508 1,348
Cash and cash equivalents at end of period $1,708 $1,192
Supplemental disclosure of cash flow information:
Cash paid for interest $ 449 $ 457
See Accompanying Notes to Consolidated Financial Statements
e)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Winthrop Growth Investors 1
Limited Partnership, (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Two Winthrop Properties, Inc. (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1998, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1998.
For further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1997.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership paid property management fees based
upon collected gross rental revenues for property management services as noted
below for the three months ended March 31, 1998 and 1997. Such fees are
included in operating expenses on the consolidated statements of operations and
are reflected in the following table. The Partnership Agreement provides for
reimbursement to the Managing General Partner and its affiliates for certain
expenses incurred in connection with the administration of Partnership
activities. The Managing General Partner and its affiliates received
reimbursements and fees as reflected in the following table (in thousands):
For the Three Months Ended
March 31,
1998 1997
Property management fees $ 73 $ 86
Reimbursements for services of affiliates 19 46
On October 28, 1997, Insignia Financial Group, Inc. ("Insignia") acquired 100%
of the Class B stock of First Winthrop Corporation. Pursuant to this
transaction, the by-laws of the Managing General Partner were amended to provide
for the creation of a Residential Committee. Pursuant to the amended and
restated by-laws, Insignia has the right to elect one director to the Managing
General Partner's Board of Directors and appoint the members of the Residential
Committee. The Residential Committee is generally authorized to cause the
Managing General Partner to take such actions as it deems necessary and
advisable in connection with the activities of the Partnership. The Managing
General Partner does not believe that this transaction will have a material
effect on the affairs and operations of the Partnership.
On February 6, 1997, LON-WGI Associates L.L.C. ("LON-WGI") commenced an offer to
purchase up to 11,000 units of limited partnership interest in the Partnership
(the "Offer") for $275 per unit, which units represent approximately 47.5% of
the total outstanding units in the Partnership. The members of LON-WGI and the
Managing General Partner are affiliates. As a result of this affiliation, the
Partnership remained neutral as to whether the Limited Partners should tender
their units pursuant to the Offer. Based on filings with the Securities and
Exchange Commission, LON-WGI acquired 4,792.34 units or approximately 20.7% of
the total limited partnership units of the Partnership. On October 28, 1997,
LON-WGI entered into an agreement to sell its units to Insignia. On April 30,
1998, Insignia completed the purchase of 4,872.34 limited partnership units from
LON-WGI. As a result of its ownership of 4,872.34 limited partnership units
Insignia could be in a position to significantly influence all voting decisions
with respect to the Registrant. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters. When voting on matters Insignia would in all likelihood
vote such Units in a manner favorable to the interest of the Managing General
Partner because of their affiliation with the Managing General Partner.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders. If the closing occurs, AIMCO will then control the Residential
Committee of the Managing General Partner.
NOTE C - SUPPLEMENTARY INFORMATION REQUIRED PURSUANT TO SECTION 9.4 OF THE
PARTNERSHIP AGREEMENT
Statement of Cash Available for Distribution for the three months ended March
31, 1998:
Net Loss $ (44,000)
Add: Amortization expense 33,000
Depreciation Expense 444,000
Less: Cash to reserves (433,000)
Cash Available for
Distribution $ --
Distributions allocated to
Limited Partners $ --
General Partners' interest in
Cash Available for Distribution $ --
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This item should be read in conjunction with the financial statements and other
items contained elsewhere in the report.
The Partnership's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 1998 and 1997:
Average
Occupancy
1998 1997
Meadow Wood Apartments 84% 91%
Jacksonville, Florida
Stratford Place Apartments 95% 99%
Gaithersburg, Maryland
Stratford Village Apartments 90% 87%
Montgomery, Alabama
Sunflower Apartments 98% 94%
Dallas, Texas
Although average occupancy rates for the three months ended March 31, 1998 vary
from the rates for the same period in 1997, they are consistent with the average
annual occupancy rates and/or trends noted for the year ended December 31, 1997.
Results of Operations
The Partnership realized a net loss of approximately $44,000 for the three
months ended March 31, 1998, compared to a net loss of approximately $84,000 for
the same period in 1997. The decrease in net loss is primarily due to a
decrease in operating expense and general and administrative expenses, partially
offset by an increase in depreciation expense. Total revenues for the three
months ended March 31, 1998 were consistent with the same period in 1997, with
overall rental rate increases at the Partnership's investment properties offset
by decreases in other income related to lower tenant charges at the Sunflower
and Stratford Village properties. Operating expenses decreased due to decreases
in advertising, property, and repairs and maintenance expenses. The decrease in
property expense is primarily attributable to decreases in payroll and utilities
costs at the Sunflower Apartments property. General and administrative expenses
decreased primarily due to a decrease in reimbursements for services of
affiliates. The increase in depreciation expense is attributable to the
increase in capital improvements during 1997. Included in operating expense for
the three months ended March 31, 1998 is approximately $9,000 in major repairs
and maintenance, which is comprised primarily of parking lot repairs at
Stratford Village.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Managing General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
Liquidity and Capital Resources
At March 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,708,000, as compared to approximately $1,192,000 at March 31,
1997. The net increase in cash and cash equivalents for the three months ended
March 31, 1998 was approximately $200,000, as compared to a decrease of
approximately $156,000 for the three months ended March 31, 1997. Net cash
provided by operating activities increased due to a decrease in net loss, as
discussed above, as well as reductions in the use of cash for receivables and
deposits, accounts payable and other assets due to the timing of payments. Net
cash used in investing activities increased due to net additions to restricted
escrows, which were partially offset by decreased property improvements and
replacements. Net cash used in financing activities declined due to the absence
of cash distributions to the partners during the three months ended March 31,
1998 as compared to the same period of 1997.
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 properties to adequately maintain the physical
assets and the other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $21,270,000 is being amortized over
varying periods with balloon payments due at maturity of approximately
$4,000,000 in 2000 and $8,000,000 in 2006, at which time the properties will
either be refinanced or sold. Cash distributions of $50,000 were paid to the
limited partners during the first three months of 1997. No distributions were
paid during the comparable period in 1998. Future cash distributions will
depend on the levels of net cash generated from operations, property sales,
refinancings and the availability of cash reserves.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
By: Two Winthrop Properties, Inc.
Managing General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
Residential Vice President
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
Residential Vice President
Date: May 15, 1998