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, 2005
[ ] 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 ___
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes __ No X_
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, 2005
Assets
Cash and cash equivalents $ 1,434
Receivables and deposits 75
Other assets 225
Investment property:
Land $ 690
Buildings and related personal property 14,472
15,162
Less accumulated depreciation (10,471) 4,691
$ 6,425
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 51
Tenant security deposit liabilities 34
Accrued property taxes 177
Other liabilities 34
Mortgage note payable 5,308
Partners' Capital
General partners $ 25
Limited partners (23,139 units
issued and outstanding) 796 821
$ 6,425
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,
2005 2004 2005 2004
(Restated) (Restated)
Revenues:
Rental income $ 647 $ 580 $ 1,909 $ 1,741
Other income 78 51 200 185
Total revenues 725 631 2,109 1,926
Expenses:
Operating 312 371 802 833
General and administrative 30 31 132 121
Depreciation 159 170 486 523
Interest 99 102 300 309
Property tax 59 56 181 167
Casualty loss (Note E) 10 12 10 12
Total expenses 669 742 1,911 1,965
Income (loss) from continuing
operations 56 (111) 198 (39)
Income (loss) from discontinued
operations (Notes A and D) 105 62 (34) 137
Gain on sale of discontinued
operations (Note D) -- -- 22,064 --
Net income (loss) $ 161 $ (49) $22,228 $ 98
Net income (loss) allocated to
general partners $ 16 $ (5) $ 225 $ 10
Net income (loss) allocated to
limited partners 145 (44) 22,003 88
$ 161 $ (49) $22,228 $ 98
Per limited partnership unit:
Income (loss) from continuing
operations $ 2.16 $ (4.32) $ 7.70 $ (1.52)
Income (loss) from discontinued
operations 4.11 2.42 (2.55) 5.32
Gain on sale of discontinued
operations -- -- 945.76 --
Net income (loss) $ 6.27 $ (1.90) $950.91 $ 3.80
Distributions per limited
partnership unit $ 58.34 $ -- $822.20 $ --
See Accompanying Notes to Consolidated Financial Statements
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(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, 2004 23,139 $ (196) $(2,182) $(2,378)
Distributions to partners -- (4) (19,025) (19,029)
Net income for the nine months
ended September 30, 2005 -- 225 22,003 22,228
Partners' capital
at September 30, 2005 23,139 $ 25 $ 796 $ 821
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,
2005 2004
Cash flows from operating activities:
Net income $22,228 $ 98
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 674 1,081
Amortization of loan costs and deferred costs 30 38
Bad debt expense, net 39 105
Gain on sale of discontinued operations (22,064) --
Loss on early extinguishment of debt 283 --
Casualty (gain) loss (124) 12
Change in accounts:
Receivables and deposits 244 (220)
Other assets 166 (46)
Accounts payable (114) 4
Tenant security deposit liabilities (135) (2)
Accrued property taxes 177 223
Other liabilities (173) (60)
Net cash provided by operating activities 1,231 1,233
Cash flows from investing activities:
Net proceeds from sale of discontinued operations 28,052 --
Property improvements and replacements (962) (302)
Insurance proceeds received 155 --
Net withdrawals from (deposits to) restricted escrows 198 (30)
Net cash provided by (used in) investing activities 27,443 (332)
Cash flows from financing activities:
Payments on mortgage notes payable (251) (305)
Repayment of mortgage note payable (8,008) --
Prepayment penalties (260) --
Distributions paid to partners (19,029) --
Advances from general partner 90 --
Repayment of advances from general partner (90) --
Net cash used in financing activities (27,548) (305)
Net increase in cash and cash equivalents 1,126 596
Cash and cash equivalents at beginning of period 308 885
Cash and cash equivalents at end of period $ 1,434 $ 1,481
Supplemental disclosure of cash flow information:
Cash paid for interest $ 633 $ 849
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 14 $ 63
Included in property improvements and replacements for the nine months ended
September 30, 2005 are approximately $23,000 of improvements, which were
included in accounts payable at December 31, 2004.
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" or
the "Managing General Partner"), 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, 2005 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2005. 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, 2004.
On September 30, 2004, AIMCO/Winthrop Growth Investors I GP, LLC, a Delaware
limited liability company 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.
As a result of the sale of Stratford Place Apartments to a third party during
the nine months ended September 30, 2005 and in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", the accompanying consolidated statements of
operations for the three and nine months ended September 30, 2004 have been
restated as of January 1, 2004 to reflect the operations of Stratford Place
Apartments as income from discontinued operations of approximately $62,000 and
$137,000 for the three and nine months ended September 30, 2004, respectively,
including revenues of approximately $859,000 and $2,500,000, respectively.
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 (i) certain payments to
affiliates for services and (ii) reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross receipts from the
Partnership's properties as compensation for providing property management
services. The Partnership paid to such affiliates approximately $170,000 and
$219,000 during the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses and income (loss) from discontinued
operations.
Affiliates of the Managing General Partner charged the Partnership for
reimbursement of accountable administrative expenses amounting to approximately
$175,000 and $89,000 for the nine months ended September 30, 2005 and 2004,
respectively which is included in general and administrative expenses and
investment property. The portion of these reimbursements included in investment
property are fees related to construction management services provided by an
affiliate of the Managing General Partner of approximately $89,000 and $4,000
for the nine months ended September 30, 2005 and 2004, respectively. The
construction management service fees are calculated based on a percentage of
certain additions to investment property.
During the nine months ended September 30, 2005 and in accordance with the
Partnership Agreement, an affiliate of the Managing General Partner advanced the
Partnership approximately $90,000 to fund the payment of real estate taxes at
Ashton Ridge Apartments. Interest was charged at the prime rate plus 2% (8.75%
at September 30, 2005) and was less than $1,000 for the nine months ended
September 30, 2005. The advance and associated accrued interest was repaid by
the Partnership during the same period.
The Partnership insures its property 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, general
liability and vehicle liability. The Partnership insures its property 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, 2005 and 2004, the Partnership was charged by AIMCO and its
affiliates approximately $37,000 and $72,000, 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, 2005 (in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
2005 2005
Net income $ 161 $22,228
Add: Amortization expense 5 30
Depreciation expense 159 674
Cash from (to) reserves 1,025 (3,903)
Cash available for distribution $ 1,350 $ 19,029
Distributions allocated to
Limited Partners $ 1,350 $ 19,025
Note D - Sale of Investment Property
On May 17, 2005, the Partnership sold Stratford Place Apartments, located in
Gaithersburg, Maryland, to a third party for $29,000,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $28,052,000. The Partnership used a portion of the proceeds
to repay the mortgage encumbering the property of approximately $8,008,000. The
sale resulted in a gain on sale of investment property of approximately
$22,064,000 during the nine months ended September 30, 2005. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$283,000 as a result of prepayment penalties paid and the write off of
unamortized loan costs, which is included in income (loss) from discontinued
operations. Included in income (loss) from discontinued operations for the three
months ended September 30, 2005 and 2004 are results of the property's
operations of approximately $105,000 and $62,000, respectively, including
revenues of approximately $105,000 and $859,000, respectively. Included in
income (loss) from discontinued operations for the nine months ended September
30, 2005 and 2004 are results of the property's operations of approximately
($34,000) and $137,000, respectively, including revenues of approximately
$1,338,000 and $2,500,000 respectively.
Note E - Casualty Events
During the nine months ended September 30, 2005 there was a casualty gain of
approximately $100,000 recorded for Stratford Place Apartments related to
damages to the property caused by a fire on January 12, 2005. This gain was the
result of the receipt of insurance proceeds of approximately $121,000, partially
offset by the write off of undepreciated fixed assets of approximately $21,000
and is included in income (loss) from discontinued operations.
During the nine months ended September 30, 2005 there was a casualty gain of
approximately $34,000 recorded for Stratford Place Apartments related to damages
to the property caused by a flood on February 1, 2005. This gain was the result
of the receipt of insurance proceeds of approximately $34,000 and is included in
income (loss) from discontinued operations.
In 2004, Ashton Ridge Apartments experienced damage from hurricane Jeanne. The
Partnership estimated total damage costs of approximately $199,000, which the
Partnership did not expect to be covered by insurance proceeds. The Partnership
recorded a casualty loss of approximately $12,000 related to this event in the
nine months ended September 30, 2004. In 2004, the Partnership estimated total
cleanup costs from this hurricane would be approximately $20,000. In addition,
it estimated clean up costs of approximately $51,000 related to hurricane
Frances in 2004. During the nine months ended September 30, 2005, the
Partnership revised the total estimated clean up costs related to hurricane
damage and reduced the estimate by approximately $56,000. This income is
included in operating expenses. During the nine months ended September 30, 2005,
the Partnership recorded a casualty loss of approximately $10,000 related to
these events. This loss was the result of the write off of undepreciated assets
of approximately $10,000.
Note F - Contingencies
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
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.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
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.
The Partnership is unaware of any other pending or outstanding litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.
Environmental
Various Federal, state and local laws subject property owners or operators to
liability for management, and the costs of removal or remediation, of certain
hazardous substances present on a property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The presence of, or the
failure to manage or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and
remediation actions brought by government agencies, and potential fines or
penalties imposed by such agencies in connection therewith, the presence of
hazardous substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose liability for the cost of removal, remediation or disposal of hazardous
substances through a licensed disposal or treatment facility. Anyone who
arranges for the disposal or treatment of hazardous substances is potentially
liable under such laws. These laws often impose liability whether or not the
person arranging for the disposal ever owned or operated the disposal facility.
In connection with the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental liabilities or costs
associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims arising from the presence of mold and for personal injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national policy and procedures to prevent or eliminate mold from
its properties and the Managing General Partner believes that these measures
will minimize the effects that mold could have on residents. To date, the
Partnership has not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the law regarding
mold is unsettled and subject to change the Managing General Partner can make no
assurance that liabilities resulting from the presence of or exposure to mold
will not have a material adverse effect on the Partnership's consolidated
financial condition or results of operations.
SEC Investigation
The Central Regional Office of the United States Securities and Exchange
Commission (the "SEC") continues its 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 have included 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, tax credit transactions, and
tender offers for limited partnership interests. AIMCO is cooperating fully.
AIMCO is not able to predict when the investigation 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 property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the nine
months ended September 30, 2005 and 2004:
Average Occupancy
2005 2004
Ashton Ridge Apartments
Jacksonville, Florida 95% 90%
The Property attributes the increase in occupancy at Ashton Ridge Apartments to
improved market conditions.
The Partnership's financial results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, the
interest rate on the mortgage loan, costs incurred to operate the investment
property, 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 property 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.
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
2005 was approximately $161,000 and $22,228,000, respectively, compared to net
(loss) income of approximately ($49,000) and $98,000 for the three and nine
months ended September 30, 2004, respectively. The increase in net income for
the three months ended September 30, 2005 is due to increases in income from
continuing operations and discontinued operations. The increase in net income
for the nine months ended September 30, 2005 is due to the gain on sale of
Stratford Place Apartments, an increase in income from continuing operations,
partially offset by a decrease in income from discontinued operations.
On May 17, 2005, the Partnership sold Stratford Place Apartments, located in
Gaithersburg, Maryland, to a third party for $29,000,000. After payment and
accrual of closing costs, the net sales proceeds received by the Partnership
were approximately $28,052,000. The Partnership used a portion of the proceeds
to repay the mortgage encumbering the property of approximately $8,008,000. The
sale resulted in a gain on sale of investment property of approximately
$22,064,000 during the nine months ended September 30, 2005. In addition, the
Partnership recorded a loss on early extinguishment of debt of approximately
$283,000 as a result of prepayment penalties paid and the write off of
unamortized loan costs, which is included in income (loss) from discontinued
operations. Included in income (loss) from discontinued operations for the three
months ended September 30, 2005 and 2004 are results of the property's
operations of approximately $105,000 and $62,000, respectively, including
revenues of approximately $105,000 and $859,000, respectively. Included in
income (loss) from discontinued operations for the nine months ended September
30, 2005 and 2004 are results of the property's operations of approximately
($34,000) and $137,000, respectively, including revenues of approximately
$1,338,000 and $2,500,000 respectively.
As a result of the sale of Stratford Place Apartments and in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", the accompanying consolidated
statements of operations for the three and nine months ended September 30, 2004
have been restated as of January 1, 2004 to reflect the operations of Stratford
Place Apartments as income from discontinued operations. The increase in income
from discontinued operations for the three months ended September 30, 2004 is
due to casualty gains recorded due to insurance proceeds received for two
casualties that occurred at Stratford Place Apartments prior to its sale as
discussed below. The decrease in income from discontinued operations for the
nine months ended September 30, 2005 is due to primarily to the loss on early
extinguishment of debt recorded as a result of the sale as discussed above.
The Partnership recognized income from continuing operations of approximately
$56,000 and $198,000 for the three and nine months ended September 30, 2005,
respectively, compared to loss from continuing operations of approximately
$111,000 and $39,000 for the corresponding periods in 2004. The increase in
income from continuing operations for the three and nine months ended September
30, 2005 is due to increases in total revenues and decreases in total expenses.
Total revenues increased for the three and nine months ended September 30, 2005
due to increases in rental and other income. Rental income increased for both
periods due to an increase in occupancy, an increase in the average rental rate
and a decrease in bad debt expense at Ashton Ridge Apartments. Other income
increased for the three and nine months ended September 30, 2005 primarily due
to an increase in resident utility reimbursements and an increase in interest
income due to higher average cash balances in interest bearing accounts
partially offset by a decrease in lease cancellation fees.
Total expenses decreased for the three and nine months ended September 30, 2005
due to decreases in operating and depreciation expense. The decrease in total
expenses for the nine months ended September 30, 2005 was partially offset by
increases in general and administrative and property tax expenses. General and
administrative expenses remained relatively constant for the three months ended
September 30, 2005. Operating expenses decreased for the three and nine months
ended September 30, 2005 primarily due to a decrease in maintenance expenses.
The decrease in operating expenses for the nine months ended September 30, 2005
was partially offset by an increase in property expense. Maintenance expense
decreased for the three and nine months ended September 30, 2005 primarily due
to a reduction of the estimated cleanup costs related to Hurricane Jeanne and
Frances at Ashton Ridge Apartments (as discussed below). The decrease in
maintenance expenses for the nine months ended September 30, 2005 was partially
offset by an increase in contract services. Property expense increased for the
nine months ended September 30, 2005 due to increases in courtesy patrol costs,
commissions and referral fees and utilities at Ashton Ridge Apartments.
Depreciation expense decreased for the three and nine months ended September 30,
2005 due to assets becoming fully depreciated in 2004 at Ashton Ridge
Apartments. Property tax expense increased for the nine months ended September
30, 2005 due to an increase in the property's assessed value.
During the nine months ended September 30, 2005 there was a casualty gain of
approximately $100,000 recorded for Stratford Place Apartments related to
damages to the property caused by a fire on January 12, 2005. This gain was the
result of the receipt of insurance proceeds of approximately $121,000, partially
offset by the write off of undepreciated fixed assets of approximately $21,000
and is included in income (loss) from discontinued operations.
During the nine months ended September 30, 2005 there was a casualty gain of
approximately $34,000 recorded for Stratford Place Apartments related to damages
to the property caused by a flood on February 1, 2005. This gain was the result
of the receipt of insurance proceeds of approximately $34,000 and is included in
income (loss) from discontinued operations.
In 2004, Ashton Ridge Apartments experienced damage from hurricane Jeanne. The
Partnership estimated total damage costs of approximately $199,000, which the
Partnership did not expect to be covered by insurance proceeds. The Partnership
recorded a casualty loss of approximately $12,000 related to this event in the
nine months ended September 30, 2004. In 2004, the Partnership estimated total
cleanup costs from this hurricane would be approximately $20,000. In addition,
it estimated clean up costs of approximately $51,000 related to hurricane
Frances in 2004. During the nine months ended September 30, 2005, the
Partnership revised the total estimated clean up costs related to hurricane
damage and reduced the estimate by approximately $56,000. This income is
included in operating expenses. During the nine months ended September 30, 2005,
the Partnership recorded a casualty loss of approximately $10,000 related to
these events. This loss was the result of the write off of undepreciated assets
of approximately $10,000.
The increase in general and administrative expenses for the nine months ended
September 30, 2005 was primarily due to an increase in the costs associated with
the annual audit required by the Partnership Agreement. Also included in general
and administrative expenses are costs of services included in the management
reimbursements to the Managing General Partner as allowed under the Partnership
Agreement and costs associated with the quarterly and annual communications with
investors and regulatory agencies.
Liquidity and Capital Resources
At September 30, 2005, the Partnership had cash and cash equivalents of
approximately $1,434,000 compared to approximately $1,481,000 at September 30,
2004. Cash and cash equivalents increased approximately $1,126,000 since
December 31, 2004 due to approximately $1,231,000 of cash provided by operating
activities and approximately $27,443,000 of cash provided by investing
activities, partially offset by approximately $27,548,000 of cash used in
financing activities. Cash provided by investing activities consisted of
proceeds from the sale of Stratford Place Apartments, receipts from escrow
accounts maintained by the mortgage lenders and insurance proceeds, partially
offset by property improvements and replacements. Cash used in financing
activities consisted of principal payments made on the mortgages encumbering the
Partnership's investment properties, repayment of the mortgage note payable as a
result of the sale of Stratford Place Apartments, prepayment penalties paid,
distributions to partners and repayments of advances from affiliates, partially
offset by advances from affiliates. 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 property 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 the
Partnership's property are detailed below.
Ashton Ridge Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $614,000 of capital improvements at Ashton Ridge Apartments
consisting primarily of floor covering and air conditioning unit replacements,
roof replacement, wood replacement, interior and exterior painting, major
landscaping, fencing, structural improvements and reconstruction of damages to
the property caused by Hurricane Jeanne. These improvements were funded from
operating cash flow. The Partnership regularly evaluates the capital improvement
needs of the property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital expenditures are
anticipated during 2005. Such capital expenditures will depend on the physical
condition of the property as well as anticipated cash flow generated by the
property.
Stratford Place Apartments
During the nine months ended September 30, 2005, the Partnership completed
approximately $339,000 of capital improvements at Stratford Place Apartments
consisting primarily of floor covering, window and appliance replacements and
reconstruction of damages to the property caused by a fire at the property in
January 2005 and a flood in February 2005 (see discussion in "Results of
Operations"). These improvements were funded from insurance proceeds, operating
cash flow and replacement reserves. The property was sold to a third party on
May 17, 2005.
Capital expenditures will be incurred only if cash is available from operations
or from Partnership reserves. To the extent that capital improvements are
completed, the Partnership's distributable cash flow, if any, may be adversely
affected 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 $5,308,000 has
a maturity date of January 2021 at which time the loan is scheduled to be fully
amortized.
The Partnership distributed the following amounts during the nine months ended
September 30, 2005 and 2004 (in thousands except per unit data):
Per Per
Nine Months Limited Nine Months Limited
Ended Partnership Ended Partnership
September 30, 2005 Unit September 30, 2004 Unit
Sale (1) $ 19,029 $ 822.20 $ -- $ --
(1) From the sale proceeds of Stratford Place Apartments in May 2005.
Future cash distributions will depend on the level of cash generated from
operations, availability of cash reserves and the timing of debt maturity,
refinancing and/or property sale. The Partnership's cash available for
distribution is reviewed on a monthly basis. There can be no assurance, however,
that the Partnership will generate sufficient funds from operations, after
required capital expenditures, to permit any further distributions to its
partners during 2005 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in
Partnership, AIMCO and its affiliates owned 10,984.25 limited partnership units
(the "Units") in the Partnership representing 47.47% of the outstanding Units at
September 30, 2005. 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 47.47%
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
The investment property is recorded at cost, less accumulated depreciation,
unless considered impaired. If events or circumstances indicate that the
carrying amount of the 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 property. 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
asset.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line basis over the term of the lease. 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.
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
AIMCO Properties L.P. and NHP Management Company, both affiliates of the
Managing General Partner, are defendants in a lawsuit alleging that they
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.
The complaint, filed in the United States District Court for the District of
Columbia, attempts to bring 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. and NHP
Management Company failed to compensate maintenance workers for time that they
were required to be "on-call". Additionally, the complaint alleges AIMCO
Properties L.P. and NHP Management Company failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally certified the collective action
on both the on-call and overtime issues, which allows the plaintiffs to provide
notice of the collective action to all non-exempt maintenance workers from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action, and AIMCO Properties, L.P. and NHP Management
Company will have the opportunity to move to decertify the collective action.
Because the court denied plaintiffs' motion to certify state subclasses, on
September 26, 2005, the plaintiffs filed a class action with the same
allegations in the Superior Court of California (Contra Costa County). 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
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.
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 5. OTHER INFORMATION
None.
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 14, 2005
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.
10.5 Purchase and Sale Contract between Stratford Place Investors
Limited Partnership, a Delaware limited partnership, as
Seller, and FF Realty LLC, a Delaware limited liability
company, as Purchaser, effective February 28, 2005 filed as
exhibit 10.5 to the Registrant's Current Report on Form 8-K
dated February 28, 2005 and filed on March 4, 2005 and
incorporated herein by reference.
10.6 First Amendment to Purchase and Sale Contract between
Stratford Place Investors Limited Partnership, a Delaware
limited partnership, as Seller, and FF Realty LLC, a Delaware
limited liability company, as Purchaser, dated March 30, 2005;
filed as Exhibit 10.6 to the Registrant's Current Report on
Form 8-K dated May 17, 2005 and filed on May 20, 2005,
incorporated herein by reference.
10.7 Second Amendment to Purchase and Sale Contract between
Stratford Place Investors Limited Partnership, a Delaware
limited partnership, as Seller, and FF Realty LLC, a Delaware
limited liability company, as Purchaser, dated April 28, 2005;
filed as Exhibit 10.7 to the Registrant's Current Report on
Form 8-K dated May 17, 2005 and filed on May 20, 2005,
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 of the equivalent of the Chief Executive Officer
and Chief Financial Officer 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 14, 2005
/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 14, 2005
/s/Stephen B. Waters
Stephen B. Waters
Vice President of
AIMCO/Winthrop Growth
Investors I, GP, LLC,
equivalent of the chief
accounting 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, 2005 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 14, 2005
/s/Stephen B. Waters
Name: Stephen B. Waters
Date: November 14, 2005
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.