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, 2000
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO 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 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2000
Assets
Cash and cash equivalents $ 1,249
Receivables and deposits, net of allowance of $52 620
Restricted escrows 469
Other assets 1,043
Investment properties:
Land $ 4,015
Buildings and related personal property 42,861
46,876
Less accumulated depreciation (25,935) 20,941
$ 24,322
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 223
Tenant security deposit liabilities 177
Accrued property taxes 72
Other liabilities 299
Mortgage notes payable 20,732
Partners' (Deficit) Capital
General partners $ (1,279)
Limited partners (23,139 units
issued and outstanding) 4,098 2,819
$ 24,322
See Accompanying Notes to Consolidated Financial Statements
b)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
Revenues:
Rental income $1,949 $1,833
Other income 84 73
Total revenues 2,033 1,906
Expenses:
Operating 754 732
General and administrative 59 42
Depreciation 532 464
Interest 448 457
Property taxes 140 90
Bad debt expense, net 98 21
Total expenses 2,031 1,806
Net income $ 2 $ 100
Net income allocated to general partners (10%) $ -- $ 10
Net income allocated to limited partners (90%) 2 90
$ 2 $ 100
Net income per limited partnership unit $ 0.09 $ 3.89
See Accompanying Notes to Consolidated Financial Statements
c)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
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, 1999 23,139 $(1,279) $ 4,096 $ 2,817
Net income for the three months
ended March 31, 2000 -- -- 2 2
Partners' (deficit) capital
at March 31, 2000 23,139 $(1,279) $ 4,098 $ 2,819
See Accompanying Notes to Consolidated Financial Statements
d)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net income $ 2 $ 100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 532 464
Amortization of loan costs and deferred costs 24 28
Casualty gain -- (82)
Bad debt expense, net 98 21
Change in accounts:
Receivables and deposits (44) (194)
Other assets 31 10
Accounts payable 65 (61)
Tenant security deposit liabilities 7 (1)
Accrued property taxes (67) 133
Other liabilities 8 17
Net cash provided by operating activities 656 435
Cash flows from investing activities:
Property improvements and replacements (677) (267)
Net insurance proceeds from casualties -- 96
Net (deposits to) withdrawals from restricted escrows (55) 34
Net cash used in investing activities (732) (137)
Cash flows from financing activities:
Payments on mortgage notes payable (74) (66)
Distributions paid to limited partners (490) (600)
Net cash used in financing activities (564) (666)
Net decrease in cash and cash equivalents (640) (368)
Cash and cash equivalents at beginning of period 1,889 1,863
Cash and cash equivalents at end of period $ 1,249 $ 1,495
Supplemental disclosure of cash flow information:
Cash paid for interest $ 432 $ 440
At December 31, 1999 and March 31, 2000, accounts payable and property
improvements and replacements were adjusted by approximately $457,000 for
non-cash activity.
See Accompanying Notes to Consolidated Financial Statements
e)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERHSIP
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Winthrop Growth
Investors 1 Limited Partnership (the "Partnership" or "Registrant") 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., a
Massachusetts corporation (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, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
Principles of Consolidation
The consolidated statements of the Partnership include its 99%, 99.9%, and
99.98% general partnership interests in DEK Associates, Meadow Wood Associates,
and Stratford Place Investors Limited Partnership, respectively. Additionally,
the Partnership is the 100% beneficiary of the Stratford Village Realty Trust.
All significant interpartnership balances have been eliminated.
Certain reclassifications have been made to the 1999 amounts to conform to the
2000 presentation.
Note B - Transfer of Control
On October 28, 1997, Insignia Financial Group, Inc. ("Insignia") acquired 100%
of the Class B stock of First Winthrop Corporation, the sole shareholder of the
Managing General Partner as well as a 20.7% limited partnership interest in the
Partnership. 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 had the right to elect
one director to the Managing General Partner's Board of Directors and to cause
the Managing General Partner to take such actions as it deemed necessary and
advisable in connection with the activities of the Partnership.
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and Insignia Properties Trust merged into Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust, with AIMCO being the surviving corporation. As a result, AIMCO
acquired all of the rights of Insignia in and to the limited partnership
interest and the rights granted to Insignia pursuant to the First Winthrop
Corporation transaction. The Managing General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Note C - 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 Agreement provides for certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were paid or
accrued to the Managing General Partner and affiliates during the three months
ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 97 $ 93
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expenses) 35 14
During the three months ended March 31, 2000 and 1999, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from all
of the Partnership's properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$97,000 and $93,000 during the three months ended March 31, 2000 and 1999,
respectively.
An affiliate of the Managing General Partner received reimbursements of
accountable administrative expenses amounting to approximately $35,000 and
$14,000 for the three months ended March 31, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 6,474.34 limited partnership units in the
Partnership representing 27.98% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. 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, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
Note D - 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, 2000 and 1999 (in thousands):
2000 1999
Net Income $ 2 $ 100
Add: Amortization expense 24 28
Depreciation expense 532 464
Less: Cash to reserves (58) (592)
Cash available for distribution $ 500 $ --
Distributions allocated to
Limited Partners $ 500 $ --
General Partners' interest in
cash available for distribution $ -- $ --
Note E - Distributions
There were no distributions declared during the three months ended March 31,
2000 and 1999. During the three months ended March 31, 2000, the Partnership
paid a distribution to the limited partners from operations of approximately
$490,000 ($21.18 per limited partnership unit) which had been declared and
accrued at December 31, 1999. Subsequent to March 31, 2000, a distribution to
the limited partners from operations of approximately $500,000 ($21.60 per
limited partnership unit) was declared. During the three months ended March 31,
1999, the Partnership paid a distribution to the limited partners from
operations of approximately $600,000 ($25.93 per limited partnership unit) which
was declared and accrued at December 31, 1998.
Note F - Mortgage Notes Payable
Although there is no assurance that it will be able to do so, the Managing
General Partner believes it will be able to refinance the debt at Ashton Ridge
Apartments maturing in December 2000.
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential properties. The Partnership's residential property segment consists
of four apartment complexes, one each located in Alabama, Florida, Maryland, and
Texas. The Partnership rents apartment units to tenants for terms that are
typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segments are the same as those of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the year ended December 31,
1999.
Factors management used to identify the Partnership's reportable segment: The
Partnership's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the three month periods ended March 31, 2000 and 1999,
is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segment.
2000 Residential Other Totals
(in thousands)
Rental income $ 1,949 $ -- $ 1,949
Other income 80 4 84
Depreciation 532 -- 532
Interest expense 448 -- 448
General and administrative expense -- 59 59
Bad debt expense 98 -- 98
Segment profit (loss) 57 (55) 2
Total assets 23,799 523 24,322
Capital expenditures for investment
properties 220 -- 220
1999 Residential Other Totals
(in thousands)
Rental income $ 1,833 $ -- $ 1,833
Other income 65 8 73
Depreciation 464 -- 464
Interest expense 457 -- 457
General and administrative expense -- 42 42
Bad debt expense 21 -- 21
Segment profit (loss) 134 (34) 100
Total assets 24,593 881 25,474
Capital expenditures for investment
properties 267 -- 267
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 the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business 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 business and
results of 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.
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, 2000 and 1999:
Average Occupancy
2000 1999
Ashton Ridge Apartments (formerly
Meadow Wood Apartments)
Jacksonville, Florida 93% 85%
Stratford Place Apartments
Gaithersburg, Maryland 98% 98%
Stratford Village Apartments
Montgomery, Alabama 92% 95%
Sunflower Apartments
Dallas, Texas 98% 95%
The Managing General Partner attributes the increase in occupancy at Ashton
Ridge to the completion of renovation projects at the property which enhanced
the property's curb appeal and improved marketing efforts. The Managing General
Partner attributes the decrease in occupancy at Stratford Village to increased
competition in the apartment rental market of Montgomery, Alabama. The Managing
General Partner attributes the increase in occupancy at Sunflower Apartments to
increased marketing efforts.
Results of Operations
The Partnership's net income for the three months ended March 31, 2000, was
approximately $2,000 compared to net income of approximately $100,000 for the
corresponding period in 1999. The decrease in net income is primarily
attributable to an increase in total expenses that more than offset the increase
in total revenues. The increase in total expenses is primarily attributable to
an increase in depreciation, property tax, bad debt, and general and
administrative expenses. Depreciation expense increased at all the Partnership's
properties due to an increase in depreciable assets placed into service over the
past year. Property tax expense increased primarily due to a refund received in
1999 for the Stratford Place Apartments and increased assessed values at the
Partnership's other properties. Bad debt expense increased due to an increase in
tenant evictions which resulted in tenant receivable balances being written off
during the three months ended March 31, 2000. The Managing General Partner has
turned these accounts over to a collection agency. General and administrative
expenses increased due to an increase in general partner reimbursements allowed
under the Partnership Agreement. Included in general and administrative expenses
are reimbursements to affiliates of the Managing General Partner allowed under
the Partnership Agreement associated with its management of the Partnership. In
addition, costs associated with the quarterly and annual communications with
investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included.
The increase in total revenues is attributable to an increase in both rental
income and other income. Rental income increased due to increased average rental
rates at all the Partnership's properties, and an increase in occupancy at
Ashton Ridge and Sunflower Apartments. Other income increased due to increases
in vending income, telephone commissions, and tenant charges, partially offset
by reduced interest income due to lower cash balances in interest bearing
accounts.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. 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, 2000, the Partnership had cash and cash equivalents of
approximately $1,249,000 compared to approximately $1,495,000 at March 31, 1999.
The decrease in cash and cash equivalents for the three months ended March 31,
2000 from the Partnership's year ended December 31, 1999 was approximately
$640,000. This decrease is due to approximately $732,000 of cash used in
investing activities and approximately $564,000 of cash used in financing
activities partially offset by approximately $656,000 of cash provided by
operating activities. Cash used in investing activities consisted of property
improvements and replacements and net deposits to restricted escrows maintained
by the mortgage lenders. Cash used in financing activities consisted of
distributions paid to the limited partners and principal payments made on
mortgages encumbering the Partnership's investment properties. The Partnership
invests its working capital reserves in a money market account.
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 other operating needs of the Partnership and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
the each of the Partnership's properties are detailed below.
Ashton Ridge Apartments
Approximately $141,000 has been budgeted for capital improvements during the
year 2000 at Ashton Ridge Apartments consisting primarily of floor covering
replacements, air conditioning unit replacement, and appliance replacement.
During the three months ended March 31, 2000, the Partnership spent
approximately $84,000 for capital improvements consisting primarily of floor
covering replacement, water meter and sewer upgrades, and appliance replacement.
These improvements were funded from operating cash flow and replacement
reserves. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Stratford Place Apartments
Approximately $114,000 has been budgeted for capital improvements during the
year 2000 at Stratford Place Apartments consisting primarily of carpet
replacement, water heater replacements, air conditioning unit replacements, and
appliance replacements. During the three months ended March 31, 2000, the
Partnership spent approximately $96,000 for capital improvements consisting
primarily of carpet replacement, plumbing enhancements, other building
improvements, and land improvements. These improvements were funded from
operating cash flow. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
Stratford Village Apartments
Approximately $225,000 has been budgeted for capital improvements during the
year 2000 at Stratford Village Apartments consisting primarily of roof
replacements, floor covering replacements, parking lot upgrades, and structural
upgrades. During the three months ended March 31, 2000, the Partnership spent
approximately $25,000 for capital improvements consisting primarily of floor
covering replacements, appliance replacements and air conditioning replacements.
These improvements were funded from operating cash flow. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
Sunflower Apartments
Approximately $80,000 has been budgeted for capital improvements during the year
2000 at Sunflower Apartments consisting primarily of floor covering replacement,
interior decoration, appliance replacement, and major landscaping. During the
three months ended March 31, 2000, the Partnership spent approximately $15,000
for capital improvements consisting primarily of floor covering replacement, and
other building enhancements. These improvements were funded from operating cash
flow. Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $20,732,000 is amortized over varying periods with
balloon payments of approximately $4,071,000 in December 2000 and $8,000,000 in
2006. The Managing General Partner will attempt to refinance such indebtedness
and/or sell the properties prior to such maturity date. If the properties cannot
be refinanced or sold for a sufficient amount, the Partnership will risk losing
such properties through foreclosure.
There were no distributions declared during the three months ended March 31,
2000 and 1999. During the three months ended March 31, 2000, the Partnership
paid a distribution to the limited partners from operations of approximately
$490,000 ($21.18 per limited partnership unit) which had been declared and
accrued at December 31, 1999. Subsequent to March 31, 2000, a distribution to
the limited partners from operations of approximately $500,000 ($21.60 per
limited partnership unit) was declared. During the three months ended March 31,
1999, the Partnership paid a distribution to the limited partners from
operations of approximately $600,000 ($25.93 per limited partnership unit) which
was declared and accrued at December 31, 1998. The Partnership's distribution
policy is reviewed on a semi-annual basis. Future cash distributions will depend
on the levels of net cash generated from operations, the availability of cash
reserves, and the timing of debt maturities, refinancings and/or property sales.
There can be no assurance, however, that the Partnership will generate
sufficient funds from operations, after required capital expenditures, to permit
distributions to its partners during the remainder of 2000 or subsequent
periods.
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, 2000.
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/Patrick J. Foye
Patrick J. Foye
Vice President - Residential
By: /s/Martha L. Long
Martha L. Long
Vice President and
Controller - Residential
Date: