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 September 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)
September 30, 2004
Assets
Cash and cash equivalents $ 1,481
Receivables and deposits 517
Restricted escrows 177
Other assets 487
Investment properties:
Land $ 2,058
Buildings and related personal property 29,120
31,178
Less accumulated depreciation (20,926) 10,252
$ 12,914
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 169
Tenant security deposit liabilities 180
Accrued property taxes 223
Other liabilities 78
Mortgage notes payable 13,654
Partners' Deficit
General partners $ (97)
Limited partners (23,139 units
issued and outstanding) (1,293) (1,390)
$ 12,914
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 Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
Revenues:
Rental income $ 1,390 $ 1,404 $ 4,071 $ 4,163
Other income 106 132 355 402
Casualty (loss) gain (Note D) (12) -- (12) 44
Total revenues 1,484 1,536 4,414 4,609
Expenses:
Operating 763 638 1,946 1,775
General and administrative 31 67 121 175
Depreciation 353 362 1,081 1,107
Interest 274 281 832 854
Property tax 112 114 336 287
Total expenses 1,533 1,462 4,316 4,198
(Loss) income from continuing
operations (49) 74 98 411
Gain on sale of discontinued
operations (Note E) -- -- -- 78
Income from discontinued
operations (Note A) -- -- -- 120
Net (loss) income $ (49) $ 74 $ 98 $ 609
Net (loss) income allocated to
general partners (10%) $ (5) $ 7 $ 10 $ 61
Net (loss) income allocated to
limited partners (90%) (44) 67 88 548
$ (49) $ 74 $ 98 $ 609
Per limited partnership unit:
(Loss) income from continuing
operations $ (1.90) $ 2.90 $ 3.80 $ 15.99
Gain on sale of discontinued
operations -- -- -- 3.03
Income from discontinued
operations -- -- -- 4.66
Net (loss) income per limited
partnership unit $ (1.90) $ 2.90 $ 3.80 $ 23.68
Distributions per limited
partnership unit $ -- $ -- $ -- $ 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 nine months
ended September 30, 2004 -- 10 88 98
Partners' deficit
at September 30, 2004 23,139 $ (97) $(1,293) $(1,390)
See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2004 2003
Cash flows from operating activities:
Net income $ 98 $ 609
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,081 1,107
Amortization of loan costs and deferred costs 38 13
Bad debt expense, net 105 127
Casualty loss (gain) 12 (44)
Change in accounts:
Receivables and deposits (220) 39
Other assets (46) (122)
Accounts payable 4 (137)
Tenant security deposit liabilities (2) 15
Accrued property taxes 223 133
Other liabilities (60) (59)
Net cash provided by operating activities 1,233 1,681
Cash flows from investing activities:
Property improvements and replacements (302) (373)
Insurance proceeds received -- 44
Net (deposits to) withdrawals from restricted escrows (30) 14
Net cash used in investing activities (332) (315)
Cash flows from financing activities:
Payments on mortgage notes payable (305) (270)
Distributions paid to partners -- (1,830)
Net cash used in financing activities (305) (2,100)
Net increase (decrease) in cash and cash equivalents 596 (734)
Cash and cash equivalents at beginning of period 885 1,504
Cash and cash equivalents at end of period $ 1,481 $ 770
Supplemental disclosure of cash flow information:
Cash paid for interest $ 849 $ 872
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 63 $ --
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 AIMCO/Winthrop
Growth Investors I GP, LLC, a Delaware limited liability company ("AIMCO GP"), a
wholly-owned subsidiary of AIMCO Properties, L.P., 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
months ended September 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.
On September 30, 2004, AIMCO/GP acquired the general partner interests in the
Partnership from Linnaeus-Lexington Associates Limited Partnership and Two
Winthrop Properties, Inc. ("Two Winthrop") for an aggregate cash consideration
of $1,023,000.
Prior to the transfer of the general partner interests to AIMCO/GP, AIMCO/NHP
Properties, Inc. ("AIMCO/NHP"), also an affiliate of AIMCO held 100% of the
voting rights with respect to the Class B stock of FWC, which provided AIMCO/NHP
with the right to elect one director to the board of directors of Two Winthrop.
That one director had the power to appoint the sole member of the Residential
Committee of Two Winthrop's board of directors. The Residential Committee was
vested with the authority to elect certain officers, and subject to certain
limitations, the Residential Committee and its appointed officers had the right
to cause the managing general partner of the Partnership to take such actions as
it deemed necessary and advisable in connection with the activities of the
Partnership. Accordingly, although ownership of the general partner interests
was transferred, the effective control of the day-to-day management of the
Partnership remains vested in an affiliate of AIMCO. As used herein, the term
"Managing General Partner" shall mean Two Winthrop, with respect to matters
occurring prior to September 30, 2004 and AIMCO GP for matters occurring from
and after September 30, 2004.
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 nine months ended September 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 depends 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 $219,000 and $222,000 during the nine months ended September 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 $89,000 and
$132,000 for the nine months ended September 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 affiliate of the Managing General Partner of
approximately $4,000 and $12,000 for the nine months ended September 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 nine months ended September 30, 2004 and
2003, the Partnership was charged by AIMCO and its affiliates approximately
$74,000 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 nine months ended
September 30, 2004 (in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
2004 2004
Net (loss) income $ (49) $ 98
Add: Amortization expense 13 38
Depreciation expense 353 1,081
Less: Cash to reserves (317) (1,217)
Cash available for distribution $ -- $ --
Note D - Casualties
During the nine months ended September 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 December 31, 2002.
During the three months ended September 30, 2004 there was an estimated casualty
loss of approximately $12,000 recorded at Ashton Ridge Apartments related to
damages to the property caused by Hurricane Jeanne. This loss was the result of
the write off of net fixed assets of approximately $12,000. No insurance
proceeds are anticipated to cover this loss. In addition, the property incurred
approximately $26,000 in clean up costs related to this hurricane.
Note E - Sale of Investment Property
On November 27, 2002, Stratford Village Apartments was sold to a 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 nine months ended
September 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 nine months ended September 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 hoursworked in excess of forty per week. On March 5, 2004, the
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.
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.
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 (the "SEC") is conducting a formal
investigation relating to certain matters. Although the staff of the SEC is not
limited in the areas that it may investigate, 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, capitalization of payroll and certain other costs, and tax
credit transactions. AIMCO is cooperating fully. AIMCO is not able to predict
when the matter will be resolved. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations. 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.
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 nine
months ended September 30, 2004 and 2003:
Average Occupancy
2004 2003
Ashton Ridge Apartments
Jacksonville, Florida 90% 97%
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 credit guidelines in acceptance of tenant applications.
The Partnership's financial results depend 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 that are
outside the control of the Partnership, such as the local economic climate and
weather, can adversely or positively affect the Partnership's financial results.
Transfer of General Partner Interests
On September 30, 2004, AIMCO/Winthrop Growth Investors I GP, LLC, a Delaware
limited liability company ("AIMCO GP") acquired the general partner interests in
the Partnership from Linnaeus-Lexington Associates Limited Partnership and Two
Winthrop Properties, Inc. ("Two Winthrop") for an aggregate cash consideration
of $1,023,000. Prior to the transfer of the general partner interests to
AIMCO/GP, AIMCO/NHP Properties, Inc. ("AIMCO/NHP"), also an affiliate of AIMCO
held 100% of the voting rights with respect to the Class B stock of FWC, which
provided AIMCO/NHP with the right to elect one director to the board of
directors of Two Winthrop. That one director had the power to appoint the sole
member of the Residential Committee of Two Winthrop's board of directors. The
Residential Committee was vested with the authority to elect certain officers,
and subject to certain limitations, the Residential Committee and its appointed
officers had the right to cause the managing general partner of the Partnership
to take such actions as it deemed necessary and advisable in connection with the
activities of the Partnership. Accordingly, although ownership of the general
partner interests was transferred, the effective control of the day-to-day
management of the Partnership remains vested in an affiliate of AIMCO. As used
herein, the term "Managing General Partner" shall mean Two Winthrop, with
respect to matters occurring prior to September 30, 2004 and AIMCO GP for
matters occurring from and after September 30, 2004.
Results of Operations
The Partnership's net income for the nine months ended September 30, 2004 was
approximately $98,000 compared to net income of approximately $609,000 for the
nine months ended September 30, 2003. The Partnership's net loss for the three
months ended September 30, 2004 was approximately $49,000 compared to net income
of approximately $74,000 for the three months ended September 30, 2003. The
decrease in net income for the nine months ended September 30, 2004 is largely
due to the income from discontinued operations and the gain on sale of
discontinued operations in 2003 (as discussed below), as well as a decrease in
total revenues and an increase in total expenses. The decrease in net income for
the three months ended September 30, 2004 is due to a decrease in total revenues
and an increase in total expenses.
On November 27, 2002, Stratford Village Apartments was sold to a 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 nine months ended
September 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 nine months ended September 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 nine months
ended September 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 (loss) income from continuing operations for the
three and nine months ended September 30, 2004 of approximately ($49,000) and
$98,000, respectively, compared to income from continuing operations for the
three and nine months ended September 30, 2003 of approximately $74,000 and
$411,000, 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 nine months ended
September 30, 2004 is due to decreases in rental and other income and a casualty
loss during the three months ended September 30, 2004. For the nine months ended
September 30, 2004 the decrease was also due to a casualty gain recognized in
2003. The decrease in rental income is due primarily to a decrease in occupancy
at Ashton Ridge Apartments partially offset by an increase in average rental
rates at Ashton Ridge Apartments and a decrease in bad debt expense at Stratford
Place Apartments. Other income decreased during the three and nine months ended
September 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. During the three months ended September 30, 2004 there was an
estimated casualty loss of approximately $12,000 recorded at Ashton Ridge
Apartments related to damages to the property caused by Hurricane Jeanne. This
loss was the result of the write off of net fixed assets of approximately
$12,000. No insurance proceeds are anticipated to cover this loss. In addition,
the property incurred approximately $26,000 in clean up costs related to this
hurricane. The decrease in casualty gain is due to a casualty gain recorded at
Ashton Ridge Apartments during the nine months ended September 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.
Total expenses increased during the three and nine months ended September 30,
2004 primarily due to an increase in operating expenses partially offset by a
decrease in general and administrative expenses. The increase in total expenses
for the nine months ended September 30, 2004 is also due to an increase in
property tax expense. Property tax expense remained relatively constant for the
three months ended September 30, 2004. 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 at Stratford Place Apartments, and courtesy
patrol costs at both of the Partnership's properties partially offset by reduced
utility expenses at both of the Partnership's properties. Maintenance expenses
decreased primarily due to a decrease in contract services and snow removal
costs at Stratford Place Apartments. Property tax expense increased due to
increased assessed values at both of the Partnership's properties.
General and administrative expenses decreased due to decreases in the costs of
the services included in the management reimbursements to the Managing General
Partner as allowed under the Partnership Agreement and the costs of professional
services associated with the administration of the Partnership. 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 September 30, 2004, the Partnership had cash and cash equivalents of
approximately $1,481,000 compared to approximately $770,000 at September 30,
2003. Cash and cash equivalents increased approximately $596,000 since December
31, 2003 due to approximately $1,233,000 of cash provided by operating
activities partially offset by approximately $332,000 and $305,000 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. Capital improvements planned for each of
the Partnership's properties are detailed below.
Ashton Ridge Apartments
During the nine months ended September 30, 2004, the Partnership completed
approximately $198,000 of capital improvements at Ashton Ridge Apartments,
consisting primarily of floor covering replacements, exterior painting,
appliance replacements, 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 $70,000 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 nine months ended September 30, 2004, the Partnership completed
approximately $167,000 of capital improvements at Stratford Place Apartments,
consisting primarily of floor covering replacements, water/sewer upgrades,
exterior painting, air conditioning unit replacements, parking area
improvements, and appliance replacements. These improvements were funded from
replacement reserves and operating cash flow. The Partnership evaluates the
capital improvement needs of the property during the year and currently expects
to complete an additional $26,000 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 $5,492,000 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 $8,162,000 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 nine months ended
September 30, 2004 and 2003 (in thousands except per unit data):
Nine Months Per Nine Months Per
Ended Limited Ended Limited
September 30, Partnership September 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
September 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, the
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.
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.
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 June 24, 2004, the Partnership sought the consent of its limited partners to
the replacement of Linnaeus - Lexington Associates Limited Partnership
("Linnaeus") 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. At the close of business on July 30, 2004, the
requisite percentage of limited partners had consented to the replacement.
ITEM 6. EXHIBITS
See Exhibit Index Attached.
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: AIMCO/Winthrop Growth
Investors I, GP, LLC
Managing General Partner
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
By: /s/Stephen B. Waters
Stephen B. Waters
Vice President
Date: November 12, 2004
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
Exhibit Index
Exhibit Number Description of Exhibit
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.
3.4 Amendment to Amended and Restated Agreement of Limited
Partnership, dated September 30, 2004, filed as an exhibit to
the Registrant's Current Report on Form 8-K dated September
30, 2004 and filed on October 5, 2004, incorporated herein by
reference.
3.5 Certificate of Amendment to the Second Amended and Restated
Certificate of Limited Partnership of Winthrop Growth
Investors 1 Limited Partnership, filed as an exhibit to the
Registrant's Current Report on Form 8-K dated September 30,
2004 and filed on October 5, 2004, incorporated herein by
reference.
10.1 Replacement Reserve Agreement, filed as exhibit 10.20 to the
Registrant's Current Report on Form 8-K dated December 22,
2000, and incorporated herein by reference.
10.2 Purchase Agreement between Linnaeus-Lexington Associates
Limited Partnership and AIMCO/Winthrop Growth Investors 1 GP,
LLC, dated September 30, 2004, filed as exhibit 10.22 to the
Registrant's Current Report on Form 8-K dated September 30,
2004 and filed on October 5, 2004, incorporated herein by
reference.
10.3 Assignment and Assumption of General Partner Interest in
Winthrop Growth Investors 1 Limited Partnership, dated
September 30, 2004, filed as exhibit 10.23 to the Registrant's
Current Report on Form 8-K dated September 30, 2004 and filed
on October 5, 2004, incorporated herein by reference.
10.4 Assignment and Assumption of General Partner Interest in
Winthrop Growth Investors 1 Limited Partnership, dated
September 30, 2004, filed as exhibit 10.24 to the Registrant's
Current Report on Form 8-K dated September 30, 2004 and filed
on October 5, 2004, 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.
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: November 12, 2004
/s/Martha L. Long
Martha L. Long
Senior Vice President of AIMCO/Winthrop
Growth Investors I, GP, LLC, 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: November 12, 2004
/s/Stephen B. Waters
Stephen B. Waters
Vice President of AIMCO/Winthrop
Growth Investors I, GP, LLC,
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 September 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: November 12, 2004
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 12, 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.