U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
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 March 31, 2005
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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 0-20273
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1999 Broadway Associates Limited Partnership
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(Exact name of small business issuer as specified in its charter)
Delaware 04-6613783
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts 02114-9507
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(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 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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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited)
March 31, December 31,
(In Thousands, Except Unit Data) 2005 2004
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Assets
Real estate, at cost:
Land $ 1,700 $ 1,700
Buildings and improvements, net of accumulated
depreciation of $30,594 (2005) and $30,090 (2004) 25,206 25,596
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26,906 27,296
Other Assets:
Cash and cash equivalents 1,336 1,524
Restricted cash 4,735 3,381
Other assets 548 601
Deferred rent receivable 2,478 2,792
Deferred costs, net of accumulated amortization
of $3,531 (2005) and $3,407 (2004) 3,197 2,166
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Total assets $ 39,200 $ 37,760
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Liabilities and Partners' Deficit
Liabilities:
Mortgage loan payable $ 48,184 $ 48,319
Accrued interest payable 331 332
Accounts payable and accrued expenses 2,566 1,856
Deferred lease termination fee -- 83
Payable to related party 333 258
Security deposits 115 98
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Total liabilities 51,529 50,946
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Partners' Deficit:
Investor limited partners' deficit (460 units outstanding) (10,667) (11,498)
General partner's deficit (1,662) (1,688)
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Total Partners' Deficit (12,329) (13,186)
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Total Liabilities and Partners' Deficit $ 39,200 $ 37,760
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Consolidated Statements of Operations (Unaudited) For the Three Months Ended
March 31, March 31,
(In Thousands, Except Unit Data) 2005 2004
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Revenues:
Rental $ 2,816 $ 2,914
Other 1,121 63
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Total revenues 3,937 2,977
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Expenses:
Real estate taxes 220 219
Payroll and payroll expense reimbursements 178 174
Operating expenses 161 172
Repairs and maintenance 292 303
Utilities 258 245
Management and other fees 273 205
General and administrative costs 59 49
Insurance 60 58
Depreciation 504 508
Amortization 115 95
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Total expenses 2,120 2,028
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Operating income 1,817 949
Non-operating income (expense):
Interest income 10 4
Interest expense (970) (990)
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Net income (loss) $ 857 $ (37)
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Net income (loss) allocated:
General Partner $ 26 $ --
Investor Limited Partners 831 (37)
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$ 857 $ (37)
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Net income (loss) allocated per unit:
Investor Limited Partners $1,806.52 $(80.43)
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Consolidated Statement of Partners' Deficit (Unaudited)
(In Thousands, Except Unit Data)
Units of Investor
Limited Limited General
Partnership Partners' Partner's
Interest Deficit Deficit Total
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Balance - December 31, 2004 460 $(11,498) $ (1,688) $(13,186)
Net income -- 831 26 857
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Balance - March 31, 2005 460 $(10,667) $ (1,662) $(12,329)
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) For the Three Months Ended
March 31, March 31,
2005 2004
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Cash Flows from Operating Activities:
Net income (loss) $ 857 $ (37)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 628 611
Amortization of deferred lease termination fee (83) (82)
Deferred rent receivable 314 (37)
Changes in assets and liabilities:
Other assets 53 37
Accrued interest payable (1) (1)
Accounts payable, accrued expenses, payable
to related party and security deposits 802 (314)
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Net cash provided by operating activities 2,570 177
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Cash Flows from Investing Activities:
Additions to buildings and improvements (114) (186)
Additions to restricted cash (1,932) (534)
Restricted cash released 578 490
Deferred costs (1,155) (1)
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Net cash used in investing activities (2,623) (231)
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Cash Flows from Financing Activities:
Principal payments on mortgage loan (135) (116)
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Cash used in financing activities (135) (116)
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Net decrease in Cash and Cash Equivalents (188) (170)
Cash and Cash Equivalents, Beginning of Period 1,524 1,619
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Cash and Cash Equivalents, End of Period $ 1,336 $ 1,449
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Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 962 $ 983
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements reflect the accounts of 1999
Broadway Associates Limited Partnership (the "Investor Partnership") and
its subsidiaries, 1999 Broadway Partnership (the "Operating Partnership")
and 1999 Broadway LLC (the "Operating Company"). The Investor Partnership,
the Operating Partnership and the Operating Company are collectively
referred to as the "Partnership". These consolidated financial statements,
footnotes and discussions should be read in conjunction with the
consolidated financial statements, related footnotes and discussions
contained in the Investor Partnership's Annual Report on Form 10-KSB for
the year ended December 31, 2004.
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 balance sheet at December 31, 2004 was derived from
audited financial statements at such date.
The results of operations for the three months ended March 31, 2005 and
2004 are not necessarily indicative of the results to be expected for the
full year.
2. Related Party Transactions
The Partnership has incurred charges and made commitments to companies
affiliated by common ownership and management with Winthrop Financial
Associates, A Limited Partnership, the managing general partner of the
Investor Partnership (the "General Partner"). Related party transactions
with the General Partner and its affiliates include the following:
a. The Partnership accrues to an affiliate of the General Partner an
annual property management fee equal to 5% of cash receipts. For the
three months ended March 31, 2005 and 2004, management fees of
$209,000 and $145,000, respectively, were incurred.
b. The Partnership pays or accrues to the General Partner an annual
partnership administration and investor service fee, as provided for
in the partnership agreement, of $100,000, which, since 1990, has
been increased annually by 6% to its present level of approximately
$254,000 per annum. Fees of $64,000 and $60,000 were paid or accrued
during the periods ended March 31, 2005 and 2004, respectively.
c. The Partnership pays or accrues to an affiliate of the General
Partner a construction management fee equal to 5% of the aggregate
cost of each applicable construction project. Fees of $5,000 and
$10,000 were incurred during the three months ended March 31, 2005
and 2004, respectively, and have been capitalized to the cost of
buildings and improvements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Allocation of Loss and Distribution of Cash Flow
In accordance with the Investor Partnership's partnership agreement losses
are allocated 1% to the General Partner and 99% to the limited partners.
Net income is allocated 3% to the General Partner and 97% to the limited
partners. Cash flow is distributed 99% to the limited partners and 1% to
the General Partner until the limited partners have received an amount
equal to an annual 6% per annum noncumulative, noncompounded return on
their invested capital and the balance, if any, 97% to the limited
partners, and 3% to the General Partner.
4. Segment Information
The Partnership has two reportable segments, the Office Tower and the
Garage. The Partnership evaluates performance based on net operating
income, which is income before depreciation, amortization, interest and
non-operating items.
Segment information for the three months ended March 31, 2005 and 2004 is
shown in the tables below (in thousands). The "Other" column includes
partnership administrative items and income and expense not allocated to a
reportable segment.
Office Parking
Tower Garage Other Total
2005
Rental income $ 2,816 $ -- $ -- $ 2,816
Other income 1,073 48 -- 1,121
Interest income 10 -- -- 10
Interest expense 940 30 -- 970
Depreciation and amortization 607 12 -- 619
Segment profit (loss) 948 6 (97) 857
Total assets 38,343 857 -- 39,200
Capital expenditures 114 -- -- 114
2004
Rental income $ 2,914 $ -- $ -- $ 2,914
Other income 5 58 -- 63
Interest income 3 -- 1
4
Interest expense 959 31 --
990
Depreciation and amortization 591 12 -- 603
Segment profit (loss) 16 15 (68) (37)
Total assets 37,159 903 -- 38,062
Capital expenditures 186 -- -- 186
5. Other Income
Other income includes a lease termination fee of $1,400,000 net of
deferred rent receivable of $345,000.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
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 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, through its effectively 99.9% ownership interest in 1999
Broadway LLC (the "Operating Company"), owns a 42-story office tower
located in Denver, Colorado together with a parking garage located one and
one-half blocks northeast of the office tower (collectively, the
"Property"). The Operating Company generates rental revenue from the
Property and is responsible for the Property's operating expenses as well
as its administrative costs.
The Registrant's level of liquidity based on cash and cash equivalents
decreased by $188,000 for the three months ended March 31, 2005, as
compared to December 31, 2004. The decrease is due to $2,623,000 of cash
used in investing activities and $135,000 of cash used for principal
payments on mortgage loan (financing activities), which were partially
offset by $2,570,000 of cash provided by operating activities. Net cash
used in investing activities consisted of $114,000 of cash used for
improvements to real estate, primarily building improvements, $1,155,000
of cash expended on leasing costs and commissions and a net increase of
$1,354,000 in restricted cash. The Property is approximately 85% leased as
of March 31, 2005 as compared to 93% at March 31, 2004. At March 31, 2005,
the Registrant had $1,336,000 in cash and cash equivalents of which
$973,000 was invested primarily in money market mutual funds.
Although the Property has been able to maintain an 85% occupancy rate in a
down office rental market in the Denver, Colorado area, the Lucent
Technologies lease which accounts for 12% of the rentable space at the
Property is scheduled to expire at the end of 2005. The Property's cash
flow exclusive of the Lucent Technologies lease may not be sufficient to
meet the Partnership's debt service payments and necessary capital
improvements. Accordingly, the Partnership is currently exploring the
following options:
o Continuing to seek one or more new tenants for the Lucent
space. Given the time left before the Lucent lease expires,
the rental rate under the Lucent lease and the weak Denver
office rental market, it is unlikely that all of the Lucent
space can be re-let at rental rates sufficient to generate the
same revenue as the Lucent lease;
o Negotiate a loan modification with the Partnership's lender to
reduce the monthly debt service payments;
o Sell the Property. In this regard, the Partnership has begun
the process of marketing the Property for sale. There can be
no assurance, however, that the Property can be sold for an
acceptable purchase price; and
o Obtaining mezzanine or junior debt from a third party or
through a rights offering made to the Partnership's partners.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Liquidity and Capital Resources (Continued)
There is no assurance that any of the foregoing alternatives will be
successful. If the Partnership is unsuccessful in consummating one or more
of the foregoing options, it is possible that the Property could be
foreclosed upon.
During the first quarter of 2005, the Partnership and Encoda Systems, Inc.
("Encoda") entered into a lease termination agreement on 65,146 square
feet, which Encoda was trying to sublease. Encoda paid $1,400,000 to
terminate the lease which was due to expire on December 31, 2008. Encoda
remains liable on 35,274 square feet through December 31, 2008, the
remaining term of its lease.
The Partnership has been able to renew some of its leases including the
lease with GSA for 34,731 square feet and Titanium Metals for 22,219
square feet. In addition, during the first quarter of 2005 the Partnership
negotiated lease modifications to expand the space leased by Kerr McGee
and Echo Geophysical to 52,911 square feet and 12,235 square feet
respectively. Both tenants were relocated to space previously occupied by
Encoda which previously vacated its space. Kerr McGee now leases
approximately 17% of the property.
The Partnership's only significant critical accounting policy relates to
the evaluation of the fair value of real estate. The Partnership evaluates
the need for an impairment loss on its real estate assets 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 evaluation of the fair value of real estate is an estimate that is
susceptible to change and actual results could differ from those
estimates.
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 the other operating needs of the Operating Company.
Such assets are currently thought to be sufficient for any near-term needs
of the Operating Company. The Registrant has budgeted approximately
$837,000 on capital improvements to the Property in 2005. As of March 31,
2005, the Registrant made no distributions to the partners.
The Registrant could be affected by declining economic conditions as a
result of various factors that affect the real estate business including
the financial condition of tenants, competition, and increased operating
costs, including insurance costs.
At this time, it appears that the original investment objective of capital
growth from the inception of the Registrant will not be attained and that
the limited partners will not receive a complete return of their invested
capital. The extent to which invested capital is refunded to the limited
partners is dependent upon the performance of the Property and the market
in which it is located.
None of the recently issued accounting standards had an effect on the
Registrant's consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Results of Operations
Net income for the three months ended March 31, 2005 was $857,000 as
compared to a net loss of $37,000 for the three months ended March 31,
2004. The net increase was due to an increase in operating income, a
decrease in interest expense, and an increase in interest income.
Operating results, before non-operating income (expense) increased by
$868,000 for the three months ended March 31, 2005, as compared to 2004,
due to an increase in revenue of $960,000, which was partially offset by
increases in expenses of $92,000.
Revenue increased by $960,000 for the three months ended March 31, 2005,
as compared to 2004, due to an increase in other income of $1,058,000
which was partially offset by a decrease in rental income of $98,000.
Other income increased primarily due to a lease termination fee of
$1,400,000 (received from Encoda Systems, Inc.) net of deferred rent
receivable of $345,000 related to Encoda's lease. Rental income decreased
by $98,000 due to decreases in occupancy and renal rates related to
additional spaces leased to Kerr McGee and Echo Geophysical.
Expenses increased by $92,000 for the three months ended March 31, 2005,
as compared to 2004, primarily due to increases in real estate taxes
($1,000), payroll and payroll expense reimbursements ($4,000), insurance
($2,000), utilities ($13,000), amortization ($20,000), management and
other fees ($68,000) and general and administrative costs ($10,000). These
increases were partially offset by decreases in repairs and maintenance
($11,000), operating expenses ($11,000) and depreciation ($4,000).
Interest income increased primarily due to higher cash balances available
for investments. Interest expense decreased due to normal amortization of
the loan balance.
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. The Registrant's mortgage note payable
at March 31, 2005 is at a fixed rate of interest.
Item 3. Controls and Procedures
The Registrant's management, with the participation of the Registrant's
Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Registrant's disclosure controls and procedures (as
such term is defined in Rules 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 Registrant's Chief Executive Officer and
Chief Financial Officer have concluded that, as of the end of such period,
the Registrant's disclosure controls and procedures are effective.
There have not been any changes in the Registrant'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 Registrant's internal control over financial
reporting.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
Part II - Other Information
Item 6. Exhibits
Exhibits required by Item 601 of Regulation S-B are filed herewith and are
listed in the attached Exhibit Index.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
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.
1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
BY: WINTHROP FINANCIAL ASSOCIATES, A LIMITED PARTNERSHIP
MANAGING GENERAL PARTNER
BY: /s/ Michael L. Ashner
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Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas Staples
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Thomas Staples
Chief Financial Officer
DATED: May 13, 2005
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB MARCH 31, 2005
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. 14 - 15
31.2 Chief Financial Officer's Certification, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 16 - 17
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. 18
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