U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 2-84760
Winthrop Growth Investors 1 Limited Partnership
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2839837
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, MA 02110
(Address of Principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data) June 30, December 31,
1996 1995
-------- ------------
Assets
Investment in Real Estate
Land $ 4,015 $ 4,015
Buildings and improvements 37,925 37,759
--------- ---------
41,940 41,774
Less accumulated depreciation 19,140 18,355
--------- ---------
22,800 23,419
--------- ---------
Cash and cash equivalents 1,643 908
Deferred costs, net of accumulated amortization
of $1,071 (1996) and $1,026 (1995) 1,505 1,018
Reserve accounts 1,030 409
Escrow accounts 599 220
Other assets 269 509
--------- ---------
5,046 3,064
--------- ---------
Total assets $ 27,846 $ 26,483
========= =========
Liabilities and Partners' Equity
Mortgage payable $ 21,826 $ 20,081
Accounts payable 144 102
Tenant security deposits 172 162
Accrued expenses and other liabilities 535 382
--------- ---------
Total Liabilities 22,677 20,727
--------- ---------
Partners' equity (deficit):
Limited partners' equity; 50,005 units authorized,
23,139 issued and outstanding 6,362 6,900
General partners' deficit (1,193) (1,144)
--------- ---------
Total partners' equity 5,169 5,756
--------- ---------
Total liabilities and partners' equity $ 27,846 $ 26,483
========= =========
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Income:
Rental $ 3,175 $ 3,163
Interest on short-term investments 36 23
Other 147 130
------- -------
Total Income 3,358 3,316
------- -------
Expenses:
Leasing 105 104
General and administrative 190 161
Management fees 164 164
Utilities 345 304
Repairs and maintenance 643 615
Insurance 133 131
Taxes 330 264
Depreciation 785 824
Amortization 45 51
Interest expense 958 956
Other expense 147 79
------- -------
Total expenses 3,845 3,653
------- -------
Net loss $ (487) $ (337)
======= =======
Net loss per Limited Partnership Unit $(18.93) $(13.09)
======= =======
Distributions per Limited Partnership Unit $ 4.32 $ 4.32
======= =======
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Three Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Income:
Rental $ 1,606 $ 1,581
Interest on short-term investments 19 11
Other 78 63
------- -------
Total Income 1,703 1,655
------- -------
Expenses:
Leasing 63 46
General and administrative 106 72
Management fees 82 82
Utilities 172 143
Repairs and maintenance 377 315
Insurance 65 63
Taxes 165 130
Depreciation 392 415
Amortization 9 25
Interest expense 478 479
Other expense 30 55
------- -------
Total expenses 1,939 1,825
------- -------
Net loss $ (236) $ (170)
======= =======
Net loss per Limited Partnership Unit $ (9.16) $ (6.61)
======= =======
Distributions per Limited Partnership Unit $ (2.16) $ (2.16)
======= =======
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
Consolidated Statement of Partners' Equity (Deficit) (Unaudited)
(In Thousands, Except Unit Data)
Units of
Limited Limited General
Partnership Partners' Partners' Total
Interest Equity Deficit Equity
----------- --------- --------- -------
Balance - January 1, 1996 23,139 $ 6,900 $(1,144) $ 5,756
Net loss (438) (49) (487)
Distribution (100) -- (100)
------- ------- ------- -------
Balance - June 30, 1996 23,139 $ 6,362 $(1,193) $ 5,169
======= ======= ======= =======
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 1996
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) For the Six Months Ended
June 30, 1996 June 30, 1995
------------- -------------
Cash Flows from Operating Activities:
Net loss $ (487) $ (337)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 830 874
Changes in assets and liabilities:
Other assets 240 95
Increase in escrow accounts (379) (191)
Increase in accounts payable 42 17
Increase in tenant security deposits 10 16
Increase in accrued expenses and other liabilities 153 69
-------- --------
Net cash provided by operating activities 409 543
-------- --------
Cash Flows from Investing Activities:
Additions to buildings and improvements (166) (274)
Increase in reserve accounts (621) (52)
-------- --------
Cash used in investing activities (787) (326)
-------- --------
Cash Flows from Financing Activities:
Satisfaction of mortgages payable (10,198) --
Notes payable proceeds 12,200 --
Principal payments on mortgage notes (257) (309)
Cash distributions paid to partners (100) (100)
Deferred financing costs paid (532) --
-------- --------
Net cash provided by (used in) financing activities 1,113 (409)
-------- --------
Net increase (decrease) in cash and cash equivalents 735 (192)
Cash and cash equivalents, beginning of period 908 923
-------- --------
Cash and cash equivalents, end of period $ 1,643 $ 731
======== ========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest $ 958 $ 956
======== ========
See notes to consolidated financial statements.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and discussions
should be read in conjunction with the consolidated financial statements,
related footnotes and discussions contained in the Partnership's annual
report for the year ended December 31, 1995.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature. Certain amounts have been reclassified to conform to the
June 30, 1996 presentation. The balance sheet at December 31, 1995 was
derived from audited financial statements at such date.
The results of operations for the six and three months ended June 30, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.
2. Accounting Change
On January 1, 1996, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recognized for long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows are
not sufficient to recover the asset's carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying amount. The
adoption of the SFAS has no effect on the Partnership's financial statements.
3. Mortgages Payable
In January 1996, the loan encumbering the Partnership's Sunflower Apartments
property was refinanced. The new loan in the principal amount of $2,700,000
bears interest at 7.46% per annum, requires monthly principal and interest
payments of approximately $19,000 and matures on February 11, 2026. The
Partnership received net proceeds of approximately $1,700,000 after
satisfying the former mortgage. Net refinancing proceeds of $900,000 were
used to pay off the second mortgage on the Stratford Place Apartments, whose
mortgage was due to mature on May 1, 1996. The lender required that $327,000
of the loan be set aside for certain capital improvements. The Partnership is
required to make monthly payments of $4,500 to a replacement reserve. A
premium (prepayment penalty) is to be calculated under the terms of the loan
if the loan is prepaid before the "Optional Prepayment Date", which is
February 11, 2006.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Mortgages Payable (continued)
In May 1996, the first mortgage encumbering the Partnerships Stratford Place
Apartments matured. The loan was extended and refinanced in June 1996. The
new loan in the principal amount of $9,500,000 bears interest at 8.23% per
annum, requires monthly principal and interest payments of approximately
$75,000 and matures in July 2006 with a balloon payment of approximately
$8,000,000. The lender required that $270,000 of the loan proceeds be set
aside for certain capital improvements. In addition, the Partnership is
required to make monthly payments of $7,000 to a replacement reserve. A
premium (prepayment penalty) is to be calculated under the terms of the loan
if the loan is prepaid. The Partnership received net proceeds of
approximately $62,000 after satisfying the former mortgage.
4. Related Party Transactions
Winthrop Management, an affiliate of the Managing General Partner, is
entitled to receive 5% of gross receipts from all Partnership properties they
manage. Winthrop Management earned $164,000 for the six months ended June 30,
1996 and 1995.
Winthrop Management received reimbursement of accountable administrative
expenses amounting to approximately $83,000 during the six months ended June
30, 1996.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation
This item should be read in conjunction with the financial statements and other
items contained elsewhere in the report.
Liquidity and Capital Resources
All of the Registrant's real estate properties are residential properties with
apartments leased to tenants pursuant to leases with original terms ranging
from three to fourteen months. The Registrant receives rental income from its
apartments and is responsible for operating expenses, administrative expenses,
capital improvements and debt service payments. The Registrant uses working
capital reserves provided from any undistributed cash flow from operations and
proceeds from mortgage refinancings as its primary sources of liquidity. For
the long term, cash from operations is expected to remain the Registrant's
primary source of liquidity, (i.e., until additional debt is refinanced or
properties sold). The Registrant distributed $100,000 to the holders of limited
partnership units ($4.32 per unit) during the six months ended June 30, 1996.
The level of liquidity based on cash and cash equivalents experienced a
$735,000 increase at June 30, 1996, as compared to December 31, 1995. The
Registrant's $1,113,000 of cash provided by financing activities and $409,000
of cash provided by operating activities was partially offset by $787,000 of
cash used in investing activities. Financing activities consisted of
$12,200,000 of proceeds from mortgage refinancings which were partially offset
by $10,198,000 of cash used for the satisfaction of notes payable, $532,000 of
deferred financing costs paid, $257,000 of notes payable principal payments and
$100,000 of cash distributions paid to limited partners. Investing activities
consisted of a $621,000 increase in reserve accounts and $166,000 of
improvements to real estate. All other increases (decreases) in certain assets
and liabilities are the result of the timing of receipt and payment of various
operating activities.
The Registrant continues to make capital improvements to the properties to
enhance their competitiveness within their markets. The $166,000 Registrant
spent on capital improvements during the six months ended June 30, 1996, was
funded from operating cash and replacement reserves held by mortgage lenders.
The Registrant invests its working capital reserves in a money market account.
The Managing General Partner believes that, if market conditions remain
relatively stable, cash flow from operations, when combined with working
capital reserves, will be sufficient to fund required capital improvements,
regular debt service payments and maintain quarterly distribution levels until
the mortgages mature. The Registrant has a balloon payment of approximately
$4,000,000 in 2000 and a balloon payment of approximately $8,000,000 in 2006.
Registrant will either have to extend or refinance these mortgages, or sell a
property, prior to the due date of these balloon payments.
As discussed in Item 1, Note 3, in January 1996, the loan encumbering the
Registrant's Sunflower Apartments property was refinanced. The new loan is in
the principal amount of $2,700,000, bears interest at 7.46% per annum and
matures in February 2026. The fixed monthly payment of principal and interest
of approximately $19,000 is a significant decrease from the approximately
$48,000 required under the previous loan.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (continued)
In June 1996, the loan encumbering the Registrant's Stratford Place Apartments
property was refinanced. The new loan is in the principal amount of $9,500,000,
bears interest at 8.23% per annum and matures July 2006. The loan requires
monthly payments of principal and interest of approximately $75,000.
Results of Operations
The Registrant's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1996 and 1995:
Average Occupancy
-----------------
Property 1996 1995
- --------------------------- ---- ----
Meadow Wood Apartments 86% 87%
Stratford Place Apartments 95% 96%
Stratford Village Apartment 88% 86%
Sunflower Apartments 91% 92%
Registrants net loss for the six months ended June 30, 1996, was approximately
$487,000, as compared to a net loss of approximately $337,000 for the six
months ended June 30, 1995. The net loss for the three months ended June 30,
1996, was approximately $236,000, as compared to a net loss of approximately
$170,000 for the three months ended June 30, 1995.
Revenues increased by $42,000 primarily due to increases in interest and other
income. Rental revenue remained relatively constant as increases in rental
rates were offset by increases in vacancy and concessions. Net rental revenue
improved at Stratford Place Apartments due to a decrease in concessions and at
Stratford Village Apartments due to an increase in rental rates and a decrease
in vacancy.
Expenses increased by $192,000 for the six months ended June 30, 1996, as
compared to 1995, primarily due to increases in other expenses of $68,000,
taxes of $66,000, utilities of $41,000, general and administrative expenses of
$29,000 and repairs and maintenance of $28,000, which were partially offset by
decreases in depreciation expense of $39,000 and amortization expense of
$6,000. Other expenses increased primarily due to increases in reimbursed
expenses and professional costs. Taxes increased primarily due to increases in
real estate taxes at the Registrant's Meadow Wood, Sunflower and Stratford
Place properties. Utilities increased primarily due to increases in water and
sewer expenses at Registrant's Meadow Wood property. Depreciation expense
decreased due to assets becoming fully depreciated. Mortgage interest expense
remained relatively constant as the decrease in interest rate on the Sunflower
Apartments was offset by an increase in mortgage principal balance on
refinancing.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
99. Supplementary Information Required Pursuant to Section 9.4
of the Partnership Agreement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1996.
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
FORM 10 - QSB JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BY: WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
Managing General Partner
BY: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer and Director
BY: /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
Dated: August 11, 1996
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WINTHROP GROWTH INVESTORS 1 LIMITED PARTNERSHIP
JUNE 30, 1996
Exhibit Index
Exhibit Page No.
- ------- --------
27. Financial Data Schedule --
99. Supplementary Information Required Pursuant to
Section 9.4 of the Partnership Agreement. 14
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