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 June 30, 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 JUNE 30, 2005
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited)
June 30, 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 $31,140 (2005) and $30,090 (2004) 25,323 25,596
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27,023 27,296
Other Assets:
Cash and cash equivalents 1,077 1,524
Restricted cash 3,683 3,381
Other assets 494 601
Deferred rent receivable 2,584 2,792
Deferred costs, net of accumulated amortization
of $3,657 (2005) and $3,407 (2004) 2,546 2,166
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Total assets $ 37,407 $ 37,760
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Liabilities and Partners' Deficit
Liabilities:
Mortgage loan payable $ 48,067 $ 48,319
Accrued interest payable 319 332
Accounts payable and accrued expenses 1,283 1,856
Deferred lease termination fee -- 83
Payable to related party 352 258
Security deposits 115 98
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Total liabilities 50,136 50,946
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Partners' Deficit:
Investor limited partners' deficit (460 units outstanding) (11,055) (11,498)
General partner's deficit (1,674) (1,688)
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Total Partners' Deficit (12,729) (13,186)
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Total Liabilities and Partners' Deficit $ 37,407 $ 37,760
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
Consolidated Statements of Operations (Unaudited) For the Six Months Ended
June 30, June 30,
(In Thousands, Except Unit Data) 2005 2004
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Revenues:
Rental $ 5,403 $ 6,032
Other 1,168 106
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Total revenues 6,571 6,138
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Expenses:
Real estate taxes 441 439
Payroll and payroll expense reimbursements 380 361
Operating expenses 319 336
Repairs and maintenance 575 562
Utilities 479 439
Management and other fees 464 413
General and administrative costs 128 101
Insurance 120 117
Depreciation 1,050 1,013
Amortization 233 203
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Total expenses 4,189 3,984
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Operating income 2,382 2,154
Non-operating income (expense):
Interest income 22 9
Interest expense (1,947) (1,977)
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Net income $ 457 $ 186
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Net income allocated:
General Partner $ 14 $ 6
Investor Limited Partners 443 180
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$ 457 $ 186
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Net income allocated per unit:
Investor Limited Partners $963.04 $391.30
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
Consolidated Statements of Operations (Unaudited) For the Three Months Ended
June 30, June 30,
(In Thousands, Except Unit Data) 2005 2004
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Revenues:
Rental $ 2,586 $ 3,118
Other 47 43
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Total revenues 2,633 3,161
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Expenses:
Real estate taxes 220 220
Payroll and payroll expense reimbursements 201 187
Operating expenses 158 164
Repairs and maintenance 283 259
Utilities 221 194
Management and other fees 192 208
General and administrative costs 69 52
Insurance 60 59
Depreciation 546 505
Amortization 118 108
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Total expenses 2,068 1,956
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Operating income 565 1,205
Non-operating income (expense):
Interest income 13 5
Interest expense (978) (987)
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Net (loss) income $ (400) $ 223
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Net (loss) income allocated:
General Partners $ (4) $ 7
Investor Limited Partners (396) 216
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$ (400) $ 223
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Net (loss) income allocated per unit:
Investor Limited Partners $(860.87) $ 469.57
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 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
----------- --------- --------- --------
Balance - December 31, 2004 460 $(11,498) $ (1,688) $(13,186)
Net income -- 443 14 457
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Balance - June 30, 2005 460 $(11,055) $ (1,674) $(12,729)
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) For the Six Months Ended
June 30, June 30,
2005 2004
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Cash Flows from Operating Activities:
Net income $ 457 $ 186
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,300 1,233
Amortization of deferred lease termination fee (83) (165)
Deferred rent receivable 208 (204)
Changes in assets and liabilities:
Other assets 107 87
Accrued interest payable (13) (13)
Accounts payable, accrued expenses, payable
to related party and security deposits (462) (818)
Reserves and escrow deposits 463 213
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Net cash provided by operating activities 1,977 519
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Cash Flows from Investing Activities:
Additions to buildings and improvements (777) (241)
Replacement/tenant improvement reserve (765) 52
Deferred costs (630) (1)
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Net cash used in investing activities (2,172) (190)
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Cash Flows from Financing Activities:
Principal payments on mortgage loan (252) (223)
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Cash used in financing activities (252) (223)
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Net (decrease) increase in Cash and Cash Equivalents (447) 106
Cash and Cash Equivalents, Beginning of Period 1,524 1,619
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Cash and Cash Equivalents, End of Period $ 1,077 $ 1,725
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Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 1,943 $ 1,973
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See notes to consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements reflect the accounts of 1999
Broadway Associates Limited Partnership (the "Investor Partnership"), 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 six and three months ended June 30, 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
six months ended June 30, 2005 and 2004, management fees of $337,000
and $293,000, 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 $127,000 and $120,000 were paid or
accrued during the periods ended June 30, 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 $37,000 and
$12,000 were incurred during the six months ended June 30, 2005 and
2004, respectively, and have been capitalized to the cost of
buildings and improvements.
3. Reclassifications
Certain amounts from 2004 have been reclassified to conform to the 2005
presentation.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
4. Allocation of Income (Loss) and Distribution of Cash Flow
In accordance with the 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.
5. 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 six months ended June 30, 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 $ 5,403 $ -- $ -- $ 5,403
Other income 1,084 84 -- 1,168
Interest income 22 -- -- 22
Interest expense 1,888 59 -- 1,947
Depreciation and amortization 1,260 23 -- 1,283
Segment profit (loss) 643 2 (188) 457
Total assets 36,561 846 -- 37,407
Capital expenditures 777 -- -- 777
2004
Rental income $ 6,032 $ -- $ -- $ 6,032
Other income 11 95 -- 106
Interest income 9 -- -- 9
Interest expense 1,916 61 -- 1,977
Depreciation and amortization 1,193 23 -- 1,216
Segment profit (loss) 314 11 (139) 186
Total assets 36,687 892 -- 37,579
Capital expenditures 241 -- -- 241
6. Other Income
Other income, for the six months ended June 30, 2005, includes a net lease
termination fee of $1,055,000.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 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 Partnership from time to
time. The discussion of the Partnership'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
Partnership'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 Partnership, 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 Partnership's level of liquidity based on cash and cash equivalents
decreased by $447,000 for the six months ended June 30, 2005, as compared
to December 31, 2004. The decrease is due to $2,172,000 of cash used in
investing activities and $252,000 of cash used for principal payments on
mortgage loan (financing activities), which were partially offset by
$1,977,000 of cash provided by operating activities. Net cash used in
investing activities consisted of $777,000 of cash used for improvements
to real estate, primarily tenant improvements, $630,000 of cash expended
on leasing costs and commissions and a net increase of $765,000 in
replacement/tenant improvement reserve. The Property is approximately 85%
leased as of June 30, 2005 as compared to 92% at June 30, 2004. At June
30, 2005, the Partnership had $1,077,000 in cash and cash equivalents, of
which $831,000 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 and is currently
unoccupied. As previously reported, 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 began marketing the Property for sale and
expects to enter into a sale agreement during the third quarter of 2005
for a sale of the Property. Upon entering into a contract, the limited
partners will receive a consent solicitation seeking their consent to the
sale. The consent solicitation will set forth the details of any such
contract. There can be no assurance, however, that the Property will
ultimately be sold or, if sold, the ultimate sales price. If the Property
cannot be sold, the Partnership will continue to seek additional tenants,
negotiate a loan modification with its existing lender and/or seek
mezzanine or junior debt from a third party.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 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 partial 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 vacated its space pursuant to the partial lease termination
agreement. 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 Partnership has budgeted approximately
$837,000 on capital improvements to the Property in 2005. The Partnership
made no distributions to the partners for the six months ended June 30,
2005.
The Partnership 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.
At this time, it appears that the original investment objective of capital
growth from the inception of the Partnership 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
Partnership's consolidated financial statements.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
Item 2. Management's Discussion and Analysis or Plan of Operation (Continued)
Results of Operations
Net income for the six months ended June 30, 2005 was $457,000 as compared
to a net income of $186,000 for the six months ended June 30, 2004. The
increase in net income was due to an increase in other revenue. Operating
results, before non-operating income (expense) increased by $228,000 for
the six months ended June 30, 2005, as compared to 2004, due to an
increase in revenues of $433,000, which was partially offset by an
increase in expenses of $205,000.
Revenue increased by $433,000 for the six months ended June 30, 2005, as
compared to 2004, due to an increase in other revenue of $1,062,000, which
was partially offset by a decrease in rental revenue of $629,000. Other
revenue increased 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 revenue decreased by $629,000 due to
decreases in occupancy and rental rates related to the spaces leased to
Kerr McGee and Echo Geophysical.
Expenses increased by $205,000 for the six months ended June 30, 2005, as
compared to 2004, primarily due to increases in repairs and maintenance
($13,000), real estate taxes ($2,000), payroll and payroll expense
reimbursements ($19,000), general and administrative costs ($27,000),
amortization ($30,000), utilities ($40,000), insurance ($3,000),
depreciation ($37,000) and management and other fees ($51,000). These
increases were slightly offset by decreases in operating expenses
($17,000).
Interest income increased primarily due to higher restricted cash
balances. Interest expense decreased due to normal amortization of the
loan balance.
Net loss for the three months ended June 30, 2005 was $400,000 as compared
to net income of $223,000 for the three months ended June 30, 2004. The
decrease in net income was primarily due to a decrease in rental revenue
as a result of decreases in occupancy and rental rates.
Quantitative and Qualitative Disclosures of Market Risk
The Partnership 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 Partnership's mortgage note
payable at June 30, 2005 is at a fixed rate of interest.
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
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 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 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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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 JUNE 30, 2005
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Partnership 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: August 12, 2005
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1999 BROADWAY ASSOCIATES LIMITED PARTNERSHIP
FORM 10-QSB JUNE 30, 2005
Exhibit Index
Exhibit Page No.
31.1 Chief Executive Officer's Certification, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 16 - 17
31.2 Chief Financial Officer's Certification, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 18 - 19
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. 20
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