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 September 30, 2001
[ ] 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)
September 30, 2001
Assets
Cash and cash equivalents $ 876
Receivables and deposits 310
Restricted escrows 178
Other assets 1,088
Investment properties:
Land $ 2,391
Buildings and related personal property 36,855
39,246
Less accumulated depreciation (22,297) 16,949
$ 19,401
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 88
Tenant security deposit liabilities 157
Accrued property taxes 149
Due to affiliate 11
Other liabilities 288
Mortgage notes payable 19,698
Partners' Deficit
General partners $ (969)
Limited partners (23,139 units
issued and outstanding) (21) (990)
$ 19,401
See Accompanying Notes to Consolidated Financial Statements
b)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Nine Months
Ended September 30, Ended September 30,
2001 2000 2001 2000
(restated) (restated)
Revenues:
Rental income $ 1,677 $ 1,970 $ 5,004 $ 5,805
Other income 103 121 291 303
Total revenues 1,780 2,091 5,295 6,108
Expenses:
Operating 734 765 1,935 2,309
General and administrative 78 140 248 284
Depreciation 461 517 1,392 1,587
Interest 402 448 1,202 1,345
Property tax 95 142 292 420
Total expenses 1,770 2,012 5,069 5,945
Net income $ 10 $ 79 $ 226 $ 163
Net income allocated to general
partner (10%) $ 1 $ 8 $ 23 $ 16
Net income allocated to limited
partners (90%) 9 71 203 147
$ 10 $ 79 $ 226 $ 163
Net income per limited
partnership unit $ .39 $ 3.07 $ 8.77 $ 6.35
Distributions per limited
partnership unit $ -- $ -- $136.48 $ 37.94
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, 2000 23,139 $ (899) $ 2,934 $ 2,035
Distributions to partners -- (93) (3,158) (3,251)
Net income for the nine months
ended September 30, 2001 -- 23 203 226
Partners' deficit
at September 30, 2001 23,139 $ (969) $ (21) $ (990)
See Accompanying Notes to Consolidated Financial Statements
d)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
Cash flows from operating activities:
Net income $ 226 $ 163
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,392 1,587
Amortization of loan costs and deferred costs 53 87
Bad debt expense, net 104 163
Change in accounts:
Receivables and deposits (19) (327)
Other assets (117) 11
Accounts payable (179) 38
Tenant security deposit liabilities 7 4
Accrued property taxes 149 168
Due to Affiliate 11 --
Other liabilities 7 (1)
Net cash provided by operating activities 1,634 1,893
Cash flows from investing activities:
Property improvements and replacements (633) (1,214)
Net withdrawals from restricted escrows 81 15
Net cash used in investing activities (552) (1,199)
Cash flows from financing activities:
Payments on mortgage notes payable (254) (222)
Distributions paid to partners (3,251) (1,368)
Net cash used in financing activities (3,505) (1,590)
Net decrease in cash and cash equivalents (2,423) (896)
Cash and cash equivalents at beginning of period 3,299 1,889
Cash and cash equivalents at end of period $ 876 $ 993
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,137 $ 1,296
At September 30, 2000, accounts payable and property improvements and
replacements were adjusted by approximately $457,000 for non-cash activity.
Distributions of approximately $490,000 were accrued at December 31, 1999 and
paid in January 2000.
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 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. The general partner of the Partnership is Two Winthrop
Properties, Inc. (the "Managing General Partner"), an affiliate of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust. In the opinion of 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 and nine
month periods ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2001. 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, 2000.
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.
Segment Reporting
Statement of Financial Standards ("SFAS") No. 131, Disclosure about Segments of
an Enterprise and Related Information established standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
established standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the consolidated financial statements as currently presented.
Reclassification
Certain reclassifications have been made to the 2000 balances to conform to the
2001 presentation.
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 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 its affiliates during the nine
months ended September 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $271 $303
Reimbursement for services of affiliates (included in
investment properties, operating expense and general
and administrative expenses) 216 191
During the nine months ended September 30, 2001 and 2000, affiliates of the
Managing General Partner were entitled to receive from 5% to 7.87% of gross
receipts from all of the Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $271,000 and $303,000 during the nine months ended September 30,
2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursements of
accountable administrative expenses amounting to approximately $216,000 and
$191,000 for the nine months ended September 30, 2001 and 2000, respectively.
Construction service reimbursements of approximately $41,000 and $6,000 are
included in these amounts for the nine months ended September 30, 2001 and 2000,
respectively.
During the nine months ended September 30, 2001, an affiliate of the Managing
General Partner loaned the Partnership approximately $131,000, including
interest. The amount was repaid during July 2001.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 9,396.25 limited partnership units
in the Partnership representing 40.61% of the outstanding units at September 30,
2001. 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
acquire additional limited partnership interests in the Partnership for cash or
in exchange for units in the operating partnership of AIMCO either through
private purchases or tender offers. In this regard, on August 30, 2001, AIMCO
Properties, LP, commenced a tender offer to acquire any and all of the Units not
owned by affiliates of AIMCO for a purchase price of $466 per Unit. Pursuant to
this offer, AIMCO acquired 297 Units during the quarter ended September 30,
2001. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include voting on certain amendments to the Partnership Agreement and
voting to remove the Managing General Partner. As a result of its ownership of
40.61% of the outstanding units, AIMCO is in a position of influence all voting
decisions with respect to the Partnership. 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 its affiliation with 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 and nine months ended
September 30, 2001 (in thousands):
Three Months Ended Nine months Ended
September 30, 2001 September 30, 2001
Net Income $ 10 $ 226
Add: Amortization expense 14 53
Depreciation expense 461 1,392
Less: Cash (to reserves)
released from reserves (435) 1,580
Cash available for distribution $ 50 $3,251
Distributions allocated to
Limited Partners $ 50 $3,158
General Partners' interest in
cash available for distribution $ -- $ 93
Note D - Distributions
During the nine months ended September 30, 2001, the Partnership paid
distributions to the partners of approximately $3,251,000 (approximately
$3,158,000 to the limited partners or $136.48 per limited partnership unit).
These distributions consisted of approximately $1,893,000 (approximately $81.81
per limited partnership unit) all to the limited partners from the refinancing
proceeds of Ashton Ridge Apartments and approximately $97,000 all to the limited
partners ($4.18 per limited partnership unit) from the remaining sale proceeds
of Sunflower Apartments. The distributions also consisted of approximately
$1,261,000 (approximately $1,168,000 to the limited partners or $50.49 per
limited partnership unit) from operations of the Partnership's remaining
investment properties.
During the nine months ended September 30, 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. In addition, the Partnership declared and paid cash
distributions to the limited partners from operations of approximately $878,000
($37.94 per limited partnership unit) during the nine months ended September 30,
2000.
Subsequent to September 30, 2001, the Partnership declared a distribution of
approximately $50,000 (approximately $2.16 per limited partnership unit) to the
limited partners from operations. Also, the Partnership is recouping
approximately $8,000 of state withholding taxes paid on behalf of the partners.
Note E - Change in Accounting Estimate
During the nine months ended September 30, 2001, certain accruals of
approximately $103,000 established related to the sale of Sunflower Apartments
in December 2000 were reversed due to actual costs being less than anticipated.
This accrual reversal is included as a reduction of operating expenses in the
nine month period ended September 30, 2001.
Note F - Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
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 three apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 2001 and 2000:
Average Occupancy
2001 2000
Ashton Ridge Apartments
Jacksonville, Florida 96% 94%
Stratford Place Apartments
Gaithersburg, Maryland 96% 98%
Stratford Village Apartments
Montgomery, Alabama 91% 92%
Results of Operations
The Partnership reported net income of approximately $226,000 for the nine
months ended September 30, 2001 as compared to net income of approximately
$163,000 for the nine months ended September 30, 2000. The Partnership reported
net income of approximately $10,000 for the three months ended September 30,
2001 as compared to approximately $79,000 for the three months ended September
30, 2000. The increase in net income for the nine month period ended September
30, 2001 is due primarily to a decrease in total expenses as a result of the
sale of Sunflower Apartments in December 2000 partially offset by a decrease in
total revenues. The decrease in net income for the three month period ended
September 30, 2001 is due to a decrease in total revenues and a decrease in
total expenses also as a result of the sale of Sunflower Apartments. Excluding
the impact of the reversal of $103,000 in accruals related to the sale of
Sunflower Apartments for the nine months ended September 30, 2001 and the impact
of operations of Sunflower Apartments, the Partnership's net income for the nine
months ended September 31, 2001 was approximately $123,000 as compared to a net
loss of approximately $20,000 for the nine months ended September 30, 2000. The
Partnership's net income was approximately $9,000 for both three month periods
ended September 30, 2001 and 2000, respectively. The increase in net income for
the nine month period was due to an increase in total revenues partially offset
by an increase in total expenses. Net income for the three month period remained
constant as a result of an increase in total revenues offset by an increase in
total expenses. Total revenues increased for the three and nine months ended
September 30, 2001 due to an increase in rental income and other income. Rental
income increased due to an increase in average rental rates at Ashton Ridge
Apartments and Stratford Place Apartments, an increase in occupancy at Ashton
Ridge Apartments and a decrease in bad debt expense at Ashton Ridge Apartments,
which were partially offset by a decrease in average rental rates at Stratford
Village Apartments. Other income increased due to an increase in utilities
reimbursements at Ashton Ridge Apartments and higher cash balances maintained in
interest bearing accounts.
Total expenses increased for the three and nine months ended September 30, 2001
due primarily to an increase in operating and depreciation expenses partially
offset by a decrease in general and administrative expense. Operating expense
increased due to an increase in property expenses and insurance expense
primarily at Ashton Ridge Apartments and Stratford Place Apartments. Property
expense increased due to an increase in salaries and related benefits at Ashton
Ridge Apartments and an increase in utility reimbursements at Stratford Place
Apartments as a result of vacant apartments. The increase in insurance expense
is the result of an increase in insurance premiums at Ashton Ridge Apartments
and Stratford Place Apartments. Depreciation expense increased at all the
Partnership's properties due to the increase in property improvements and
replacements placed into service during the past twelve months which are now
being depreciated.
General and administrative expenses decreased for both the three and nine months
periods due to a decrease in the cost of services included in the management
reimbursements to the General Partner as allowed under the Partnership Agreement
and legal and professional fees associated with managing the partnership
partially offset by an increase in audit fees. Also included in general and
administrative expense are costs associated with the quarterly and annual
communications with investors and regulatory agencies.
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 September 30, 2001, the Partnership had cash and cash equivalents of
approximately $876,000 compared to approximately $993,000 at September 30, 2000.
The decrease in cash and cash equivalents for the nine months ended September
30, 2001 from the Partnership's year ended December 31, 2000 was approximately
$2,423,000. This decrease is due to approximately $3,505,000 of cash used in
financing activities and approximately $552,000 of cash used in investing
activities which were partially offset by approximately $1,634,000 of cash
provided by operating activities. Cash used in financing activities consisted
primarily of distributions paid to the limited partners and, to a lesser extent,
principal payments made on the mortgages encumbering the Partnership's
investment properties. Cash used in investing activities consisted of property
improvements and replacements partially offset by net withdrawals from
restricted escrows maintained by the mortgage lenders. The Partnership invests
its working capital reserves in interest bearing accounts.
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
for each of the Partnership's properties are detailed below.
Ashton Ridge Apartments
During the nine months ended September 30, 2001, the Partnership spent
approximately $254,000 for capital improvements consisting primarily of
structural improvements, floor covering and appliance replacements, the
installation of a sprinkler system, and air conditioning unit replacements.
These improvements were funded from operating cash flow and replacement
reserves. Approximately $390,000 has been budgeted for capital improvements
during the year 2001 at Ashton Ridge Apartments consisting primarily of floor
covering and appliance replacements, installation of a sprinkler system,
plumbing improvements, and air conditioning unit replacement. 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
During the nine months ended September 30, 2001, the Partnership spent
approximately $206,000 for budgeted and non-budgeted capital improvements
consisting primarily of counter top replacements, structural improvements,
plumbing enhancements, and floor covering and appliance replacements. These
improvements were funded from Partnership reserves and operating cash flow.
Approximately $110,000 has been budgeted, but is not limited to, for capital
improvements during the year 2001 at Stratford Place Apartments consisting
primarily of floor covering replacements, water heater replacements, air
conditioning unit replacements, and appliance replacements. 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
During the nine months ended September 30, 2001, the Partnership spent
approximately $173,000 for capital improvements consisting primarily of major
landscaping, floor covering and appliance replacements, air conditioning
improvements, structural improvements, and interior decorations. These
improvements were funded from Partnership reserves and operating cash flow.
Approximately $185,000 has been budgeted for capital improvements during the
year 2001 at Stratford Village Apartments consisting primarily of air
conditioning unit replacements, floor covering and appliance replacements, and
plumbing enhancements. 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 $19,698,000 has maturity dates ranging from July
2006 to November 2024 at which time the mortgages will be fully amortized.
During the nine months ended September 30, 2001, the Partnership paid
distributions to the partners of approximately $3,251,000 (approximately
$3,158,000 to the limited partners or $136.48 per limited partnership unit).
These distributions consisted of approximately $1,893,000 (approximately $81.81
per limited partnership unit) all to the limited partners from the refinancing
proceeds of Ashton Ridge Apartments and approximately $97,000 all to the limited
partners ($4.18 per limited partnership unit) from the remaining sale proceeds
of Sunflower Apartments. The distributions also consisted of approximately
$1,261,000 (approximately $1,168,000 to the limited partners or $50.49 per
limited partnership unit) from operations of the Partnership's remaining
investment properties.
During the nine months ended September 30, 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. In addition, the Partnership declared and paid cash
distributions to the limited partners from operations of approximately $878,000
($37.94 per limited partnership unit) during the nine months ended September 30,
2000.
Subsequent to September 30, 2001, the Partnership declared a distribution of
approximately $50,000 (approximately $2.16 per limited partnership unit) to the
limited partners from operations. Also, the Partnership is recouping
approximately $8,000 of state withholding taxes paid on behalf of the partners.
The Partnership's distribution policy is reviewed on a monthly 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 additional distributions to its
partners during the remainder of 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 9,396.25 limited partnership units
in the Partnership representing 40.61% of the outstanding units at September 30,
2001. 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
acquire additional limited partnership interests in the Partnership for cash or
in exchange for units in the operating partnership of AIMCO either through
private purchases or tender offers. In this regard, on August 30, 2001, AIMCO
Properties, LP, commenced a tender offer to acquire any and all of the Units not
owned by affiliates of AIMCO for a purchase price of $466 per Unit. Pursuant to
this offer, AIMCO acquired 297 Units during the quarter ended September 30,
2001. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include voting on certain amendments to the Partnership Agreement and
voting to remove the Managing General Partner. As a result of its ownership of
40.61% of the outstanding units, AIMCO is in a position to influence all voting
decisions with respect to the Partnership. 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 its affiliation with the
Managing General Partner.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K filed during the quarter ended September 30,
2001:
None.
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: November 6, 2001