<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------------------------------------
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 0-8914
---------------
UNIVERSITY REAL ESTATE PARTNERSHIP V
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3240567
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Ross Avenue, Suite 4600, Dallas, Texas 75201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(214) 740-2200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former address, if changed since last report)
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
--- ---
1
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
Page
----
Part I - Financial Information
Item 1 - Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
(b) Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1998 and 1997 4
(c) Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 5
(d) Notes to Condensed Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures (pursuant to General Instruction E) 11
All other items called for by the instructions are omitted as they are
either inapplicable, not required, or the information is included in the
Condensed Consolidated Financial Statements or Notes thereto.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) UNIVERSITY REAL ESTATE PARTNERSHIP V
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
----------- -----------
<S> <C> <C>
ASSETS
- ------
Real estate investments
Land $ 524,145 $ 5,255,247
Buildings and improvements 2,009,826 14,261,080
---------- -----------
2,533,971 19,516,327
Less: Accumulated depreciation and
amortization (754,247) (8,565,066)
---------- -----------
1,779,724 10,951,261
---------- -----------
Note receivable 792,258 250,000
Cash and cash equivalents (including $19,755 and $18,985
for security deposits at June 30, 1998 and
December 31, 1997, respectively) 215,119 136,596
Accounts receivable, net of allowance for doubtful accounts of
$0 at June 30, 1998 and $107,044 at December 31, 1997 12,326 40,826
Deferred borrowing costs, net of accumulated amortization
of $42,397 and $139,586 at June 30, 1998 and
December 31, 1997, respectively 109,501 206,755
Prepaid expenses and other assets 139,528 663,512
---------- -----------
$3,048,456 $12,248,950
========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net of discounts $1,690,475 $10,680,255
Accrued mortgage interest 12,404 254,478
Accrued property taxes 24,654 127,951
Accounts payable and accrued expenses 60,166 105,782
Subordinated real estate commissions 549,218 549,218
Security deposits 21,792 23,726
---------- -----------
2,358,709 11,741,410
---------- -----------
Partners' equity (deficit)
Limited Partners - 50,000 units authorized; 34,275 and 34,301
units issued and outstanding at June 30, 1998 and December 31,
1997, respectively, (17,723 and 17,733 Income units at June 30,
1998 and December 31, 1997, respectively, and 16,552 and 16,568
Growth/Shelter units at June 30, 1998 and December 31, 1997,
respectively) 1,230,014 1,053,768
General Partner (540,267) (546,228)
---------- -----------
689,747 507,540
---------- -----------
$3,048,456 $12,248,950
========== ===========
</TABLE>
3
<PAGE>
(b) UNIVERSITY REAL ESTATE PARTNERSHIP V
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------------
1998 1997 1998 1997
--------- -------- ---------- ----------
Revenues:
Rental income $ 434,826 $601,425 $1,069,317 $1,153,177
Interest 29,253 5,451 34,963 13,566
Other income 22,071 44,910 23,329 85,097
--------- -------- ---------- ----------
Total revenues 486,150 651,786 1,127,609 1,251,840
--------- -------- ---------- ----------
Expenses:
Interest 212,440 257,279 467,740 515,185
Depreciation and
amortization 56,977 154,026 210,761 308,450
Property taxes 53,554 31,020 86,251 60,851
Other property operations 184,478 200,464 402,893 411,452
General and administrative 95,909 65,643 146,785 121,088
--------- -------- ---------- ----------
Total expenses 603,358 708,432 1,314,430 1,417,026
--------- -------- ---------- ----------
Net operating loss $(117,208) $(56,646) $ (186,821) $ (165,186)
========= ======== ========== ==========
Other income (expenses);
Gain on sale of
real estate 198,610 - 198,610 -
--------- -------- ---------- ----------
Income (loss) before
extraordinary item 81,402 (56,646) 11,789 (165,186)
Extraordinary item gain
on debt forgiveness 420,418 - 420,418 -
--------- -------- ---------- ----------
Net income (loss) $ 501,820 $(56,646) $ 432,207 $ (165,186)
========= ======== ========== ==========
Net income (loss)allocable
to General Partner $ 5,018 $ (566) $ 4,322 $ (1,652)
Net income (loss) allocable
to Limited Partners 496,802 (56,080) 427,885 (163,534)
--------- -------- ---------- ----------
Net income (loss) $ 501,820 $(56,646) $ 432,207 $ (165,186)
========= ======== ========== ==========
Net income (loss) per
Limited Partnership Unit
Income (loss) before
extraordinary item $ 2.35 $ (1.64) $ 0.34 $ (4.77)
Extraordinary item 12.14 - 12.14 -
--------- -------- ---------- ----------
Net income (loss) $ 14.49 $ (1.64) $ 12.48 $ (4.77)
========= ======== ========== ==========
4
<PAGE>
(c) UNIVERSITY REAL ESTATE PARTNERSHIP V
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
1998 1997
---------- ---------
Net Income(loss) $ 432,207 $(165,186)
---------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 210,761 308,450
Gain on sale of real estate (198,610) -
Extraordinary gain on debt forgiveness (420,418) -
Changes in assets and liabilities:
Accounts receivable (11,058) (6,015)
Prepaid expenses and other assets (3,068) (65,825)
Accounts payable and accrued expenses (40,875) (19,647)
Accrued mortgage interest 131,492 42,349
Accrued property taxes 85,953 23,445
Security deposits (1,934) (96)
---------- ---------
Total adjustments (247,756) (282,661)
---------- ---------
Net cash provided by operating activities 184,450 117,475
---------- ---------
Cash flows from investing activities:
Additions to real estate investments (30,532) (64,225)
Investment in notes receivable (4,000) -
Cash proceeds from sale of Glasshouse Square 1,564,330 -
---------- ---------
Net cash provided by (used in) investing activities 1,529,798 (64,225)
---------- ---------
Cash flows from financing activities:
Distributions to partners (250,000) -
Principal payments on mortgage notes payable (1,385,725) (52,380)
---------- ---------
Net cash (used in) financing activities (1,635,725) (52,380)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 78,523 870
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 136,596 175,878
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 215,119 $ 176,748
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 336,248
==========
Cash paid during the year for taxes $ 298
==========
5
<PAGE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On May 8, 1998, the Partnership sold the Glasshouse Square Shopping Center for
$10,600,000. The transaction was recorded as follows:
Net cash received $ 1,564,330
Real estate investment (9,018,637)
Other assets/liabilities/expenses incurred
On sale 198,862
Mortgage note 7,454,055
-----------
Gain on sale of Glasshouse Square Shopping Center $ 198,610
===========
A portion of this transaction was accounted for as a non-cash transaction in the
statement of cash flows.
During 1998, the Partnership was forgiven debt in the amount of $420,418, which
was accounted for as a non-cash transaction in the statement of cash flows.
6
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1997. The December 31, 1997
condensed consolidated balance sheet was derived from audited numbers.
Certain reclassifications have been made to the 1997 balances to conform to the
1998 presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
The general partner of the Partnership is University Advisory Company ("UAC" or
the "General Partner"), a California general partnership. Prior to December 15,
1996, Southmark Commercial Management, Inc. ("SCM"), and Southmark Investors,
Inc. ("SII"), both wholly-owned subsidiaries of Southmark Corporation
("Southmark") were the two general partners of UAC. On December 15, 1996, OS
General Partner Company ("OSGPC"), a Texas corporation, and OS Holdings, Inc.
("OS"), a Texas corporation, acquired both interests in UAC held by SCM and SII.
On March 9, 1993, Southmark and several of its affiliates (including the General
Partner) entered into an Asset Purchase Agreement with SHL Acquisition Corp.
III, a Texas corporation, and its permitted assigns (collectively "SHL") to sell
various general and limited partnership interests owned by Southmark and its
affiliates, including the general partnership interest of the Partnership. On
December 16, 1993, Southmark and SHL executed the Second Amendment to Asset
Purchase Agreement whereby SHL acquired an option to purchase the general
partnership interest of the Partnership, rather than purchase the partnership
interest itself. On the same date, SHL assigned its rights under the amended
Asset Purchase Agreement to Hampton Realty Partners, L.P., a Texas limited
partnership ("Hampton") and Hampton and Southmark affiliates also entered into
an Option Agreement whereby Hampton acquired the right to purchase the option
assets, including the general partnership interest of the Partnership, subject
to the approval of the limited partners. On April 20, 1994, Insignia Financial
Group, Inc., a Delaware corporation, and certain of its affiliates (collectively
"Insignia") entered into an Option Purchase Agreement with Hampton to acquire
Hampton's rights to solicit proxies from the Limited Partners seeking their
consent to Hampton becoming the general partner of the Partnership. On August
8, 1994, the Insignia contract was terminated. On December 30, 1994, Hampton
entered into an Assignment and Assumption of Option Agreement with JKD Financial
Management, Inc. ("JKD"), a Texas corporation, whereby, among other things, JKD
obtained the right to acquire Hampton's rights to proxy into the Partnership
subject to the approval of the Limited Partners. As a result of a 1996
transaction among OS, OSGPC, SCM and SII, JKD's option was assigned to OSGPC.
See discussion of transaction among SCM, SII, OSGPC and OS below.
Effective as of December 14, 1992, the Partnership entered into a Portfolio
Services Agreement and a Property Management Agreement with Hampton UREF
Management, Ltd. ("Hampton UREF"), a Texas limited partnership, pursuant to
which Hampton UREF began providing management for the Partnership's properties
and certain other portfolio services. The operations of the Partnership's
properties were managed by Hampton Management, Inc. (formerly SHL Management,
Inc.) through a subcontract agreement with Hampton UREF. From April 20, 1994 to
August 8, 1994, the Partnership and its properties were managed by Insignia
pursuant to a Property Management Subcontract Agreement with Hampton UREF. As
of August 8, 1994, the properties only were managed by an affiliate of Insignia
under a Property Management Agreement directly with the Partnership.
As of December 30, 1994, Hampton UREF entered into an Assignment and Assumption
of Portfolio Services Agreement with JKD pursuant to which JKD oversees the
management of the Partnership.
7
<PAGE>
On January 29, 1996, SCM and SII entered into a purchase agreement to sell their
partnership interests in UAC to OS Holdings, Inc. ("OS"), a Texas corporation,
and JKD, respectively. The transfer documents were executed January 31, 1996,
and placed into escrow. The transfer would not be effective until certain
conditions precedent were satisfied and, if the conditions precedent were not
satisfied by April 29, 1996, the transfer documents would be returned to SCM and
SII and the transfer would not occur. On April 29, 1996, the purchase agreement
was amended to facilitate the substitution of OS General Partner Company
("OSGPC"), a Texas corporation, for JKD and to extend the escrow period through
June 30, 1996. On June 25, 1996, a Second Amendment of Escrow Agreement was
entered into to extend the escrow period through August 31, 1996. On December
15, 1996, it was determined that all conditions precedent to the OS and OSGPC
purchase of the partnership interests in UAC had been met and the sale was
consummated and OS and OSGPC became the owners and interest holders in UAC.
As further discussed in Note 3 Sale of Glasshouse Square Shopping Center, the
Partnership sold the Glasshouse Square Shopping Center on May 8, 1998. The
Partnership had previously entered into a Debt Workout Consulting Agreement with
Meridian Realty Advisors, Inc., an affiliate of the General Partner to assist
the Partnership in its ongoing efforts to negotiate debt relief from its lenders
and assist in the marketing and sale of the Partnership's Properties. In
conjunction with the sale of the Glasshouse Square property, the Partnership
obtained a $150,000 principal discount from the mortgage lender, as well as
forgiveness of $270,418 of accrued and unpaid interest. The Partnership paid
$216,800 to the affiliate pursuant to such agreement.
NOTE 3 - SALE OF GLASSHOUSE SQUARE SHOPPING CENTER
On May 8, 1998, the Partnership sold Glasshouse Square Shopping Center to an
unaffiliated third party for a gross sales price of $10,600,000. The property
was acquired by the purchaser with a cash downpayment of approximately
$2,600,000 and assumption of the first mortgage lien on the property of
$7,465,000. In conjunction with the sale, the Partnership provided short term
seller financing in the approximate amount of $538,000. The seller note
receivable bears interest at 8% and matures March 1, 1999. The net cash
proceeds received by the Partnership were used to pay real estate commissions,
property taxes, closing costs and to payoff the second mortgage lien on the
property. The Partnership was able to obtain a $150,000.00 principal discount
on the second mortgage from the second mortgage lender, as well as forgiveness
of $270,418 of accrued and unpaid interest. This gain on debt forgiveness is
reflected as an extraordinary item in the Partnership's consolidated statement
of operations for the three and six months ended June 30, 1998.
NOTE 4 - DISTRIBUTIONS
As a result of the Glasshouse sale, as discussed further in Note 3, on June 10,
1998, the Partnership paid a $250,000 distribution, pursuant to the Partnership
Agreement, to the Income Unit holders of record as of June 10, 1998. This
distribution represents a $14.11 per Income Unit distribution.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership's net loss from operations for the six months ended June 30,
1998 was $186,821. The net loss for the same period in 1997 was $165,186.
Total revenues for the six months ended June 30, 1998 were $1,127,609 versus
$1,251,840 for the same period in 1997. The decrease in total revenues in 1998
is primarily attributable to to the sale of the Glasshouse Shopping Center on
May 8, 1998. After giving effect for the gain of the sale of the Glasshouse
property and the related forgiveness of debt income, the Partnership recorded
net income of $432,207 for the six months ended June 30, 1998.
Total expenses for the six months ended June 30, 1998 were $1,314,430 versus
$1,417,026 for the same period in 1997. The decrease in total expenses is due
to the sale of the Glasshouse Square property.
During the six months ended June 30, 1998, the Partnership recorded an increase
in cash of $78,523 versus an increase of $870 for the same period in 1997. The
statement of cash flows included an increase in cash provided by operating
activities of $66,975 primarily due to the sale of the Glasshouse Square
property on May 8, 1998. The statement of cash flows included an increase in
cash provided by investing activities of $1,594,023 due to the cash proceeds
received from the sale of Glasshouse Square (See Note 3 for further discussion).
The statement of cash flows included an increase in cash used in financing
activities of $1,688,105 resulting from the payoff of the mortgage debt related
to Glasshouse Square.
8
<PAGE>
Should operations deteriorate and present resources not be adequate for current
needs, the Partnership has no outside lines of credit on which to draw for its
working capital needs. Neither the General Partner nor its affiliates have any
obligation to provide financial support to the Partnership. Accordingly,
continued operation of the Partnership is dependent on the Partnership being
able to generate cash from operations or sale of its remaining operating
properties or negotiated reductions in requirements related to outstanding debt
obligations.
Washington Towne Apartments - Atlanta, Georgia
Average occupancy for the three months ended June 30, 1998 was 94% versus 93%
for the same period in 1997. Occupancy at Washington Towne continues to remain
steady.
Glasshouse Square - San Diego, California
Average occupancy for the six months ended June 30, 1998 was 94% versus 91% for
the same period in 1997. This increase in occupancy is primarily due to the
execution of lease agreements with two tenants in February and June 1997.
Glasshouse Square was sold on May 8, 1998 for a gross sales price of
$10,600,000. See Note 3--Sale of Glasshouse Square for further discussion.
Bank of San Pedro Note Receivable
On July 20, 1995, the Partnership sold the Bank of San Pedro Office Building for
$1,350,000. The Partnership received partial consideration from the sale in the
form of a note receivable for $350,000, bearing interest at 9% per annum with
interest only payments due monthly, secured by a second lien deed of trust on
the Bank of San Pedro Office Building, maturing on July 20, 1998 and net cash of
$291,562.
As of March 30, 1996, the borrower on the note receivable ceased making
regularly scheduled debt payments constituting an event of default. The
borrower has currently cured the default situation; however, a provision for
loss in the amount of $100,000 was recorded in 1995 to reflect the market value
of the real estate.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------ -----------
3. and 4. Limited Partnership Agreement (Incorporated by reference to
Registration Statement No. 2-74914 on Form S-11 filed by
Registrant).
11. Statement regarding computation of Net Loss per Limited
Partnership Unit: Net Loss per Limited Partnership Unit is
computed by dividing net loss allocated to the Limited Partners
by the number of Limited Partnership Units outstanding. Per unit
information has been computed based on 34,275 and 34,301 Limited
Partnership Units outstanding in 1998 and 1997, respectively.
16. Letter dated July 18, 1995 from Price Waterhouse with respect to
a change in certifying accountant. Incorporated by reference to
Form 8-K - Current Report for the period ending September 30,
1995, as filed with the Securities and Exchange Commission on
July 24, 1995.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended June 30, 1998.
10
<PAGE>
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 the
undersigned, thereunto duly authorized.
UNIVERSITY REAL ESTATE PARTNERSHIP V
By: UNIVERSITY ADVISORY COMPANY
General Partner
By: OS GENERAL PARTNER COMPANY
September 23, 1998 By: /s/ Curtis R. Boisfontaine, Jr.
- -------------------------- ---------------------------------------------
Date Curtis R. Boisfontaine, Jr. President,
Principal Executive Officer and Director
OS General Partner Company
September 23, 1998 By: /s/ David K. Ronck
- -------------------------- ---------------------------------------------
Date David K. Ronck
Vice President and Chief Accounting Officer
OS General Partner Company
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 215,119
<SECURITIES> 0
<RECEIVABLES> 12,326
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 366,973
<PP&E> 2,533,971
<DEPRECIATION> 754,247
<TOTAL-ASSETS> 3,048,456
<CURRENT-LIABILITIES> 82,048
<BONDS> 2,276,751
0
0
<COMMON> 0
<OTHER-SE> 689,747
<TOTAL-LIABILITY-AND-EQUITY> 3,048,456
<SALES> 0
<TOTAL-REVENUES> 1,127,609
<CGS> 0
<TOTAL-COSTS> 635,929
<OTHER-EXPENSES> 210,761
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467,740
<INCOME-PRETAX> (186,821)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 619,028
<CHANGES> 0
<NET-INCOME> 432,207
<EPS-PRIMARY> 0
<EPS-DILUTED> 12.48
</TABLE>
