**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM 10-QSB**

 

**QUARTERLYREPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 
| **For the  Quarter Ended September 30, 2004** | **Commission File Number 0-12210** |
|-----------------------------------------------|------------------------------------|

 

**PRESIDENTIAL ASSOCIATES I LIMITED PARTNERSHIP**

(exact name of small business issuer asspecified in its charter)
|                                                                        |   |                                 |
|-----------------------------------------------------------------------------|--------|--------------------------------------|
| **Maryland**                                                                |   | 04-2801764                           |
| (State or other jurisdiction of  incorporation or organization)             |   | (I.R.S. Employer Identification No.) |
|                                                                        |   |                                 |
| **7 Bulfinch Place, Suite 500, Boston, MA**                                 |   | **02114**                            |
| (Address of principal executive offices)                                    |   | (Zip Code)                           |
|                                                                        |   |                                 |
| Registrant’s  telephone number, including area code **(617) 570-4600** |

 

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

YES ý         NOo

 

 

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PRESIDENTIAL ASSOCIATES I LIMITED PARTNERSHIP

 

PART 1 - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

BALANCE SHEETS

 
| ** **                                   | ** ** | **September 30,  2004** | ** **      | **December 31,  2003** | ** ** |
|----------------------------------------------|------------|-------------------------|-----------------|------------------------|------------|
|                                         |       | **(Unaudited)**         | ** **      | **(Audited)**          |       |
|                                         |       | ** **              | ** **      | ** **             |       |
| ASSETS                                       |       |                    | ** **      |                   |       |
|                                         |       |                    | ** **      |                   |       |
| Assets                                       |       |                    | ** **      |                   |       |
| Cash and cash equivalents                    |       | $                       | 1,732,565       | ** **             | $          | 1,759,889 |   |
| Accounts receivable                          |       | 30,000                  | ** **      | —                 |       |
|                                         |       |                    | ** **      |                   |       |
| Total assets                                 |       | $                       |  1,762,565 | ** **             | $          |  1,759,889 |   |
|                                         |       |                    | ** **      |                   |       |
| LIABILITIES  AND PARTNERS’ CAPITAL      |       |                    | ** **      |                   |       |
|                                         |       |                    | ** **      |                   |       |
| Liabilities and partners’ capital       |       |                    | ** **      |                   |       |
| Accounts payable                             |       | $                       |  —    | ** **             | $          |  — |   |
| Partners’ capital                       |       | 1,762,565               | ** **      | 1,759,889              |       |
|                                         |       |                    | ** **      |                   |       |
| Total liabilities and partners’ capital |       | $                       |  1,762,565 | ** **             | $          |  1,759,889 |   |

 

See notes to financialstatements

 

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PRESIDENTIAL ASSOCIATES ILIMITED PARTNERSHIP

 

STATEMENTS OF OPERATIONS

(UNAUDITED)

 
| ** **                                                              | ** ** | **For the three months ended  September 30** | ** **  | **For the nine months ended  September 30** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------------|-------------|---------------------------------------------|------------|
| ** **                                                              | ** ** | **2004**                                     | ** **  | **2003**                                    | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
| INCOME:                                                                 |       |                                         |        |                                        |       |   |   |   |   |
| Distribution from Operating Partnership                                 |       | $                                            | —      |                                        | $          | — |   | $ | 199,980 |   | $ | — |   |
| Interest                                                                |       | 3,928                                        |        | 3,751                                       |       | 11,681 |   | 14,654 |   |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
|                                                                    |       | 3,928                                        |        | 3,751                                       |       | 211,661 |   | 14,654 |   |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
| EXPENSES:                                                               |       |                                         |        |                                        |       |   |   |   |   |
| Legal and Professional Services                                         |       | 7,774                                        |        | 8,583                                       |       | 7,774 |   | 13,133 |   |
| Other                                                                   |       | 606                                          |        | 584                                         |       | 3,579 |   | 584 |   |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
|                                                                    |       | 8,380                                        |        | 9,167                                       |       | 11,353 |   | 13,717 |   |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
| Net income (loss)                                                       |       | $                                            | (4,452      | )                                           | $          | (5,416 | ) | $ |  200,308 |   | $ | 937 |   |
|                                                                    |       |                                         |        |                                        |       |   |   |   |   |
| Net income (loss) per unit of limited  partnership interest outstanding |       | $                                            |  (7.47 | )                                           | $          |  (9.09 | ) | $ |  336.11 |   | $ |  1.57 |   |

 

See notes to financial statements

 

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PRESIDENTIAL ASSOCIATES ILIMITED PARTNERSHIP

 

STATEMENT OF CHANGES IN PARTNERS’ CAPITAL

 
| **For the Nine Months Ended  September 30, 2004 and 2003  (Unaudited)** | ** ** | **Winthrop  Financial Co.,  Inc.** | ** ** | **Linnaeus-  Phoenix  Associates  Limited  Partnership** | ** ** | **Investor  Limited  Partners** | ** ** | **Total  Partners’  Capital** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------|------------|------------------------------------|------------|
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Balance, December 31, 2002                                              |       | $                                  | (260,894   | )                                                        | $          | (562,803                        | )          | $                                  | 3,077,035  |   | $ | 2,253,338 |   |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Net income                                                              |       | 5                                  |       | 5                                                        |       | 927                             |       | 937                                |       |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Contributions                                                           |       | —                             |       | —                                                   |       | 5,873                           |       | 5,873                              |       |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Distributions                                                           |       | —                             |       | —                                                   |       | (500,000                        | )          | (500,000                           | )          |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Balance, September 30, 2003                                             |       | $                                  | (260,889   | )                                                        | $          | (562,798                        | )          | $                                  | 2,583,835  |   | $ | 1,760,148 |   |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Balance, December 31, 2003                                              |       | $                                  | (263,391   | )                                                        | $          | (565,300                        | )          | $                                  | 2,588,580  |   | $ | 1,759,889 |   |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Net income                                                              |       | 1,002                              |       | 1,002                                                    |       | 198,304                         |       | 200,308                            |       |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Contributions                                                           |       | —                             |       | —                                                   |       | 2,348                           |       | 2,348                              |       |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Distributions                                                           |       | —                             |       | —                                                   |       | (199,980                        | )          | (199,980                           | )          |
|                                                                    |       |                               |       |                                                     |       |                            |       |                               |       |
| Balance, September 30, 2004                                             |       | $                                  | (262,389   | )                                                        | $          | (564,298                        | )          | $                                  | 2,589,252  |   | $ | 1,762,565 |   |
|                                                                         |            |                                    |            |                                                          |            |                                 |            |                                    |            |  |  |  |  |  |  |  |  |  |  |  |

 

See notes to financial statements

 

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PRESIDENTIAL ASSOCIATES ILIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

 
| **For the Nine Months Ended**

**September 30, 2004 and 2003  (Unaudited)**    | ** ** | **2004**  | ** ** | **2003**  | ** ** |
|--------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                           |       |      |       |      |       |
| Cash flow from operating activities:                                           |       |      |       |      |       |
| Net income (loss)                                                              |       | $         | 200,308    |      | $          | 937 |   |
| Adjustments to reconcile net income to net  cash used in operating activities: |       |      |       |      |       |
| Increase in other assets                                                       |       | (30,000   | )          | —    |       |
|                                                                           |       |      |       |      |       |
| Net cash provided by (used in) operating  activities                           |       | 170,308   |       | 937       |       |
|                                                                           |       |      |       |      |       |
| Cash flows from financing activities:                                          |       |      |       |      |       |
| Distributions to partners                                                      |       | (199,980  | )          | (500,000  | )          |
| Contributions from partners                                                    |       | 2,348     |       | 5,873     |       |
|                                                                           |       |      |       |      |       |
| Net cash provided by (used in) financing  activities                           |       | (197,632  | )          | (494,127  | )          |
|                                                                           |       |      |       |      |       |
| Net increase (decrease) in cash and cash  equivalents                          |       | (27,324   | )          | (493,190  | )          |
|                                                                           |       |      |       |      |       |
| Cash and cash equivalents at beginning of  period                              |       | 1,759,889 |       | 2,253,338 |       |
|                                                                           |       |      |       |      |       |
| Cash and cash equivalents at end of period                                     |       | $         | 1,732,565  |      | $          | 1,760,148 |   |

 

See notes to financialstatements

 

5

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PRESIDENTIAL ASSOCIATES ILIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

September 30, 2003

(Unaudited)

 

1.             ACCOUNTING ANDFINANCIAL REPORTING POLICIES

 

The condensed financial statements included herein have been preparedby the Partnership, without audit, pursuant to the rules and regulations of theSecurities and Exchange Commission.  ThePartnership’s accounting and financial reporting policies are in conformitywith generally accepted accounting principles and include all adjustments ininterim periods considered necessary for a fair presentation of the results ofoperations.  Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted pursuant to such rules and regulations. It is suggested that these financial statements be read in conjunctionwith the financial statements and the notes thereto included in the Partnership’sAnnual Report on Form 10-KSB for the year ended December 31, 2003.

 

The accompanying financial statements reflect the Partnership’s resultsof operations for an interim period and are not necessarily indicative of theresults of operations for the year ending December 31, 2004.

 

2.             INVESTMENT INOPERATING PARTNERSHIP

 

The Partnership accounts for its investment in Presidential Towers,Ltd. (the “Operating Partnership”) using the equity method of accounting.  Under the equity method of accounting, theinitial investment is recorded at cost, increased or decreased by thePartnership’s share of income or losses, and decreased by distributions.  Equity in the loss of the OperatingPartnership is no longer recognized once the investment balance reaches zero.

 

The loss from the Operating Partnership, not recognized since theinvestment balance reached zero, will be offset against the Partnership’s shareof future income from the Operating Partnership.

 

3.             TAXABLE LOSS

 

The Partnership’s taxable income for 2004 is not expected to differfrom that for financial reporting purposes.

 

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The matters discussed in this Form 10-QSB containcertain forward-looking statements and involve risks and uncertainties(including changing market conditions, competitive and regulatory matters,etc.)  The discussion of the Partnership’sbusiness and results of operations, including forward-looking statementspertaining to such matters does not take into account the effects of anychanges to the Partnership’s business and results of operations.  Accordingly, actual results could differmaterially from those projected in the forward-looking statements as a resultof a number of factors, including those identified herein.

 

This Item should be read in conjunction with the financial statementsand other items contained elsewhere in the report.

 

Liquidity and Capital Resources

 

The Partnership’s primary source of liquidity is distributions fromPresidential Towers Ltd., an Illinois limited partnership (the “OperatingPartnership”).  As a result of asignificant restructuring of the ownership and debt of the Operating Partnershipthat was finalized in April 1995, the Partnership currently holds a 19.998%limited partnership interest in the Operating Partnership.  The Partnership is responsible for payingvarious administrative costs associated with monitoring the Partnership’s investmentin the Operating Partnership, and paying various professional fees associatedwith the affairs of the Partnership.

 

During the ninemonths ended September 30, 2004 the Operating Partnership paid a distributionto the Partnership in the amount of $199,980. The Operating Partnership did not make any distribution to thePartnership during the nine months ended September 30, 2003.  In connection with the April 1995 restructuring,the Partnership is entitled to receive an annual distribution from theOperating Partnership as a reimbursement of the Partnership’s administrativeexpenses and professional fees up to an annual maximum of $30,000 as well asits allocable share of all distributions after a preferred return to TKIPresidential Partners (“TKI”).  Inaddition, the Operating Partnership distributes to the Partnership an amountequal to the amount of income allocated to the Partnership by the OperatingPartnership in each year.  On January 10,2001, the Operating Partnership purchased the two mortgage notes from HUD byrefinancing the Project with a new first mortgage loan secured by the Projectwith a third party lender.  The newmortgage requires payments of interest only at a rate of 6.55% per annum and matureson February 1, 2011.  As a result of therefinancing, the regulatory agreements with HUD and the Restructuring Agreementwere terminated.  Further, as a result ofthis refinancing, TKI’s priority return was satisfied and the preferred returndue HUD was extinguished.  Accordingly,depending on the property’s operating results, it is expected that thePartnership will receive annual distributions from the Operating Partnership.

 

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The Partnership’sliquidity based on cash and cash equivalents decreased by $27,324 to $1,732,565at September 30, 2004 as compared to December 31, 2003.  This decrease as due to $170,308 of cashprovided by operating activities being more than offset by $197,980 of cashused in financing activities.  Cash usedin financing activities consisted of a $199,980 distribution by the Partnershipto its partners which was slightly offset by $2,348 of contributions formpartners.  It is expected that so long asthe Partnership’s administrative expenses do not exceed $30,000 in any year,unless the Operating Partnership makes a distribution, the Partnership’s cashand cash equivalents will remain relatively constant until the OperatingPartnership is liquidated.

 

The Partnership’s liquid assets are currently thought to be sufficientfor any near-term needs of the Partnership.

 

Results of Operations

 

Net income increased by $199,371 for the nine months ended September30, 2004 as compared to the nine months ended September 30, 2003 due to anincrease in income of $197,007 and a decrease in expenses of $2,364.  The increase in income is attributable to a$199,980 distribution received from the Operating Partnership partially offsetby a decrease in interest income.  Netloss for the three months ended September 30, 2004 decreased to $4,452 ascompared to a net loss of $5,416 for the three months ended September 30, 2003due to an increase in income and a decrease in expenses.

 

ITEM 3 - CONTROLS AND PROCEDURES

 

Theprincipal executive officer and principal financial officer of the Partnership’sgeneral partner have, within 90 days of the filing date of this quarterlyreport, evaluated the effectiveness of the Partnership’s disclosure controlsand procedures (as defined in Exchange Act Rules 13a - 14(c)) and havedetermined that such disclosure controls and procedures are adequate.  There have been no significant changes in thePartnership’s internal controls or in other factors that could significantlyaffect such internal controls since the date of evaluation.  Accordingly, no corrective actions have beentaken with regard to significant deficiencies or material weaknesses.

 

8

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PART II - OTHER INFORMATION

 

Item 6.  Exhibit

 

31            Certifications Pursuant to Section302 of the Sarbanes-Oxley Act of 2002

 

32            CertificationPursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                    | PRESIDENTIAL ASSOCIATES I  LIMITED PARTNERSHIP |
|-------------------------|------------------------------------------------|
|                    | (Partnership)                                  |
|                    |                                           |
|                    | By:                                            | Winthrop Financial Co., Inc. |
|                    |                                           | Managing General Partner |
|                    |                                           |
| Date: November 12, 2004 | By:                                            |   /s/ Thomas C. Staples |   |
|                    |                                           | Thomas C. Staples |
|                    |                                           | Chief Financial Officer |
|                    |                                           |
| Date: November 12, 2004 | By:                                            |   /s/ Michael L. Ashner |   |
|                    |                                           | Michael L. Ashner |
|                    |                                           | Chief Executive Officer |
|                         |                                                |  |  |  |

 

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EXHIBIT INDEX

 
| **Exhibit No.** | ** ** | ** **                                                                | ** ** | ** ** |
|-----------------|------------|---------------------------------------------------------------------------|------------|------------|
|            |       |                                                                      |       |       |
| 31              |       | Certifications  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |       |       |
|            |       |                                                                      |       |       |
| 32              |       | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002  |       |       |
|            |       |                                                                      |       |       |

 

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