FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ........to.........
Commission file number 2-84760
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2839837
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. 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
a)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,612
Receivables and deposits 769
Restricted escrows 1,223
Other assets 1,140
Investment properties:
Land $ 4,015
Buildings and related personal property 39,956
43,971
Less accumulated depreciation (22,509) 21,462
$ 26,206
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 227
Tenant security deposit liabilities 156
Other liabilities 558
Mortgage notes payable 21,208
Partners' (Deficit) Capital
General Partners' $ (1,264)
Limited Partners' (23,139 units
issued and outstanding) 5,321 4,057
$ 26,206
See Accompanying Notes to Consolidated Financial Statements
b)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 1,740 $ 1,681 $ 3,452 $ 3,373
Other income 95 93 159 178
Total revenues 1,835 1,774 3,611 3,551
Expenses:
Operating 763 748 1,491 1,545
General and administrative 37 25 79 98
Depreciation 453 397 897 793
Interest 470 491 939 948
Property tax 129 143 266 281
Total expenses 1,852 1,804 3,672 3,665
Net loss $ (17) $ (30) $ (61) $ (114)
Net loss allocated to
general partner (10%) $ (2) $ (3) $ (6) $ (11)
Net loss allocated to limited
partners (90%) (15) (27) (55) (103)
$ (17) $ (30) $ (61) $ (114)
Net loss per limited
partnership unit: $ (.66) $ (1.17) $ (2.37) $ (4.45)
Distributions per limited
partnership unit $ 4.32 $ 2.16 $ 4.32 $ 4.32
See Accompanying Notes to Consolidated Financial Statements
c)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners' Partners' Total
Original capital contributions 23,149 $ 2,000 $ 23,149 $ 25,149
Partners' (deficit) capital at
December 31, 1997 23,139 $ (1,258) $ 5,476 $ 4,218
Distributions declared -- -- (100) (100)
Net loss for the six months
ended June 30, 1998 -- (6) (55) (61)
Partners' (deficit) capital at
June 30, 1998 23,139 $ (1,264) $ 5,321 $ 4,057
See Accompanying Notes to Consolidated Financial Statements
d)
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net loss $ (61) $ (114)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 897 793
Amortization of loan costs and deferred costs 60 60
Loss on disposal of property 34 --
Change in accounts:
Receivables and deposits (176) (380)
Other assets 93 39
Accounts payable (22) (138)
Tenant security deposit liabilities 9 (8)
Other liabilities 116 203
Net cash provided by operating activities 950 455
Cash flows from investing activities:
Property improvements and replacements (568) (396)
Net (deposits to) withdrawals from
restricted escrows (155) 197
Net cash used in investing activities (723) (199)
Cash flows from financing activities:
Payments on mortgage notes payable (123) (113)
Distributions paid to partners -- (100)
Net cash used in financing activities (123) (213)
Net increase in cash and cash equivalents 104 43
Cash and cash equivalents at beginning of period 1,508 1,348
Cash and cash equivalents at end of period $ 1,612 $ 1,391
Supplemental disclosure of cash flow information:
Cash paid for interest $ 889 $ 899
Supplemental disclosure of non-cash activity:
At June 30, 1998, accounts payable and distributions paid to partners were
each adjusted by $100,000 for non-cash activity.
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 financial statements of Winthrop Growth Investors 1
Limited Partnership, (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Two Winthrop Properties, Inc. (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1998, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1998. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the
fiscal year ended December 31, 1997.
Reclassification
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership paid property management fees based upon
collected gross rental revenues for property management services as noted below
for the six month periods ended June 30, 1998 and 1997. Such fees are included
in operating expenses on the consolidated statements of operations and are
reflected in the following table. The Partnership Agreement provides for
reimbursement to the Managing General Partner and its affiliates for certain
expenses incurred in connection with the administration of Partnership
activities. The Managing General Partner and its affiliates received
reimbursements and fees as reflected in the following table (in thousands):
For the Six Months Ended
June 30,
1998 1997
Property management fees $180 $171
Reimbursements for services of affiliates 31 46
In addition, the Partnership paid approximately $11,000 during the six month
period ended June 30, 1998 to an affiliate of the Managing General Partner for
construction oversight reimbursements related to capital improvements and major
repair projects. There were no similar expenses paid during the corresponding
period in 1997.
On October 28, 1997, Insignia Financial Group, Inc. ("Insignia") acquired 100%
of the Class B stock of First Winthrop Corporation, the sole shareholder of the
Managing General Partner. Pursuant to this transaction, the by-laws of the
Managing General Partner were amended to provide for the creation of a
Residential Committee. Pursuant to the amended and restated by-laws, Insignia
has the right to elect one director to the Managing General Partner's Board of
Directors who, in turn, has the right to appoint the members of the Residential
Committee. The Residential Committee is generally authorized to cause the
Managing General Partner to take such actions as it deems necessary and
advisable in connection with the activities of the Partnership. The Managing
General Partner does not believe that this transaction will have a material
effect on the affairs and operations of the Partnership.
On February 6, 1997, LON-WGI Associates L.L.C. ("LON-WGI") commenced an offer
to purchase up to 11,000 units of limited partnership interest in the
Partnership (the "Offer") for $275 per unit, which units represent
approximately 47.5% of the total outstanding units in the Partnership. The
members of LON-WGI and the Managing General Partner are affiliates. As a
result of this affiliation, the Partnership remained neutral as to whether the
Limited Partners should tender their units pursuant to the Offer. Based on
filings with the Securities and Exchange Commission, LON-WGI acquired 4,792.34
units or approximately 20.7% of the total limited partnership units of the
Partnership. On October 28, 1997, LON-WGI entered into an agreement to sell
its units to Insignia. On April 30, 1998, Insignia completed the purchase of
4,872.34 limited partnership units from LON-WGI. As a result of its ownership
of 4,872.34 limited partnership units Insignia could be in a position to
significantly influence all voting decisions with respect to the Registrant.
Under the Partnership Agreement, unitholders holding a majority of the Units
are entitled to take action with respect to a variety of matters. When voting
on matters Insignia would in all likelihood vote such Units in a manner
favorable to the interest of the Managing General Partner because of their
affiliation with the Managing General Partner.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in September or October of 1998, is subject to
customary conditions, including government approvals and the approval of
Insignia's shareholders. If the closing occurs, AIMCO will then control the
Residential Committee of the Managing General Partner.
NOTE C - SUPPLEMENTARY INFORMATION REQUIRED PURSUANT TO SECTION 9.4 OF THE
PARTNERSHIP AGREEMENT
Statement of Cash Available for Distribution:
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
Net Loss $ (17,000) $ (61,000)
Add: Amortization expense 27,000 60,000
Depreciation expense 453,000 897,000
Less: Cash to reserves (363,000) (796,000)
Cash Available for
Distribution $ 100,000 $ 100,000
Distributions allocated to
Limited Partners $ 100,000 $ 100,000
General Partners' interest
Cash Available for
distribution $ -- $ --
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for the six
month periods ended June 30, 1998 and 1997:
Average
Occupancy
1998 1997
Meadow Wood Apartments 87% 89%
Jacksonville, Florida
Stratford Place Apartments 96% 98%
Gaithersburg, Maryland
Stratford Village Apartments 84% 86%
Montgomery, Alabama
Sunflower Apartments 98% 95%
Dallas, Texas
Occupancy at Sunflower Apartments has increased due to stronger marketing
efforts. The occupancy rate at Stratford Village Apartments continues to be
affected by move-outs due to military transfers and job loss/transfers.
Additionally, market conditions in the Montgomery area continue to be soft due
to low interest rates and new construction. Although low, occupancy at Meadow
Wood Apartments is comparable to the average occupancy in the surrounding area.
In addition, renovations to the exterior building and pool area are currently
underway and additional improvements to the overall appearance of this
investment property are planned for the third quarter of 1998.
Results of Operations
The Partnership realized a net loss of approximately $61,000 for the six months
ended June 30, 1998, compared to a net loss of approximately $114,000 for the
same period in 1997. The Partnership's net loss for the three months ended June
30, 1998 was approximately $17,000 compared to a net loss of approximately
$30,000 for the same period in 1997. The decrease in net loss is primarily due
to increased rental income and a decrease in operating expense partially offset
by an increase in depreciation expense. Rental revenues increased due to
overall rental rate increases at the Partnership's investment properties
partially offset by occupancy decreases at three of the Partnership's investment
properties. Operating expenses decreased primarily due to decreases in
advertising, property insurance, and repairs and maintenance expenses. This
decrease was offset somewhat by a $34,000 loss on the disposal of property
during the second quarter due to the write off of the undepreciated value of
roofs that were replaced at the Meadow Wood and Stratford Place properties. The
increase in depreciation expense is attributable to the addition of
approximately $1,100,000 of capital improvements and replacements at the
Partnership's investment properties over the last twelve months. Included in
operating expense for the six months ended June 30, 1998 is approximately
$11,000 in major repairs and maintenance, which is comprised primarily of
parking lot repairs at Stratford Village Apartments and construction services
expenses at Meadow Wood Apartments.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each 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, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
Liquidity and Capital Resources
At June 30, 1998, the Partnership had cash and cash equivalents of approximately
$1,612,000 as compared to approximately $1,391,000 at June 30, 1997. The net
increase in cash and cash equivalents for the six months ended June 30, 1998 was
approximately $104,000, as compared to an increase of approximately $43,000 for
the six months ended June 30, 1997. Net cash provided by operating activities
increased due to a decrease in net loss, as discussed above, as well as
reductions in the use of cash for receivables and deposits, accounts payable and
other assets due to the timing of receipts and payments. Net cash used in
investing activities increased due to net additions to restricted escrows and
increased property improvements and replacements. Net cash used in financing
activities decreased due to a lack of cash distributions paid out during the six
months ended June 30, 1998.
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 the other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $21,208,000 is being amortized over
varying periods with balloon payments due at maturity of approximately
$4,000,000 in 2000 and $8,000,000 in 2006, at which time the properties will
either be refinanced or sold. A distribution of $100,000 was declared for the
benefit of the limited partners during the six months ended June 30, 1998. Cash
distributions of $100,000 were declared and paid during the corresponding period
of 1997. Future cash distributions will depend on the levels of net cash
generated from operations, property sales, refinancings and the availability of
cash reserves.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed no
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
(b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
By: Two Winthrop Properties, Inc.
Managing General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
Residential Vice President
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
Residential Vice President
Date: August 7, 1998