UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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 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
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2004
Assets
Cash and cash equivalents $ 1,420
Receivables and deposits 512
Restricted escrows 168
Other assets 418
Investment properties:
Land $ 2,058
Buildings and related personal property 28,977
31,035
Less accumulated depreciation (20,619) 10,416
$ 12,934
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 89
Tenant security deposit liabilities 178
Accrued property taxes 111
Other liabilities 144
Mortgage notes payable 13,753
Partners' Deficit
General partners $ (92)
Limited partners (23,139 units
issued and outstanding) (1,249) (1,341)
$ 12,934
See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
Revenues:
Rental income $ 1,339 $ 1,401 $ 2,681 $ 2,759
Other income 128 127 249 270
Casualty gain (Note D) -- 44 -- 44
Total revenues 1,467 1,572 2,930 3,073
Expenses:
Operating 610 598 1,183 1,137
General and administrative 46 55 90 108
Depreciation 362 375 728 745
Interest 278 286 558 573
Property tax 112 86 224 173
Total expenses 1,408 1,400 2,783 2,736
Income from continuing operations 59 172 147 337
Income from discontinued
operations (Note A and Note E) -- 120 -- 120
Gain on sale of discontinued
operations (Note E) -- 78 -- 78
Net income $ 59 $ 370 $ 147 $ 535
Net income allocated to general
partners (10%) $ 6 $ 37 $ 15 $ 53
Net income allocated to limited
partners (90%) 53 333 132 482
$ 59 $ 370 $ 147 $ 535
Per limited partnership unit:
Income from continuing operations $ 2.29 $ 6.70 $ 5.70 $ 13.14
Income from discontinued
operations -- 4.66 -- 4.66
Gain on sale of discontinued
operations -- 3.03 -- 3.03
Net income $ 2.29 $ 14.39 $ 5.70 $ 20.83
Distributions per limited
partnership unit $ -- $ 60.97 $ -- $ 73.94
See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 23,149 $ 2 $23,149 $23,151
Partners' deficit at
December 31, 2003 23,139 $ (107) $(1,381) $(1,488)
Net income for the six months
ended June 30, 2004 -- 15 132 147
Partners' deficit
at June 30, 2004 23,139 $ (92) $(1,249) $(1,341)
See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
Cash flows from operating activities:
Net income $ 147 $ 535
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 728 745
Amortization of loan costs and deferred costs 25 9
Bad debt expense, net 85 80
Casualty gain -- (44)
Change in accounts:
Receivables and deposits (195) (20)
Other assets 36 9
Accounts payable (50) (82)
Tenant security deposit liabilities (4) 11
Accrued property taxes 111 75
Other liabilities 6 (53)
Net cash provided by operating activities 889 1,265
Cash flows from investing activities:
Property improvements and replacements (127) (213)
Insurance proceeds received -- 44
Net (deposits to) withdrawals from restricted escrows (21) 1
Net cash used in investing activities (148) (168)
Cash flows from financing activities:
Payments on mortgage notes payable (206) (178)
Distributions paid to partners -- (1,830)
Net cash used in financing activities (206) (2,008)
Net increase (decrease) in cash and cash equivalents 535 (911)
Cash and cash equivalents at beginning of period 885 1,504
Cash and cash equivalents at end of period $ 1,420 $ 593
Supplemental disclosure of cash flow information:
Cash paid for interest $ 579 $ 560
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 37 $ 15
See Accompanying Notes to Consolidated Financial Statements
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 six
months ended June 30, 2004 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2004. 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, 2003.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
consolidated statement of operations for the three and six months ended June 30,
2003 reflect the operations of Stratford Village Apartments as income from
discontinued operations due to the property's sale in November 2002.
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.
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Partnership's properties as compensation for providing
property management services. The Partnership paid to such affiliates
approximately $147,000 and $148,000 during the six months ended June 30, 2004
and 2003, respectively, which is included in operating expenses.
An affiliate of the Managing General Partner earned reimbursements of
accountable administrative expenses amounting to approximately $63,000 and
$81,000 for the six months ended June 30, 2004 and 2003, respectively, which is
included in general and administrative expenses and investment properties.
Included in these amounts are fees related to construction management services
provided by an affiliates of the Managing General Partner of approximately
$4,000 and $1,000 for the six months ended June 30, 2004 and 2003, respectively.
The construction management service fees are calculated based on a percentage of
certain additions to investment properties.
The Partnership insures its properties up to certain limits through coverage
provided by AIMCO which is generally self-insured for a portion of losses and
liabilities related to workers compensation, property casualty and vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the
Managing General Partner. During the six months ended June 30, 2004 and 2003,
the Partnership was charged by AIMCO and its affiliates approximately $45,000
and $69,000, respectively, for insurance coverage and fees associated with
policy claims administration.
Note C - Supplementary Information Required Pursuant to Section 9.4 of the
Partnership Agreement
Statement of cash available for distribution for the three and six months ended
June 30, 2004 (in thousands):
Three Months Six Months
Ended Ended
June 30, June 30,
2004 2004
Net Income $ 59 $ 147
Add: Amortization expense 14 25
Depreciation expense 362 728
Less: Cash to reserves (435) (900)
Cash available for distribution $ -- $ --
Note D - Casualty Gain
During the six months ended June 30, 2003, there was a casualty gain of
approximately $44,000 recorded at Ashton Ridge Apartments related to a fire in
April 2002 that damaged eight apartment units. This gain was the result of the
receipt of remaining insurance proceeds of approximately $44,000. The write off
of the damaged assets was completed during the year ended 2002.
Note E - Sale of Investment Property
On November 27, 2002, Stratford Village Apartments was sold to an unaffiliated
third party for approximately $9,514,000. After closing costs and expenses
related to the sale, the net proceeds received by the Partnership were
approximately $9,214,000. The Partnership realized a gain on the sale of
investment property of approximately $5,492,000 during the fourth quarter of
2002. During the six months ended June 30, 2003, the Partnership recognized
additional gain on the sale of approximately $78,000 due to the write-off of
expense reserves. Additionally, during the six months ended June 30, 2003, the
Partnership received approximately $120,000 that was held by the trustee for the
bonds underlying the mortgage encumbering Stratford Village Apartments. When the
property's mortgage was paid off at closing and the underlying bonds were
repaid, these remaining funds were released to the Partnership and are included
in income from discontinued operations.
Note F - Contingencies
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The defendants have filed an answer to the amended complaint denying
the substantive allegations. Some discovery has taken place and settlement
negotiations continue. Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its financial condition or results of operations
taken as a whole. Similarly, the Managing General Partner does not believe that
the ultimate outcome will have a material adverse effect on the Partnership's
financial condition or results of operations taken as a whole.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment properties that are not of a routine
nature arising in the ordinary course of business.
As previously disclosed, the Central Regional Office of the United States
Securities and Exchange Commission is conducting an investigation relating to
certain matters. AIMCO believes the areas of investigation include AIMCO's
miscalculated monthly net rental income figures in third quarter 2003,
forecasted guidance, accounts payable, rent concessions, vendor rebates, and
capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated financial condition or results of operations taken as a whole.
Similarly, the Managing General Partner does not believe that the ultimate
outcome will have a material adverse effect on the Partnership's consolidated
financial condition or results of operations taken as a whole.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 2004 and 2003:
Average Occupancy
2004 2003
Ashton Ridge Apartments
Jacksonville, Florida 90% 96%
Stratford Place Apartments
Gaithersburg, Maryland 95% 95%
The Managing General Partner attributes the decrease in occupancy at Ashton
Ridge Apartments to military deployments in the local market and adhering to
stricter financial guidelines in acceptance of tenant applications.
The Partnership's financial results are dependent upon a number of factors
including the ability to attract and maintain tenants at the investment
properties, interest rates on mortgage loans, costs incurred to operate the
investment properties, general economic conditions and weather. 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 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, the Managing General Partner may use
rental concessions and rental rate reductions to offset softening market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to sustain such a plan. Further, a number of factors which are
outside the control of the Partnership such as the local economic climate and
weather can adversely or positively impact the Partnership's financial results.
Results of Operations
The Partnership's net income for the six months ended June 30, 2004 was
approximately $147,000 compared to net income of approximately $535,000 for the
six months ended June 30, 2003. The Partnership's net income for the three
months ended June 30, 2004 was approximately $59,000 compared to net income of
approximately $370,000 for the three months ended June 30, 2003. The decrease in
net income for both periods is largely due to the income from discontinued
operations, the gain on sale of discontinued operations in 2003 and decreases in
revenues as discussed below.
On November 27, 2002, Stratford Village Apartments was sold to an unaffiliated
third party for approximately $9,514,000. After closing costs and expenses
related to the sale, the net proceeds received by the Partnership were
approximately $9,214,000. The Partnership realized a gain on the sale of
investment property of approximately $5,492,000 during the fourth quarter of
2002. During the six months ended June 30, 2003, the Partnership recognized
additional gain on the sale of approximately $78,000 due to the write-off of
expense reserves. Additionally, during the six months ended June 30, 2003, the
Partnership received approximately $120,000 that was held by the trustee for the
bonds underlying the mortgage encumbering Stratford Village Apartments. When the
property's mortgage was paid off at closing and the underlying bonds were
repaid, these remaining funds were released to the Partnership and are included
in income from discontinued operations.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", the
consolidated statement of operations for the three and six months ended June 30,
2003 reflect the operations of Stratford Village Apartments as income from
discontinued operations due to the property's sale in November, 2002.
The Partnership recognized income from continuing operations for the three and
six months ended June 30, 2004 of approximately $59,000 and $147,000,
respectively, compared to income from continuing operations for the three and
six months ended June 30, 2003 of approximately $172,000 and $337,000,
respectively. The decrease in income from continuing operations for both periods
is due to a decrease in total revenues and an increase in total expenses. The
decrease in total revenues for the three and six months ended June 30, 2004 is
due to a decrease in rental income and a casualty gain recognized in 2003. The
decrease in total revenues for the six months ended June 30, 2004 is also due to
a decrease in other income. Other income remained relatively constant for the
three months ended June 30, 2004. The decrease in rental income is due to a
decrease in occupancy at Ashton Ridge Apartments partially offset by an increase
in average rental rates at both of the Partnership's properties. The decrease in
casualty gain is due to a casualty gain recorded at Ashton Ridge Apartments
during the six months ended June 30, 2003 related to a fire that damaged eight
units during April 2002. This gain was the result of the receipt of remaining
insurance proceeds of approximately $44,000. Other income decreased during the
six months ended June 30, 2004 primarily due to a decrease in lease cancellation
fees at Stratford Place Apartments and late charges at both of the Partnership's
properties partially offset by an increase in lease cancellation fees at Ashton
Ridge Apartments and utility reimbursements at Stratford Place Apartments.
Total expenses increased during the three and six months ended June 30, 2004
primarily due to increases in operating and property tax expenses partially
offset by decreases in general and administrative and depreciation expenses.
Operating expenses increased primarily due to an increase in property expenses
partially offset by a decrease in maintenance expenses. Property expenses
increased primarily due to increases in salaries and other related benefits and
utility expenses at Stratford Place Apartments. Maintenance expenses decreased
primarily due to decreases in contract services at both of the Partnership's
properties and snow removal costs at Stratford Place Apartments. Property tax
expense increased due to increased assessed values at both of the Partnership's
properties. Depreciation expense decreased due to assets becoming fully
depreciated at Ashton Ridge Apartments.
General and administrative expenses decreased due to a decrease in the costs of
the services included in the management reimbursements to the Managing General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative expenses are costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement.
Liquidity and Capital Resources
At June 30, 2004, the Partnership had cash and cash equivalents of approximately
$1,420,000 compared to approximately $593,000 at June 30, 2003. Cash and cash
equivalents increased approximately $535,000 since December 31, 2003 due to
approximately $889,000 of cash provided by operating activities partially offset
by approximately $148,000 and $206,000 of cash used in investing and financing
activities, respectively. 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 principal payments made on the mortgages encumbering the Partnership's
investment properties. 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. The Managing General Partner
monitors developments in the area of legal and regulatory compliance. For
example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional
compliance measures with regard to governance, disclosure, audit and other
areas. In light of these changes, the Partnership expects that it will incur
higher expenses related to compliance, including increased legal and audit fees.
Capital improvements planned for each of the Partnership's properties are
detailed below.
Ashton Ridge Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $101,000 of capital improvements at Ashton Ridge Apartments,
consisting primarily of floor covering replacements, exterior painting,
furniture and fixtures, air conditioning upgrades and structural improvements.
These improvements were funded from operating cash flow. The Partnership
evaluates the capital improvement needs of the property during the year and
currently expects to complete an additional $95,000 in capital improvements
during the remainder of 2004. Additional capital improvements may be considered
and will depend on the physical condition of the property as well as the
anticipated cash flow generated by the property.
Stratford Place Apartments
During the six months ended June 30, 2004, the Partnership completed
approximately $63,000 of capital improvements at Stratford Place Apartments,
consisting primarily of floor covering replacements, water/sewer upgrades, air
conditioning unit replacements, and parking area improvements. These
improvements were funded from operating cash flow and replacement reserves. The
Partnership evaluates the capital improvement needs of the property during the
year and currently expects to complete an additional $130,000 in capital
improvements during the remainder of 2004. Additional capital improvements may
be considered and will depend on the physical condition of the property as well
as the anticipated cash flow generated by the property and replacement reserves.
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 assets are thought to be sufficient for any near-term needs
(exclusive of capital improvements) of the Partnership. The mortgage
indebtedness encumbering Ashton Ridge Apartments of approximately $5,535,000 has
a maturity date of January 2021 at which time the loan is scheduled to be fully
amortized. The mortgage indebtedness encumbering Stratford Place Apartments of
approximately $8,218,000 requires a balloon payment of approximately $7,739,000
in July 2006. The Managing General Partner will attempt to refinance such
indebtedness and/or sell Stratford Place Apartments prior to its maturity date.
If the property cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing the property through foreclosure.
The Partnership distributed the following amounts during the six months ended
June 30, 2004 and 2003 (in thousands except per unit data):
Six Per Six Per
Months Ended Limited Months Ended Limited
June 30, Partnership June 30, Partnership
2004 Unit 2003 Unit
Operations $ -- $ -- $ 1,191 $ 46.33
Sale (1) -- -- 639 27.61
$ -- $ -- $ 1,830 $ 73.94
(1) From the remaining undistributed sale proceeds of Stratford Village
Apartments.
The Partnership's cash available for distribution 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 any distributions to its partners
during the remainder of 2004 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 10,969.25 limited partnership units
(the "Units") in the Partnership representing 47.41% of the outstanding Units at
June 30, 2004. 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 Units in exchange for cash or a combination of cash and
units in AIMCO Properties, L.P., the operating partnership of AIMCO either
through private purchases or tender offers. Pursuant to the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters that would include, but are not
limited to, voting on certain amendments to the Partnership Agreement and voting
to remove the Managing General Partner. As a result of its ownership of 47.41%
of the outstanding units, AIMCO and its affiliates are in a position to
influence all voting decisions with respect to the Partnership. Although the
Managing General Partner owes fiduciary duties to the limited partners of the
Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as
its sole stockholder. As a result, the duties of the Managing General Partner,
as managing general partner, to the Partnership and its limited partners may
come into conflict with the duties of the Managing General Partner to AIMCO, as
its sole stockholder.
Critical Accounting Policies and Estimates
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to make estimates and assumptions. The Partnership believes that of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Impairment of Long-Lived Assets
Investment properties are recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of the
property.
Real property investments are subject to varying degrees of risk. Several
factors may adversely affect the economic performance and value of the
Partnership's investment properties. These factors include, but are not limited
to, changes in the national, regional and local economic climate; local
conditions, such as an oversupply of multifamily properties; competition from
other available multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area. Any
concessions given at the inception of the lease are amortized over the life of
the lease.
ITEM 3. Controls and Procedures
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Managing General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Managing General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General
Partner, was served with a complaint in the United States District Court,
District of Columbia alleging that AIMCO Properties L.P. willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs
filed an amended complaint also naming NHP Management Company, which is also an
affiliate of the Managing General Partner. The complaint is styled as a
Collective Action under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate maintenance workers for
time that they were required to be "on-call". Additionally, the complaint
alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating
maintenance workers for time that they worked in responding to a call while
"on-call". The defendants have filed an answer to the amended complaint denying
the substantive allegations. Some discovery has taken place and settlement
negotiations continue. Although the outcome of any litigation is uncertain,
AIMCO Properties, L.P. does not believe that the ultimate outcome will have a
material adverse effect on its financial condition or results of operations
taken as a whole. Similarly, the Managing General Partner does not believe that
the ultimate outcome will have a material adverse effect on the Partnership's
financial condition or results of operations taken as a whole.
The Managing General Partner does not anticipate that any costs to the
Partnership, whether legal or settlement costs, associated with this case will
be material to the Partnership's overall operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 23, 2004, the Partnership sought the consent of its limited partners to
the replacement of Two Winthrop Properties, Inc. as the general partner of the
Partnership with AIMCO/Winthrop Growth Investors I GP, LLC, a Delaware limited
liability company ("AIMCO GP"). In addition, on June 24, 2004, the Partnership
sought the consent of its limited partners to the replacement of Linnaeus -
Lexington Associates Limited Partnership as the associate general partner of the
Partnership with AIMCO GP. In order to effect such substitutions, the consent of
two-thirds in interest of the limited partners is required. In connection with
the March 23, 2004 consent, the Managing General Partner and AIMCO GP agreed not
to consummate the replacement if Limited Partners holding a majority of the
Units held by Limited Partners who are not affiliates of the AIMCO GP objected
in writing to the replacement. Further, although not required by the terms of
the Partnership's partnership agreement, the Partnership sought in the March 23,
2004 consent, the consent of the Limited Partners to a waiver of its right of
first refusal with respect to the acquisition by an affiliate of AIMCO of
certain interests in Meadow Wood Associates and Stratford Place Investors
Limited Partnership. At the close of business on April 30, 2004 and July 30,
2004, the requisite percentage of limited partners had consented to the
replacements. The Partnership is in the process of obtaining other necessary
approvals in order to complete this replacement. An affiliate of the AIMCO GP
has effectively had the right to control the day to day operations of the
Partnership since October 1998. Accordingly, the replacement is not expected to
have a material effect on the operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
See Exhibit Index Attached.
b) Reports on Form 8-K filed during the quarter ended June 30, 2004:
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/Martha L. Long
Martha L. Long
Vice President - Residential
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President - Residential
Date: August 13, 2004
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
Exhibit Index
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by
and between AIMCO and IPT; incorporated by reference to the
Registrant's Current Report on Form 8-K, dated October 1,
1998.
3 Amended and Restated agreement of Limited Partnership of
Winthrop Growth Investors I Limited Partnership dated as of
May 11, 1984.
3(a) Amendment to Amended and Restated Agreement of Limited
Partnership dated August 23, 1995.
3.1 Amended and Restated Agreement of Limited Partnership of
Winthrop Growth Investors I Limited Partnership dated May 11,
1984 (included as an exhibit to the Partnership's Registration
Statement on Form S-11, File No. 2-84760 and incorporated
herein by reference).
3.2 Amendment to Amended and Restated Agreement of Limited
Partnership dated August 23, 1985 (Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 is incorporated herein by reference).
3.3 Amendment to the Amended and Restated Agreement of Limited
Partnership, dated November 20, 2003, filed as an exhibit to
the Registrant's Current Report on Form 8-K dated December 3,
2003 and incorporated herein by reference.
10.7 Management Agreement between Stratford Place and Winthrop
Management dated January 1, 1990 filed as an exhibit to the
Registrant's Current Report on Form 8-K dated September 19,
1996, and incorporated herein by reference.
10.20 Replacement Reserve Agreement, filed as an exhibit to the
Registrant's Current Report on Form 8-K dated December 22,
2000, and incorporated herein by reference.
10.21 Purchase and Sale Contract between Registrant and B&M
Management Company, LLC effective November 27, 2002 filed as
an exhibit to the Registrant Current Report on Form 8-K dated
December 24, 2002, and incorporated herein by reference.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.1 Supplementary information required pursuant to Section 9.4
of the Partnership Agreement.
Exhibit 31.1
CERTIFICATION
I, Martha L. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Winthrop Growth
Investors I Limited Partnership;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of the small business issuer's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Martha L. Long
Martha L. Long
Vice President - Residential of Two
Winthrop Properties, Inc., equivalent of
the chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Winthrop Growth
Investors I Limited Partnership;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small
business issuer's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the small business issuer's internal control over
financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: August 13, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President - Residential of Two
Winthrop Properties, Inc., equivalent
of the chief financial officer of the
Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Winthrop Growth
Investors I Limited Partnership (the "Partnership"), for the quarterly period
ended June 30, 2004 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), Martha L. Long, as the equivalent of the chief
executive officer of the Partnership, and Stephen B. Waters, as the equivalent
of the chief financial officer of the Partnership, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Martha L. Long
Name: Martha L. Long
Date: August 13, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: August 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.