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 March 31, 2004
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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 0-14536
Winthrop California Investors Limited Partnership
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(Exact name of small business issuer as specified in its charter)
Delaware 04-2869812
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 Bulfinch Place, Suite 500, Boston, MA 02114-9507
- --------------------------------------- ------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 570-4600
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Indicate by check mark whether 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 No X
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT DATA)
MARCH 31, 2004 DECEMBER 31,
(UNAUDITED) 2003
-------------- ------------
ASSETS
Cash and cash equivalents $ 1,949 $ 2,530
Equity investment in Development Partnership 13,659 13,659
Receivables 8 --
Assets of discontinued operations -- 68
---------- --------
Total assets $ 15,616 $ 16,257
========== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable, accrued expenses and other $ 41 $ 377
Liabilities of discontinued operations -- 39
---------- --------
Total liabilities 41 416
---------- --------
Partners' capital:
Limited Partners -
Limited Partners capital-units of Investor Limited Partnership Interest,
$65,000 stated value per cash unit and $66,000 stated value per deferred
unit; authorized - 3,500 units; issued
and outstanding - 3,500 units 35,180 35,386
General partners' deficit (19,605) (19,545)
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Total partners' capital 15,575 15,841
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Total liabilities and partners' capital $ 15,616 $ 16,257
========== ========
See notes to consolidated financial statements.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
FOR THE THREE MONTHS ENDED
MARCH 31, MARCH 31,
2004 2003
---------- ----------
Income:
Interest income $ 4 $ 8
-------- -------
Total income 4 8
-------- -------
Expenses:
General and administrative 20 63
Asset management fees 188 188
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Total expenses 208 251
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Loss from continuing operations before
equity in loss of Development Partnership (204) (243)
Equity in loss of Development Partnership -- (126)
-------- -------
Loss from continuing operations (204) (369)
-------- -------
Discontinued Operations:
Loss from discontinued operations (6) (5)
-------- -------
Net loss $ (210) $ (374)
======== =======
Net loss allocated to General Partners $ (4) $ (7)
======== =======
Loss from continuing operations allocated to
Investor Limited Partners $ (200) $ (362)
Loss from discontinued operations allocated
to Investor Limited Partners (6) (5)
-------- -------
Net loss allocated to Investor Limited Partners $ (206) $ (367)
======== =======
Loss from continuing operations per unit of
of limited partnership interest $ (57.14) $ (103.43)
Loss from discontinued operations
per unit of limited partnership interest (1.72) (1.43)
-------- -------
Net loss per Unit of Limited Partnership Interest $ (58.86) $ (104.86)
======== =======
See notes to consolidated financial statements.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
UNITS OF
INVESTOR INVESTOR
LIMITED LIMITED GENERAL TOTAL
PARTNERSHIP PARTNERS' PARTNERS' PARTNERS'
INTEREST CAPITAL DEFICIT CAPITAL
------------- ----------- ----------- -----------
Balance - January 1, 2004 3,500 $ 35,386 $(19,545) $ 15,841
Net loss -- (206) (4) (210)
Distributions -- -- (56) (56)
------ -------- -------- --------
Balance - March 31, 2004 3,500 $ 35,180 $(19,605) $ 15,575
====== ======== ======== ========
See notes to consolidated financial statements.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS) FOR THE THREE MONTHS ENDED
MARCH 31, MARCH 31,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Continuing Operations:
Loss from continuing operations $ (204) $ (369)
Adjustments to reconcile loss from continuing
operations to net cash used in continuing operations:
Equity in loss of Development Partnership -- 126
Changes in assets and liabilities:
Increase in receivables (8) --
Decrease in accounts payable, accrued expenses
and other (336) (245)
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Net cash used in continuing operations (548) (488)
-------- --------
Discontinued Operations:
Loss from discontinued operations (6) (5)
Adjustments to reconcile loss from discontinued operations
to net cash provided by (used in) discontinued operations:
Changes in liabilities:
Decrease in assets of discontinued operations 68 --
Decrease in liabilities of discontinued operations (39) --
-------- --------
Net cash provided by (used in) discontinued operations 23 (5)
-------- --------
Net cash used in operating activities (525) (493)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Continuing Operations:
Distributions to partners (56) --
-------- --------
Cash used in financing activities (56) --
-------- --------
Net decrease in cash and cash equivalents (581) (493)
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Cash and cash equivalents, beginning of period 2,530 3,375
-------- --------
Cash and cash equivalents, end of period $ 1,949 $ 2,882
======== ========
See notes to consolidated financial statements.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
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 Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 2003.
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. The consolidated balance sheet at December 31,
2003 was derived from audited financial statements at such date.
The results of operations for the three months ended March 31, 2004 and
2003 are not necessarily indicative of the results to be expected for
the full year.
Certain amounts from 2003 have been reclassified to conform to the 2004
presentation.
2. EQUITY INVESTMENT IN DEVELOPMENT PARTNERSHIP
The Registrant owns a 25% Limited Partner's interest in Crow Winthrop
Development Limited Partnership (the "Development Partnership"), which
is accounted for under the equity method. At March 31, 2004, the
historical cost basis of the Registrant's equity investment in the
Development Partnership is $13,659,000. As described below, pursuant to
a settlement agreement, the Registrant is entitled to receive a
preference payment of $22,000,000 from any "Capital Transaction," as
defined, in exchange for the Registrant surrendering its interest in
the Development Partnership.
In October 2003, the Registrant entered into a settlement agreement
with Crow Irvine #2, a California limited partnership ("Crow") which
holds a 75% interest in and is the general partner of the Development
Partnership. The Registrant and Crow agreed to the dismissal of two
lawsuits between them that were pending in the Superior Court of the
State of California, County of Orange. In addition, the Registrant and
Crow agreed to an amendment of their partnership agreement. As part of
the amendment, the Registrant is entitled to receive a preference
payment of $22,000,000 arising from any "Capital Transaction," as
defined, that occurs during the period October 3, 2003 through October
2, 2005. If a Capital Transaction does not occur by October 3, 2005, in
addition to the preference payment, the Registrant will then be
entitled to receive interest of 6.0% per annum on the preference
payment. If a Capital Transaction does not occur by October 3, 2008,
the Registrant will become the general partner of the Development
Partnership and Crow will become the limited partner of the Development
Partnership. If the Registrant receives the preference payment and, if
applicable, any accrued interest, the Registrant has agreed to
surrender its interest in the Development Partnership to Crow.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. EQUITY INVESTMENT IN DEVELOPMENT PARTNERSHIP (CONTINUED)
In March 2004, the Managing General Partner of the Registrant was
advised by the general partner of the Development Partnership that the
Development Partnership has entered into an agreement to sell a portion
of the Development Partnership's land for a purchase price that, if the
sale is consummated, would yield net proceeds sufficient to potentially
pay a portion of or fully satisfy the $22,000,000 preference payment to
the Registrant. The sale, however, is subject to the buyer's due
diligence review as well as a number of other conditions. Accordingly,
there can be no assurance that the sale will be consummated. If the
sale is consummated, it is not expected that it will occur until
December 2004 at the earliest. Further, prior to any sale being
consummated, the Development Partnership will be required to build a
parking garage at an estimated cost of $20,000,000 to ensure that
sufficient parking is provided under applicable zoning laws and
agreements.
3. RELATED PARTY TRANSACTIONS
Asset management fees earned by the Managing General Partner totaled
$188,000 during the three months ended March 31, 2004 and March 31,
2003.
The Registrant paid the General Partners approximately $56,000 during
the three months ended March 31, 2004 for distributions that should
have been allocated to the General Partners in prior years.
4. DISCONTINUED OPERATIONS
The Registrant has classified the operations of its management
partnership, Winthrop California Management Limited Partnership and its
operating partnership, Crow Winthrop Operating Partnership as
discontinued operations as a result of the sale of the Fluor
Corporation World Headquarters Facility during 2002. Discontinued
operations are summarized as follows:
Three Months Ended
March 31,
----------------------------
2004 2003
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Income $ 2 $ -
Expenses 8 5
---------- ----------
Loss from discontinued operations $ (6) $ (5)
========== ==========
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosures contained in this Form
10-QSB and the other filings with the Securities and Exchange
Commission made by the Registrant from time to time. The
discussion of the Registrant's liquidity, capital resources and
results of operations, including forward-looking statements
pertaining to such matters, does not take into account the effects
of any changes to the Registrant's operations. Accordingly, actual
results could differ materially from those projected in the
forward-looking statements as a result of a number of factors,
including those identified herein.
Liquidity and Capital Resources
The Registrant uses its working capital reserves and any cash
distributions received from Crow Winthrop Development Limited
Partnership (the "Development Partnership") as its primary source
of liquidity.
In October 2003, the Registrant entered into a settlement
agreement with Crow Irvine #2, a California limited partnership
("Crow") which holds a 75% interest in and is the general partner
of the Development Partnership. The Registrant and Crow agreed to
the dismissal of two lawsuits between them that were pending in
the Superior Court of the State of California, County of Orange.
In addition, the Registrant and Crow agreed to an amendment of
their partnership agreement. As part of the amendment, the
Registrant is entitled to receive a preference payment of
$22,000,000 arising from any "Capital Transaction," as defined,
that occurs during the period October 3, 2003 through October 2,
2005. If a Capital Transaction does not occur by October 3, 2005,
in addition to the preference payment, the Registrant will then be
entitled to receive interest of 6.0% per annum on the preference
payment. If a Capital Transaction does not occur by October 3,
2008, the Registrant will become the general partner of the
Development Partnership and Crow will become the limited partner
of the Development Partnership. If the Registrant receives the
preference payment and, if applicable, any accrued interest, the
Registrant has agreed to surrender its interest in the Development
Partnership to Crow.
In March 2004, the Managing General Partner of the Registrant was
advised by the general partner of the Development Partnership that
the Development Partnership has entered into an agreement to sell
a portion of the Development Partnership's land for a purchase
price that, if the sale is consummated, would yield net proceeds
sufficient to potentially pay a portion of or fully satisfy the
$22,000,000 preference payment to the Registrant. The sale,
however, is subject to the buyer's due diligence review as well as
a number of other conditions. Accordingly, there can be no
assurance that the sale will be consummated. If the sale is
consummated, it is not expected that it will occur until December
2004 at the earliest. Further, prior to any sale being
consummated, the Development Partnership will be required to build
a parking garage at an estimated cost of $20,000,000 to ensure
that sufficient parking is provided under applicable zoning laws
and agreements.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
Liquidity and Capital Resources (Continued)
The Registrant had $1,949,000 in cash and cash equivalents at
March 31, 2004. Cash and cash equivalents are temporarily invested
in short-term instruments. The Registrant's level of liquidity
based upon cash and cash equivalents experienced a $581,000
decrease at March 31, 2004 as compared to December 31, 2003. The
decrease resulted from $548,000 of net cash used in continuing
operations and $56,000 of cash used in financing activities, which
were partially offset by $23,000 of net cash provided by
discontinued operations. Cash used in financing activities
consisted of distributions to the General Partners for amounts
that should have been allocated to them in prior years.
In February 2004, Quadrangle Associates III LLC, an affiliate of
Winthrop Financial Associates ("WFA"), a General Partner of the
Registrant, offered to purchase up to 964 (27.54%) of the
outstanding units of limited partnership interest of the
Registrant for a purchase price of $2,450 per limited partnership
interest upon the terms and subject to the conditions set forth in
the affiliate's offer to purchase, as amended. The offer by
Quadrangle Associates III LLC expired on March 31, 2004.
Quadrangle Associates III LLC accepted a total of 160.25 (4.58%)
of the outstanding units of limited partnership interest of the
Registrant at the purchase price of $2,450 per unit. Pursuant to
an agreement entered into with MB Special LLC, an entity
affiliated with several original partners of WFA who retained an
indirect minor interest in WFA and which has the right to review
the Partnership's budget, distributions and extraordinary
transactions, Mango Bay Realty LLC, an affiliate of MB Special
LLC, has the right to acquire up to 46% of any units acquired by
Quadrangle Associates III LLC in its offer, at any time prior to
May 31, 2004.
Results of Operations
Net Loss
The Registrant recorded a net loss of $210,000 for the three
months ended March 31, 2004 as compared to a net loss of $374,000
recorded in 2003. The decrease in net loss is primarily due to a
decrease in equity in loss of the Development Partnership of
$126,000 and a decrease in general and administrative expenses of
$43,000.
Income
Interest income decreased by $4,000 during the three months ended
March 31, 2004 as compared to 2003. This decrease is due to lower
cash balances invested during the three months ended March 31,
2004.
Expenses
Expenses decreased from $251,000 in 2003 to $208,000 in 2004,
primarily as a result of decreased professional fees.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
Results of Operations (Continued)
Equity in Loss of Development Partnership
Equity in loss of the Development Partnership was $126,000 for the
three months ended March 31, 2003 compared to no loss recorded for
the three months ended March 31, 2004. As a result of the
settlement agreement that is described above in Liquidity and
Capital Resources, the Registrant has not recorded any additional
losses on their equity investment in the Development Partnership
due to the Registrant's historical cost basis being lower than the
preference payment that the Registrant is entitled to receive in
connection with the settlement agreement.
Discontinued Operations
The Registrant has classified the operations of its management
partnership, Winthrop California Management Limited Partnership
and its operating partnership, Crow Winthrop Operating Partnership
as discontinued operations as a result of the sale of the Fluor
Corporation World Headquarters Facility in 2002. Loss from
discontinued operations was $5,000 for the three months ended
March 31, 2003 compared to a loss of $6,000 for the three months
ended March 31, 2004.
Inflation
Inflation is not expected to have a material impact on the
operations or financial position of the Registrant.
Critical Accounting Policy
The Registrant's only significant critical accounting policy
relates to the evaluation of the fair value of its equity
investment. The Registrant assesses whether there has been a
permanent impairment in the value of its equity investment if
events or changes in circumstances indicate that the carrying
amount of the equity investment may not be recoverable. The
Registrant considers factors such as expected future operating
income, trends and prospects, as well as the effects of demand,
competition and other economic factors. The carrying amount would
be adjusted, if necessary, to estimated fair value to reflect
impairment in the value of the equity investment. The evaluation
of the fair value of its equity investment is an estimate that is
susceptible to change and actual results could differ from those
estimates.
None of the recently issued accounting standards had any effect on
the Partnership's financial statements.
Quantitative and Qualitative Disclosures of Market Risk
The Registrant does not have any financial instruments that would
expose it to market risk associated with the risk of loss arising
from adverse changes in market rates and prices.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
ITEM 3. CONTROLS AND PROCEDURES
The Partnership's management, with the participation of the
Partnership's Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the Partnership's disclosure
controls and procedures (as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this report. Based on such
evaluation, the Partnership's Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are
effective.
There have not been any changes in the Partnership's internal
control over financial reporting (as defined in Rule 13a-15(f)
under the Securities and Exchange Act of 1934, as amended) 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.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibits required by Item 601 of Regulation S-B are filed
herewith and are listed in the attached Exhibit Index.
(b) Reports of Form 8-K:
No reports on Form 8-K were filed during the period ended
March 31, 2004.
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
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 FINANCIAL ASSOCIATES, A LIMITED
PARTNERSHIP
Managing General Partner
BY: /s/ Michael L. Ashner
------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas C. Staples
------------------------
Thomas C. Staples
Chief Financial Officer
Dated: May 12, 2004
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WINTHROP CALIFORNIA INVESTORS LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2004
EXHIBIT INDEX
Exhibit Page No.
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31.1 Chief Executive Officer's Certification, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. 15 - 16
31.2 Chief Financial Officer's Certification, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. 17 - 18
32 Certification of 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. 19
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