10-K 1 dw-ipi_10k.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 2001 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 0-13260 DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3174553 -------------------------------------------------------------------------------- (State (IRS Employer organization) Identification No.) 1221 Avenue of the Americas, New York, NY 10020 ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (800) 829-8585 ------------------------------------------------------------------------------ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered -------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests -------------------------------------- (Title of Class) 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K's or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by nonaffiliates of the registrant. Not Applicable DOCUMENTS INCORPORATED BY REFERENCE None PART I ITEM 1. BUSINESS The Registrant, Dean Witter Realty Income Partnership I, L.P. (the "Partnership"), is a limited partnership formed in August 1983 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing primarily in income-producing office, industrial and retail properties. The Managing General Partner of the Partnership is Dean Witter Realty Income Properties I Inc. (the "Managing General Partner"), a Delaware corporation which is wholly owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Income Associates I, L.P. (the "Associate General Partner"), a Delaware limited partnership, the general partner of which is Dean Witter Realty Income Associates I Inc., a wholly-owned subsidiary of the Managing General Partner. The Managing General Partner manages and controls all aspects of the business of the Partnership. The terms of transactions between the Partnership and its affiliates are set forth below in footnote 6 to the Financial Statements in Item 8 and in Item 13 below. The Partnership issued 92,780 units of limited partnership interest (the "Units") with gross proceeds from the offering of $92,780,000. The offering has been terminated and no additional Units will be sold. The proceeds from the offering were used to make equity investments in four office properties, two office/research and development properties and one retail property, all of which were acquired without mortgage debt. Except for the North Lake Plaza retail property (which is described in Item 2 below), all of the Partnership's properties were sold to unaffiliated purchasers prior to November 1, 1998. On January 18, 2002, the Partnership entered into an agreement to sell the North Lake Plaza property to an unaffiliated third party. Consummation of the sale is subject to customary closing costs and conditions, including final due diligence by the buyer. There can be no assurance that the sale contemplated by the agreement will be consummated, and that, if the sale is consummated, the final sale price would not be less than the contract price. The sale of the property would cause the dissolution of the Partnership; however, the timing of the final termination of the Partnership is uncertain at this time. See Item 7 and footnote 4 to the financial statements in Item 8 below. The Partnership considers its business to include one industry segment, investment in real property. Financial information regarding the Partnership is included in the Partnership's Financial Statements in Item 8 below. The Partnership has no employees. All of the Partnership's business is conducted in the United States. ITEM 2. PROPERTY The Partnership's principal offices are located at 1221 Avenue of the Americas, New York, New York 10020. The Partnership has no other offices. As of October 31, 2001, the Partnership owned directly the North Lake Plaza property, a shopping center located in Altamonte Springs, FL. The acquisition was completed in 1986 for a cost of approximately $10,110,000. The property has a net rentable area of 137,000 square feet, and was built with on-site parking facilities. Generally, the leases pertaining to the property provide for pass-throughs to the tenants of their pro-rata share of certain operating expenses. In the opinion of the Managing General Partner, the property is adequately covered by insurance. An affiliate of the Partnership was the property manager for the North Lake Plaza property through December 31, 1999. Further information relating to the Partnership's properties is included in Item 7 and footnotes 4 and 5 to the Financial Statements in Item 8 below. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND STOCKHOLDER MATTERS An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow its limited partners (the "Limited Partners") to transfer their units if a suitable buyer can be located. As of December 31, 2001, there were 12,583 holders of limited partnership interests. The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make distributions of cash to its partners. Pursuant to the partnership agreement, distributable cash, as defined, is paid 90% to the Limited Partners and 10% to the general partners (the "General Partners"). Sale proceeds are distributed, to the extent available, first, to each Limited Partner, until there has been a return of the Limited Partner's capital contribution plus cumulative distributions of distributable cash and sale proceeds in an amount sufficient to provide a 9% cumulative annual return on the Limited Partner's adjusted capital contribution. Thereafter, any remaining sale proceeds will be distributed 85% to the Limited Partners and 15% to the General Partners after the Managing General Partner receives a brokerage fee, if earned, of up to 3% of the selling price of any equity investment. To date, the General Partners have not received any distributions of sale proceeds or brokerage fees. In fiscal year 2001, the Partnership paid a cash distribution of $10.75 per Unit from the previously undistributed proceeds from the 1998 sale of the Harborgate property. The total distribution of $997,385 was paid 100% to the Limited Partners. The Partnership did not pay cash distributions during the year ended October 31, 2000. The Partnership does not anticipate making regular distributions to its partners in the future. Generally, future cash distributions will be paid from proceeds received from the sale of the North Lake Plaza property and cash reserves. Taxable income generally is allocated in the same proportions as distributions of distributable cash or sale proceeds (except that the General Partners must be allocated at least 1% of taxable income from sales). In the event there is no distributable cash or sale proceeds, taxable income will be allocated 90% to the Limited Partners and 10% to the General Partners. Any tax loss will be allocated 90% to the Limited Partners and 10% to the General Partners. ITEM 6. SELECTED FINANCIAL DATA The following sets forth a summary of the selected financial data for the Partnership:
Dean Witter Realty Income Partnership I, L.P. For the years ended October 31, 2001, 2000, 1999, 1998 and 1997 2001 2000 1999 1998 (1) 1997 (2) --------------------------------------------------------------------------------- Total revenues $ 1,069,841 $1,155,033 $ 1,131,337 $ 14,765,035 $ 10,453,915 Net (loss) income (3) $(1,365,263) $ 459,904 $ 478,655 $ 13,380,578 $ 5,854,208 Net (loss) income per unit of Limited Partnership Interest $ (15.43) $ 4.46 $ 4.64 $ 143.68 $ 60.72 Cash distributions paid per Unit of Limited Partnership Interest (4)(5) $ 10.75 $ -- $ -- $ 418.03 $ 144.61 Total assets at October 31 $ 6,309,223 $8,757,448 $ 8,174,590 $ 7,781,223 $ 33,613,496
1. Revenues and net income include gains of $12.9 million on the sales of the Carmel Park, Westwood 10 and Harborgate properties. 2. Revenues and net income include gains of $3.7 million on the sales of the Century Square and Arlington Business Center properties. 3. Includes a $2.0 million loss on impairment recorded for the North Lake Plaza property in 2002. 4. Distributions paid to Limited Partners in 1998 include a return of capital of $351.10 per Unit, calculated as the excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed. All distributions paid to Limited Partners in 2001 and 1997 represent returns of capital. 5. Includes distributions of proceeds from sales of real estate of $10.75, $405.78 and $110.05 in 2000, 1998 and 1997, respectively. The above financial data should be read in conjunction with the Financial Statements and the related notes in Item 8. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As a result of the September 11, 2001 destruction of the World Trade Center, the Partnership changed the location of its principal offices to 1221 Avenue of the Americas, New York, NY, 10020. The 2 World Trade Center address was the location of management and administration of the Partnership; the Partnership did not hold any of its assets at this location. The Partnership raised $92,780,000 in a public offering which was terminated in 1984. The Partnership has no plans to raise additional capital. The Partnership purchased six properties and made one investment in a partnership which owned an office property on an all-cash basis. The Partnership's acquisition program has been completed. No additional investments are planned. Except for the North Lake Plaza shopping center, all of the Partnership's properties were sold prior to November 1, 1998. As discussed in Note 4 to the Financial Statements, the Partnership entered into an agreement to sell North Lake Plaza to an unaffiliated third party. The closing of the sale is expected to occur during the second quarter of fiscal 2002. Consummation of the sale is subject to customary closing costs and conditions, including final due diligence by the buyer. Since the amount the Partnership expects to receive from the sale of the property is less than the net carrying value of the property, the Partnership wrote down the net carrying value of the property on its Financial Statements in Item 8, and recognized a loss on impairment of real estate. The value of the property, as well as most commercial real estate, decreased in 2001 due to the deteriorating national economy (further hurt by the events of September 11, 2001). There can be no assurance that the sale of North Lake Plaza contemplated by the agreement will be consummated, and that, if the sale is consummated, the final sale price would not be less than the contract price. However, if the Partnership does collect the amount it expects to receive from the sale, then the Managing General Partner expects to distribute the sale proceeds 100% to Limited Partners. Some sale proceeds are expected to be distributed approximately three months after closing. The Partnership Agreement provides that the Partnership shall dissolve upon the sale of the Partnership's last investment, and that dissolution shall be effective on the day on which the event occurs giving rise to the dissolution. Accordingly, the Partnership will dissolve pursuant to the terms of its Partnership Agreement on the date of the closing of the sale of the North Lake Plaza property. Thereafter, the Partnership will wind up its affairs and terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State. The timing of such termination is uncertain at the current time. During 2001, average occupancy at North Lake Plaza was 83% and at October 31, 2001, occupancy at the shopping center was approximately 80% (a decrease of 6% from October 31, 2000). The lease for Home Depot (for approximately 50% of the property's space) is scheduled to expire in 2003. The Burlington Coat Factory, which subleased all the space leased to Home Depot, vacated the space in October 1999; however, both Home Depot and Burlington Coat Factory remain obligated, and continue to pay rent, under the lease. Since rent is being paid on this space, the Partnership considers the Home Depot space to be occupied. However, the physical vacancy of the Home Depot space is adversely impacting the sales of smaller tenants at the property, and, as a result, the increase in vacancy at the property has been caused by small tenants leaving their rental spaces. The lease of Marshalls Inc. (for approximately 21% of the space) is scheduled to expire in 2007. North Lake Plaza is leased to 3 other tenants; no other tenants occupy more than 10% of the property's space. During the year ended October 31, 2001, North Lake Plaza generated positive cash flow from operations, and it is anticipated that the property will continue to do so during the period the Partnership continues to own it. During the year ended October 31, 2001, the Partnership added the cash generated by the property to the Partnership's cash reserves. The Partnership believes that its cash reserves are adequate for its needs until it is terminated. In November 2000, the Partnership paid a cash distribution of $10.75 per Unit to Limited Partners only. The amount distributed consisted of previously undistributed proceeds from the 1998 sale of the Harborgate property. Generally, future cash distributions will be paid from proceeds received from the sale of North Lake Plaza and cash reserves. Except as discussed above and in the Financial Statements, the Managing General Partner is not aware of any trends or events, commitments or uncertainties that may have a material impact on liquidity. OPERATIONS Fluctuations in the Partnership's operating results for the year ended October 31, 2001 compared to 2000 and the year ended October 31, 2000 compared to 1999 were primarily attributable to the following: The decrease in depreciation and amortization expense in 2001 compared to 2000 was due to the absence of depreciation expense on the North Lake Plaza property since February 1, 2001. The Partnership no longer records depreciation on this property because the Partnership reclassified North Lake Plaza as real estate held for sale on January 31, 2001. The 2001 loss on impairment of real estate was caused by the writedown of the North Lake Plaza property (and related assets) to its expected sale price, net of closing costs and other deductions. There were no other individually significant factors which caused changes in revenues or expenses in 2001 compared to 2000. There were no individually significant factors which caused changes in the Partnership's operating results in 2000 as compared to 1999. INFLATION Inflation has been consistently low during the periods presented in the Financial Statements and, as a result, has not had a significant effect on the operations of the Partnership or its property. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. INDEX (a) Financial Statements Independent Auditors' Report Balance Sheets at October 31, 2001 and 2000 Statements of Operations for the years ended October 31, 2001, 2000 and 1999 Statements of Partners' Capital for the years ended October 31, 2001, 2000 and 1999 Statements of Cash Flows for the years ended October 31, 2001, 2000 and 1999 Notes to Financial Statements (b) Financial statement schedule III. Real Estate and Accumulated Depreciation All schedules other than those indicated above have been omitted because either the required information is not applicable or the information is shown in the financial statements or notes thereto. INDEPENDENT AUDITORS' REPORT To The Partners of Dean Witter Realty Income Partnership I, L.P.: We have audited the accompanying balance sheets of Dean Witter Realty Income Partnership I, L.P. (the "Partnership") as of October 31, 2001 and 2000, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended October 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Dean Witter Realty Income Partnership I, L.P. as of October 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2001 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York January 22, 2002 DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. BALANCE SHEETS OCTOBER 31, ------------------------------- 2001 2000 ------------------------------- ASSETS ------ Cash and cash equivalents $ 1,668,178 $ 2,118,062 Real estate: Land -- 2,312,300 Building and improvements -- 7,489,594 ---------- ---------- 9,801,894 Accumulated depreciation -- (3,295,444) ---------- ---------- -- 6,506,450 Real estate held for sale 4,600,000 -- Other assets 41,045 132,936 ---------- ---------- $ 6,309,223 $ 8,757,448 ========== ========== LIABILITIES AND PARTNERS' CAPITAL Accounts payable and other liabilities $ 245,839 $ 331,416 ---------- ---------- Partners' capital (deficiency) General partners (4,280,486) (4,346,567) Limited partners ($1,000 per Unit, 92,780 Units issued) 10,343,870 12,772,599 ---------- ---------- Total partners' capital 6,063,384 8,426,032 ---------- ---------- $6,309,223 $8,757,448 ========== ========== See accompanying notes to financial statements. DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 2001 2000 1999 ---- ---- ---- Revenues: Rental $ 1,019,312 $ 1,074,253 $ 1,060,291 Interest and other 50,529 80,780 71,046 ----------- ----------- ----------- 1,069,841 1,155,033 1,131,337 ----------- ----------- ----------- Expenses: Property operating 263,958 330,456 320,502 Depreciation and amortization 66,458 238,389 216,168 General and administrative 78,619 126,284 116,012 Loss on impairment of real estate 2,026,069 -- -- ----------- ----------- ----------- 2,435,104 695,129 652,682 ----------- ----------- ----------- Net (loss) income $(1,365,263) $ 459,904 $ 478,655 =========== =========== =========== Net (loss) income allocated to: Limited partners $(1,431,344) $ 413,914 $ 430,789 General partners 66,081 45,990 47,866 ----------- ----------- ----------- $(1,365,263) $ 459,904 $ 478,655 =========== =========== =========== Net (loss) income per Unit of limited partnership interest $ (15.43) $ 4.46 $ 4.64 =========== =========== =========== See accompanying notes to financial statements. DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 LIMITED GENERAL PARTNERS PARTNERS TOTAL -------- -------- ----- Partners' capital (deficiency) at November 1, 1998 $ 11,927,896 $ (4,440,423) $ 7,487,473 Net income 430,789 47,866 478,655 ------------ ------------ ------------ Partners' capital (deficiency) at October 31, 1999 12,358,685 (4,392,557) 7,966,128 Net income 413,914 45,990 459,904 ------------ ------------ ------------ Partners' capital (deficiency) at October 31, 2000 12,772,599 (4,346,567) 8,426,032 Net (loss) income (1,431,344) 66,081 (1,365,263) Cash distribution (997,385) -- (997,385) ------------ ------------ ------------ Partners' capital (deficiency) at October 31, 2001 $ 10,343,870 $ (4,280,486) $ 6,063,384 ============ ============ ============ See accompanying notes to financial statements.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 31, 2001, 2000 AND 1999 2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net (loss) income $(1,365,263) $ 459,904 $ 478,655 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Loss on impairment of real estate 2,026,069 -- -- Depreciation and amortization 66,458 238,389 216,168 Increase in other assets (94,186) (24,180) (104,424) (Decrease) increase in accounts payable and other liabilities (85,577) 122,954 (85,288) ----------- ----------- ----------- Net cash provided by operating activities 547,501 797,067 505,111 ----------- ----------- ----------- Cash flows from investing activities: Additions to real estate -- (35,000) (223,750) ----------- ----------- ----------- Cash flows from financing activities: Cash distributions (997,385) -- -- ----------- ----------- ----------- (Decrease) increase in cash and cash equivalents (449,884) 762,067 281,361 Cash and cash equivalents at beginning of year 2,118,062 1,355,995 1,074,634 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 1,668,178 $ 2,118,062 $ 1,355,995 ----------- ----------- ----------- Supplemental disclosure of non-cash investing activities: Reclassification to real estate held for sale: Land $ 2,312,300 $ -- $ -- Building and improvements 7,489,594 -- -- Accumulated depreciation (3,350,890) -- -- Deferred leasing commissions and other assets 175,065 -- -- ----------- ----------- ----------- 6,626,069 -- -- Loss on impairment of real estate (2,026,069) -- -- ----------- ----------- ----------- Real estate held for sale $ 4,600,000 $ -- $ -- =========== =========== =========== See accompanying notes to financial statements.
DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. 1. THE PARTNERSHIP Dean Witter Realty Income Partnership I, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of Delaware in 1983. The Partnership is managed by Dean Witter Realty Income Properties I Inc. (the "Managing General Partner"). The Partnership's fiscal year ends on October 31. In 1984, the Partnership issued 92,780 units of limited partnership interest (the "Units") for $92,780,000. No additional Units will be sold. The proceeds of the offering were used to make equity investments in income-producing office, industrial and retail properties which were not encumbered by debt when acquired. As discussed in Note 4, the Partnership has entered into an agreement to sell the North Lake Plaza shopping center, its last remaining real estate investment, to an unaffiliated third party. Pursuant to the Partnership Agreement, the sale of the Partnership's last such investment will cause the dissolution of the Partnership. Thereafter, the Partnership plans to wind up its affairs and terminate. However, there can be no assurance that the sale contemplated by the agreement will be consummated. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less. The carrying value of real estate includes the purchase price paid by the Partnership and acquisition fees and expenses. Costs of improvements to the properties are capitalized, and repairs are expensed. Depreciation is recorded on the straight-line method. The Partnership stops recording depreciation on a property when it is reclassified as real estate held for sale. At least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate and any related assets. As part of this evaluation, the Partnership assesses, among other things, whether there has been a significant decrease in the market value of any of its properties. If events or circumstances indicate that the net carrying value of a property may not be recoverable, the expected future net cash flows from the property are estimated for a period of approximately five years (or a shorter period if the Partnership expects that the property may be disposed of sooner), along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value as determined (in some cases with the assistance of outside real estate consultants) based on discounted cash flows, and a loss on impairment recognized by a charge to earnings. Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of October 31, 2001. The cash flows used to evaluate the recoverability of the properties and to determine fair value are based on good faith estimates and assumptions developed by the Managing General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore, actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs which could be material in subsequent years if real estate markets or local economic conditions change. Deferred leasing commissions, which were a component of other assets, were amortized over the applicable lease terms. Net (loss) income per Unit amounts are calculated by dividing net (loss) income allocated to Limited Partners, in accordance with the Partnership Agreement, by the weighted average number of Units outstanding. No provision for income taxes has been made in the financial statements, since the liability for such taxes is that of the partners rather than the Partnership. For income tax purposes, Partnership results are reported for the calendar year. The accounting policies used for tax reporting purposes differ from those used for financial reporting as follows: (a) depreciation is calculated using accelerated methods, (b) rental income is recognized based on the payment terms in the applicable leases, and (c) writedowns for impairment of real estate are not deductible. In addition, offering costs are treated differently for tax and financial reporting purposes. The tax basis of the Partnership's assets and liabilities is approximately $7.4 million higher than the amounts reported for financial statement purposes. 3. PARTNERSHIP AGREEMENT The Partnership Agreement provides that distributable cash, as defined, will be paid 90% to the Limited Partners and 10% to the General Partners. Sale proceeds will be distributed, to the extent available, first, to each Limited Partner, until there has been a return of the Limited Partner's capital contribution plus cumulative distributions of distributable cash and sale proceeds in an amount sufficient to provide a 9% cumulative annual return on the Limited Partner's adjusted capital contribution. Thereafter, any remaining sale proceeds will be distributed 85% to the Limited Partners and 15% to the General Partners after the Managing General Partner receives a brokerage fee, if earned, of up to 3% of the selling price of any equity investment. To date, the General Partners have not received any distributions of sale proceeds or brokerage fees. Taxable income generally is allocated in the same proportions as distributions of distributable cash or sale proceeds (except that the General Partners must be allocated at least 1% of taxable income from sales). In the event there is no distributable cash or sale proceeds, taxable income will be allocated 90% to the Limited Partners and 10% to the General Partners. Any tax loss will be allocated 90% to the Limited Partners and 10% to the General Partners. Distributions paid to the Limited Partners during the year ended October 31, 2001 included a return of capital, determined as cash distributed per Unit in excess of accumulated earnings per Unit not previously distributed, of $10.75 per Unit. No distributions were paid during the years ended October 31, 2000 and 1999. 4. REAL ESTATE HELD FOR SALE The location, year of acquisition and net carrying value of the Partnership's sole property are as follows: NET CARRYING VALUE AT YEAR OF OCTOBER 31 ACQUISITION 2001 2000 ----------- ---- ---- North Lake Plaza Altamonte Springs, FL 1984, 1986 $4,600,000 $6,506,450 ========== ========== On January 18, 2002, the Partnership entered into an agreement to sell North Lake Plaza to an unaffiliated third party. The closing of the sale is expected to occur during the second quarter of fiscal 2002. Consummation of the sale is subject to customary closing costs and conditions, including final due diligence by the buyer. There can be no assurance that the sale contemplated by the agreement will be consummated, and that, if the sale is consummated, the final sale price would not be less than the contract price. The Partnership expects to receive $4.6 million, net of closing costs and other deductions, from the sale of North Lake Plaza. In accordance with the impairment evaluation policy described in Note 2, the Partnership evaluated the recoverability of its investment in real estate held for sale and concluded that, based on the $4.6 million that the Partnership expects to receive from the sale of the property, the Partnership would be unable to recover its recorded investment in North Lake Plaza. Accordingly, as of October 31, 2001, the Partnership wrote the property down to $4.6 million, and recorded a loss on impairment of real estate of approximately $2.0 million. Originally, the Partnership agreed to sell the North Lake Plaza shopping center to a different unaffiliated third party pursuant to a Purchase and Sale Agreement executed February 15, 2001. In June 2001, the Agreement lapsed without closing of the sale. However, at January 31, 2001, the Partnership reclassified the North Lake Plaza property as real estate held for sale. Accordingly, the Partnership did not record depreciation on the property after the first quarter of 2001. Currently, the Partnership only earns rental revenues from the North Lake Plaza property. During the year ended October 31, 2001, the following two tenants at the property generated approximately 72% of the Partnership's rental revenues: Home Depot (57%) and Marshalls (15%). Expense reimbursements, paid by tenants of North Lake Plaza pursuant to their leases, are included in rental revenues. 5. LEASES Minimum future rental income under noncancellable operating leases of the North Lake Plaza property as of October 31, 2001 is as follows: Year ending October 31: 2002 748,144 2003 408,693 2004 236,928 2005 194,936 2006 151,200 Thereafter 37,800 ---------- Total $1,777,701 ========== The Partnership has determined that all of the property's leases are operating leases. The leases generally provide for fixed minimum rents with rental escalation and/or expense reimbursement clauses. 6. RELATED PARTY TRANSACTIONS An affiliate of the Managing General Partner provided property management services for North Lake Plaza until December 31, 1999. The Partnership paid the affiliate management fees of approximately $8,000 and $43,000 for the years ended October 31, 2000 and 1999, respectively. These amounts are included in property operating expenses. Another affiliate of the Managing General Partner performs administrative functions, processes certain investor transactions and prepares tax information for the Partnership. In 2001, 2000 and 1999 the affiliate was reimbursed approximately $21,000, $32,000 and $46,000, respectively, for these services. These amounts are included in general and administrative expenses. At October 31, 2001 and 2000, the Partnership's accounts payable and other liabilities included approximately $44,000 and $42,000, respectively, due to affiliates of the Managing General Partner for administrative fees and expense reimbursements. 7. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) NET INCOME (LOSS) PER UNIT OF NET INCOME LIMITED PARTNERSHIP REVENUE (LOSS) INTEREST ------- ------ ------------------------- 2001 January 31 $ 284,549 $ 146,580 $ 1.42 April 30 291,339 216,190 2.10 July 31 276,117 136,260 1.32 October 31 217,836 (1,864,293) (20.27) ----------- ----------- ----------- Total $ 1,069,841 $(1,365,263) $ (15.43) =========== =========== =========== 2000 January 31 $ 292,571 $ 125,370 $ 1.22 April 30 283,587 86,322 0.83 July 31 283,342 123,594 1.20 October 31 295,533 124,618 1.21 ----------- ----------- ----------- Total $ 1,155,033 $ 459,904 $ 4.46 =========== =========== =========== The net loss incurred during the quarter ended October 31, 2001, includes the loss on impairment of real estate discussed in Note 4 above. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership is a limited partnership that has no directors or officers. The directors and executive officers of the Managing General Partner are as follows: POSITION WITH THE NAME MANAGING GENERAL PARTNER ---- ------------------------ William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Ronald T. Carman Secretary and Director All of the directors have been elected to serve until the next annual meeting of the shareholder of the Managing General Partner or until their successors are elected and qualify. Each of the executive officers has been elected to serve until his successor is elected and qualifies. William B. Smith, age 58, has been an Advisory Director of Morgan Stanley Dean Witter & Co., Inc. since July 2000. From June 1997 to July 2000, Mr. Smith was a Managing Director of Morgan Stanley & Co., Inc. and Co-head of Morgan Stanley Realty Incorporated. Prior to June 1997, Mr. Smith was an Executive Vice President of Morgan Stanley DW Inc. and Director of its Investment Banking Department for more than five years. E. Davisson Hardman, Jr., age 52, has been an Advisory Director of Morgan Stanley Dean Witter & Co. since September 2001. From June 1997 to September 2001, he was a Managing Director of Morgan Stanley Asia, Ltd. For more than five years before June 1997, Mr. Hardman was a Managing Director of Dean Witter Realty Inc. Ronald T. Carman, age 50, has been an Assistant Secretary of Morgan Stanley Dean Witter & Co. since June 1997 and a Managing Director of Morgan Stanley & Co. Inc. since July 1998. Previously, he was a Senior Vice President and Associate General Counsel of Morgan Stanley DW Inc., which he joined in 1984. There is no family relationship among any of the foregoing persons. ITEM 11. EXECUTIVE COMPENSATION The General Partners are entitled to receive cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are in Item 5 above. There were no cash distributions paid to the General Partners in fiscal years 2001, 2000 and 1999. The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 6 to the Financial Statements in Item 8 above. The directors and officers of the Partnership's Managing General Partner received no remuneration from the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) The following is known to the Partnership to be the beneficial owner of more than five percent of the Units: UNITS BENEFICIALLY OWNED NAME OF BENEFICIAL OWNERS NUMBER PERCENT ------------------------- ------ ------- Madison Avenue Investment Partners, LLC ("MAIP"); First Equity Realty, LLC ("FER"); The Harmony Group II, LLC ("Harmony"); Ronald M. Dickerman; Bryan E. Gordon (collectively the "Reporting Persons") 6,131 6.61% The information set forth in this Item 12 (a) is based on Amendment No. 1 to Schedule 13G Information Statement filed February 14, 2001 by the Reporting Persons. Such Schedule 13G discloses that MAIP has sole voting and sole dispositive power over 6,131 Units and that each of the Reporting Persons beneficially owns and has shared voting and shared dispositive power over 6,131 Units. The address of MAIP, Harmony and Mr. Gordon is P.O. Box 7533, Incline Village, Nevada 89452. The address of FER and Mr. Dickerman is 410 Park Avenue, Suite 540, NY, NY 10022. (b) The directors and executive officers of the Managing General Partner own the following Units as of January 1, 2001: (1) (2) (3) NAME OF AMOUNT AND NATURE OF TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP -------------- ---------------- -------------------- Limited All directors and executive * Partnership officers of Managing General Interests Partner, as a group ________________________ * Own, by virtue of their ownership of Limited Partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As a result of their being partners of a limited partnership which is the limited partner of the Associate General Partner, certain current and former officers and directors of the Managing General Partner also own indirect general partnership interests in the Partnership. The Partnership Agreement of the Partnership provides that cash distributions and allocations of income and loss to the General Partners be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The General Partners' share of cash distributions and income or loss is described in Item 5 above. All of the outstanding shares of common stock of the Managing General Partner are owned by Realty, a Delaware corporation which is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The general partner of the Associate General Partner is Dean Witter Realty Income Associates I Inc., which is a wholly-owned subsidiary of the Managing General Partner. The limited partner of the Associate General Partner is LSA 84 L.P., a Delaware limited partnership. Realty and certain current and former officers and directors of Realty are partners of LSA 84 L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above. The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 6 to the Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K A. The following documents are filed as part of this Annual Report: 1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 2. Financial Statement Schedule (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 3. Exhibits (a) Amended and Restated Agreement of Limited Partnership dated as of August 15, 1983 set forth in Exhibit A to the Prospectus included in Registration Statement Number 286041 is incorporated herein by reference. (b) Certificate of Limited Partnership included in Registration Statement Number 286041 is incorporated herein by reference. 4. (a) Amended and Restated Agreement of Limited Partnership dated as of August 15, 1983 set forth in Exhibit A to the Prospectus included in Registration Statement Number 286041 is incorporated herein by reference. (b) Certificate of Limited Partnership included in Registration Statement Number 286041 is incorporated herein by reference. 10. (a) Purchase and Sale Agreements for properties purchased were filed as Exhibits to Form 8-K on April 26, 1984, October 17, 1984, October 26, 1984, October 31, 1984, December 20, 1984, July 15, 1985 and October 29, 1985 and are incorporated herein by reference. (b) "Purchase Agreement" dated as of May 31, 1996 for sale of the 1718 Connecticut Avenue property was filed as an Exhibit to Form 8-K on June 24, 1996 and is incorporated herein by reference. (c) "Purchase and Sale Agreement" dated as of February 28, 1997 for sale of the Century Square property was filed as an Exhibit to Form 8-K on April 10, 1997 and is incorporated herein by reference. (d) "Purchase and Sale Agreement" dated as of September 8, 1997 for sale of the Arlington Business Center property was filed as an Exhibit to Form 8-K on October 10, 1997 and is incorporated herein by reference. (e) "Purchase and Sale Agreement" dated as of November 10,1997 for sale of the Carmel Park property and the related "First Amendment to Purchase and Sale Agreement" dated as of December 2, 1997 were filed as Exhibits to Form 8-K on December 8, 1997 and are incorporated herein by reference. (f) "Purchase and Sale Agreement" dated as of October 30,1997 for sale of the Westwood 10 property was filed as an Exhibit to Form 8-K on December 23, 1997 and is incorporated herein by reference. (g) "Purchase and Sale Agreement" dated as of May 29, 1998 for sale of the Harborgate property was filed as an Exhibit to Form 8-K on July 10, 1998 and is incorporated herein by reference. B. Reports on Form 8-K Report on Form 8-K dated September 11, 2001, disclosing the change of the address of the Partnership's executive office due to the destruction of the World Trade Center. SCHEDULE III DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. REAL ESTATE AND ACCUMULATED DEPRECIATION OCTOBER 31, 2001 INITIAL COST TO PARTNERSHIP (A) COST CAPITALIZED BUILDING AND SUBSEQUENT DESCRIPTION LAND IMPROVEMENTS TOTAL ACQUISITION ----------- ---- ------------ ----- ----------- Shopping Center Altamonte Springs, FL $ 2,300,000 $7,626,517 $9,926,517 $1,252,377 GROSS AMOUNT AT WHICH CARRIED AT END OF PERIOD --------------------------------------- BUILDINGS & DESCRIPTION REDUCTIONS LAND IMPROVEMENTS TOTAL ----------- ---------- ----- ------------ ----- Shopping Center Altamonte Springs, FL $(1,377,000)(B) $ -- $ -- $ -- (9,801,894)(C) ---------- $(11,178,894) ========== LIFE ON WHICH DEPRECIATION IN LATEST INCOME ACCUMULATED DATE OF STATEMENTS IS DESCRIPTION DEPRECIATION CONSTRUCTION DATE ACQUIRED COMPUTED ----------- ------------ ------------ ------------- -------------- Shopping Center Altamonte Springs, FL $3,350,890 1981-1985 October 1984 5-40 years Notes: (A) The initial cost includes the purchase price paid by the Partnership and acquisition fees and expenses. No carrying costs have been capitalized subsequent to acquisition. There is no difference between cost for financial reporting purposes and federal income tax purposes. (B) 1996 loss on impairment of real estate (C) Shopping center was reclassified as real estate held for sale in fiscal year 2001.
SCHEDULE III (CONT'D) 2001 2000 1999 ---- ---- ---- (B) Reconciliation of real estate owned at October 31: Balance at beginning of period $ 9,801,894 $ 9,766,894 $ 9,543,144 Improvements -- 35,000 223,750 Reclass to real estate held for sale (9,801,894) -- -- ---------- ---------- --------- Balance at end of period $ -- $ 9,801,894 $ 9,766,894 ========== ========== ========= (C) Reconciliation of accumulated depreciation: Balance at beginning of period $ 3,295,444 $ 3,071,562 $2,866,051 Depreciation expense 55,446 223,882 205,511 Reclass to real estate held for sale (3,350,890) -- -- ---------- ---------- --------- Balance end of period $ -- 3,295,444 $ 3,071,562 ========== ========== =========
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEAN WITTER REALTY INCOME PARTNERSHIP I, L.P. By: Dean Witter Realty Income Properties I Inc. Managing General Partner By: /s/ E. Davisson Hardman, Jr. Date: January 25, 2002 ---------------------------------------- E. Davisson Hardman, Jr. President By: /s/Jeffrey D. Hahn Date: January 25, 2002 ---------------------------------------- Jeffrey D. Hahn Vice President (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. DEAN WITTER REALTY INCOME PROPERTIES I INC. Managing General Partner /s/ William B. Smith Date: January 25, 2002 ---------------------------------------- William B. Smith Chairman of the Board of Directors /s/ E. Davisson Hardman, Jr. Date: January 25, 2002 ---------------------------------------- E. Davisson Hardman, Jr. Director /s/ Ronald T. Carman Date: January 25, 2002 ---------------------------------------- Ronald T. Carman Director