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 May 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from_____ to _____ .
Commission File Number: 0-17145
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
(Exact name of registrant as specified in its charter)
Delaware 13-3069311
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
--------------
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 |_|
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
Statement of
Net Assets in
Liquidation
May 31, 1997 Balance Sheet
ASSETS (Unaudited) August 31, 1996
------------ ---------------
(In thousands)
Investment property held for sale $ 3,964
Cash and cash equivalents $ 4,507 376
Escrowed cash 140
Accounts receivable 20
Prepaid insurance 7
--------- ---------
4,507 $ 4,507
--------- =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses 127 $ 48
Accounts payable - affiliates 49 3
Accrued real estate taxes 72
Tenant security deposits 18
Partners' capital 4,366
--------- ---------
176 $ 4,507
--------- =========
Net assets in liquidation $ 4,331
=========
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
For the period April 18, 1997 to May 31, 1997 (Unaudited)
(In thousands)
Net assets in liquidation at April 18, 1997 $ 4,306
Interest income 25
--------
Net assets in liquidation at May 31, 1997 $ 4,331
========
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
March 1, 1997 to Ended September 1, 1996 Ended
April 17, 1997 May 31, 1996 to April 17, 1997 May 31, 1996
-------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Interest earned on
short-term investments $ 7 $ 4 $ 17 $ 9
Expenses:
Management fees 3 3 9 9
General and administrative 68 60 159 179
Liquidation expenses 124 - 124 -
------ -------- ------- -------
195 63 292 188
- ------ -------- ------- -------
Operating loss (188) (59) (275) (179)
Income from operations of
investment property held
for sale, net 88 184 315 458
Gain on sale of operating
investment property 53 - 53 -
-------- -------- ------- -------
Net income (loss) $ (47) $ 125 $ 93 $ 279
======== ======== ======= =======
Net income (loss) per Limited
Partnership Unit $ (2.48) $ 6.58 $ 4.89 $ 14.72
======== ======== ======= =======
Cash distributions per Limited
Partnership Unit $ 2.69 $ 2.69 $ 8.07 $ 8.07
======== ======== ======= =======
</TABLE>
The above per Limited Partnership Unit information is based upon the 18,781
Units of Limited Partnership Interest outstanding for each period.
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the period September 1, 1996 to April 17, 1997
and the nine months ended May 31, 1996 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at August 31, 1995 $ (26) $ 4,286
Net income 2 277
Cash distributions (2) (151)
Balance at May 31, 1996 ------- --------
$ (26) $ 4,412
======= ========
Balance at August 31, 1996 $ (25) $ 4,391
Net income 1 92
Cash distributions (2) (151)
------ --------
Balance at April 17, 1997 $ (26) $ 4,332
====== ========
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
STATEMENTS OF CASH FLOWS
For the period September 1, 1996 to April 17, 1997
and the nine months ended May 31, 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
Nine
September 1, 1996 months ended
to April 17, 1997 May 31, 1996
----------------- ------------
Cash flows from operating activities:
Net income $ 93 $ 279
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of operating investment
property (53) -
Changes in assets and liabilities:
Escrowed cash 140 (69)
Accounts receivable 14 160
Prepaid insurance and other assets 7 (13)
Accounts payable and accrued expenses 224 (24)
Accrued real estate taxes (72) (24)
Tenant security deposits (18) (8)
--------- --------
Total adjustments 242 22
--------- --------
Net cash provided by operating
activities 335 301
Cash flows from investing activities:
Net proceeds from sale of operating
investment property 4,017 -
Purchase of land - (46)
--------- -------
Net cash provided by (used in)
investing activities 4,017 (46)
Cash flows from financing activities:
Distributions to partners (153) (153)
-------- ----------
Net increase in cash and cash equivalents 4,199 102
Cash and cash equivalents, beginning of
period 376 223
--------- ---------
Cash and cash equivalents, end of period $ 4,575 $ 325
========= =========
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
Notes to Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should
be read in conjunction with the financial statements and footnotes
contained in the Partnership's Annual Report for the year ended August
31, 1996. In the opinion of management, the accompanying financial
statements, which have not been audited, reflect all adjustments
necessary to present fairly the results for the interim period. All of
the accounting adjustments reflected in the accompanying interim
financial statements are of a normal recurring nature.
As a result of the disposition of the Partnership's remaining operating
investment property on April 17, 1997 (see Note 3) and management's
plans to terminate the Partnership, the Partnership changed its basis of
accounting from the going concern basis to the liquidation basis as of
April 17, 1997. Accordingly, all non-liquid assets are stated at their
estimated net realizable value and all liabilities reflect their
estimated settlement amounts as of May 31, 1997.
2. Related Party Transactions
The Adviser earned management fees of $9,000 for both the nine-month
periods ended May 31, 1997 and 1996. Accounts payable - affiliates at both
May 31, 1997 and August 31, 1996 includes management fees of $3,000
payable to the Adviser. No further management fees will be earned by the
Adviser subsequent to May 31, 1997.
Included in general and administrative expenses for the period September
1, 1996 to April 17, 1997 and for the nine-month period ended May 31, 1996
is $62,000 and $74,000, respectively, representing reimbursements to an
affiliate of the General Partner for providing certain financial,
accounting and investor communication services to the Partnership. In
addition, included in liquidation expenses for the period September 1,
1996 to April 17, 1997 is $53,000 representing reimbursements to this
affiliate for services rendered, or to be rendered, through the
Partnership's final liquidation. Accounts payable - affiliates as of May
31, 1997 includes $46,000 payable to this affiliate for services to be
rendered through the Partnership's final liquidation.
3. Sale of Operating Investment Property and Partnership Liquidation
On April 17, 1997, the Partnership sold its wholly-owned operating
investment property, the Harwood Village North Shopping Center, located in
Bedford, Texas, to an unrelated third party for $4,245,000. The
Partnership received net proceeds of approximately $4,017,000 after
deducting closing costs and other credits to the buyer. This amount
exceeded the carrying value of the Partnership's investment in Harwood
Village by $53,000, which is reflected as a gain on the accompanying
statement of income for the period September 1, 1996 to April 17, 1997. On
January 2, 1997, the Partnership had entered into a contract to sell the
Harwood Village property for $4,300,000. Due to potential environmental
concerns, the sales contract was amended to allow the buyer additional
time to complete due diligence and to secure financing. As part of the
amendment, the Partnership agreed to remediate the two contaminated
locations identified in a Phase II environmental survey completed as part
of the buyer's due diligence. In addition, the Partnership agreed to
reduce the purchase price to $4,245,000 in consideration of certain
repairs required to the roof of the building. The remediation of the two
contaminated locations involved the removal of sections of the foundation
slab of a dry cleaner tenant and an area of the parking lot. It also
involved the removal and proper disposal of contaminated soil as well as
replacement of the concrete slab in the dry cleaner's space and repairs to
the parking lot. The necessary documents were filed with the State of
Texas to complete the work, and on April 7, 1997 the State approved the
plan. The remediation work was completed a week later at a cost of
approximately $83,000, which was paid for by the Partnership. The
prospective buyer was willing to close as soon as the cleanup work had
been completed, and in accordance with this agreement, the sale
transaction closed on April 17, 1997. The proper documentation for the
cleanup has been filed by the contractor and the certification of the
cleanup from the State of Texas is expected to be received by late July or
early August. As soon as this certification is received, the Partnership
expects to make a Special Distribution of approximately $4,226,000, or
$225.00 per original $1,000 Unit, which represents the available proceeds
from the sale of Harwood Village.
The Partnership acquired the Harwood Village Shopping Center through
foreclosure proceedings under the terms of a mortgage loan secured by the
property on June 19, 1995. At the date of foreclosure, management believed
that the fair value of Harwood Village was approximately equal to the
aggregate carrying value of the Partnership's land and mortgage loan
investments of $3,918,000. Accordingly, the Partnership reclassified such
carrying values to investment property held for sale. During fiscal 1996,
the Partnership purchased an additional out-parcel of land adjacent to
Harwood Village for $46,000 and began to actively market the property for
sale. Despite the downward trend in values for retail shopping centers in
many markets due to certain consolidations and bankruptcies among
retailers which have led to an oversupply of space and the generally flat
rate of growth in retail sales, management believed that a sale of the
property followed by a liquidation of the Partnership was more favorable
than the uncertainties and risks associated with ownership of the property
for an extended holding period and was in the best interests of the
Limited Partners. Now that the sale of the Harwood Village North Shopping
Center, which was the Partnership's only remaining real estate investment,
has closed, a formal liquidation of the Partnership is underway. Based on
projected liquidation-related expenses, residual cash reserves available
for distribution after the Special Distribution referred to above are
estimated at approximately $5 per original $1,000 investment. The payment
of the final distribution and the formal liquidation of the Partnership
are expected to be completed by September 15, 1997.
The Partnership recorded income from the investment property held for sale
in the amount of the difference between the property's gross revenues and
property operating expenses (including leasing costs and improvement
expenses), taxes and insurance. Summarized operating results for the
Harwood Village Shopping Center for the periods March 1, 1997 to April 17,
1997, September 1, 1996 to April 17, 1997 and the three and nine months
ended May 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
For the Period Three Months For the Period Nine Months
March 1,1997 to Ended September 1, 1996 Ended
April 17, 1997 May 31,1996 to April 17, 1997 May 31, 1996
-------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Rental revenues and
expense recoveries $ 159 $ 234 $ 511 $ 633
Property operating expenses 12 13 57 67
Property taxes and insurance 21 29 87 86
Bad debt expense 34 - 34 -
Management fees 4 8 18 22
------- ------ ------ ------
71 50 196 175
------- ------ ------ ------
Income from investment property
held for sale, net $ 88 $ 184 $ 315 $ 458
======= ====== ====== ======
</TABLE>
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND LP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
On April 17, 1997, the Partnership sold its wholly-owned operating
investment property, the Harwood Village North Shopping Center, located in
Bedford, Texas, to an unrelated third party for $4,245,000. The Partnership
received net proceeds of approximately $4,017,000 after deducting closing costs
and other credits to the buyer. This amount exceeded the carrying value of the
Partnership's investment in Harwood Village by $53,000, which is reflected as a
gain on the accompanying financial statements. As previously reported, on
January 2, 1997 the Partnership had entered into a contract to sell the Harwood
Village property for $4,300,000. Due to potential environmental concerns, the
sales contract was amended to allow the buyer additional time to complete due
diligence and to secure financing. As part of the amendment, the Partnership
agreed to remediate the two contaminated locations identified in a Phase II
environmental survey completed as part of the buyer's due diligence. In
addition, the Partnership agreed to reduce the purchase price to $4,245,000 in
consideration of certain repairs required to the roof of the building. The
remediation of the two contaminated locations involved the removal of sections
of the foundation slab of a dry cleaner tenant and an area of the parking lot.
It also involved the removal and proper disposal of contaminated soil as well as
replacement of the concrete slab in the dry cleaner's space and repairs to the
parking lot. The necessary documents were filed with the State of Texas to
complete the work, and on April 7, 1997 the State approved the plan. The
remediation work was completed a week later at a cost of approximately $83,000,
which was paid for by the Partnership. The prospective buyer was willing to
close as soon as the cleanup work had been completed, and in accordance with
this agreement, the sale transaction closed on April 17, 1997. The proper
documentation for the cleanup has been filed by the contractor and the
certification of the cleanup from the State of Texas is expected to be received
by late July or early August. As soon as this certification is received, the
Partnership expects to make a Special Distribution of approximately $4,226,000,
or $225.00 per original $1,000 Unit, which represents the available proceeds
from the sale of Harwood Village.
The Partnership acquired the Harwood Village Shopping Center through
foreclosure proceedings under the terms of a mortgage loan secured by the
property on June 19, 1995. At the date of foreclosure, management believed that
the fair value of Harwood Village was approximately equal to the aggregate
carrying value of the Partnership's land and mortgage loan investments of
$3,918,000. Accordingly, the Partnership reclassified such carrying values to
investment property held for sale. During fiscal 1996, the Partnership purchased
an additional out-parcel of land adjacent to Harwood Village for $46,000 and
began to actively market the property for sale. Despite the downward trend in
values for retail shopping centers in many markets due to certain consolidations
and bankruptcies among retailers which have led to an oversupply of space and
the generally flat rate of growth in retail sales, management believed that a
sale of the property followed by a liquidation of the Partnership was more
favorable than the uncertainties and risks associated with ownership of the
property for an extended holding period and was in the best interests of the
Limited Partners. Now that the sale of the Harwood Village North Shopping
Center, which was the Partnership's only remaining real estate investment, has
closed, a formal liquidation of the Partnership is underway. Based on projected
liquidation-related expenses, residual cash reserves available for distribution
after the Special Distribution referred to above are estimated at approximately
$5 per original $1,000 investment. The payment of the final distribution and the
formal liquidation of the Partnership are expected to be completed by September
15, 1997.
As of May 31, 1997, the Partnership had cash and cash equivalents of
$4,507,000. Such cash and cash equivalents, together with any interest earnings
and net of the expenses to be incurred to complete the liquidation of the
Partnership, will be used to make distributions to the Limited Partners. As
noted above, a Special Distribution of approximately $4,226,000, or $225.00 per
original $1,000 Unit, representing the available proceeds from the sale of
Harwood Village, will be made as soon as the Partnership receives the site
cleanup certification from the State of Texas. Based on current estimates of
liquidation expenses, residual cash reserves of approximately $5 per original
$1,000 Unit would be available to pay to the Limited Partners in a final
liquidating distribution which is expected to be made by September 15, 1997.
Results of Operations
For the period March 1, 1997 to April 17, 1997
- ----------------------------------------------
As discussed further in the notes to the accompanying financial
statements, the Partnership changed its basis of accounting from going concern
to liquidation basis as of April 17, 1997, upon completing the sale of its final
real estate investment. The Partnership reported a net loss of $47,000 for the
period March 1, 1997 to April 17, 1997 as compared to net income of $125,000 for
the three-month period ended May 31, 1996. This $172,000 unfavorable change in
net operating results is attributable to a $129,000 increase in the
Partnership's operating loss and a $96,000 decrease in income from operations of
investment property held for sale, which were partially offset by a $53,000 gain
on the sale of operating investment property. The increase in the Partnership's
operating loss is primarily attributable to the additional liquidation-related
expenses recognized during the period ended April 17, 1997 in connection with
the change in the Partnership's basis of accounting. Income from operations of
investment property held for sale decreased primarily due to the shorter period
in which the operating investment property was held prior to its sale on April
17, 1997 compared to the full three months of operations for the three-month
period ended May 31, 1996. The Partnership realized a gain on the sale of
Harwood Village of $53,000, which represents the excess of the net sale proceeds
over the cost basis of the Partnership's investment in the Harwood Village
property.
For the period September 1, 1996 to April 17, 1997
- --------------------------------------------------
The Partnership reported net income of $93,000 for the period September
1, 1996 to April 17, 1997 as compared to net income of $279,000 for the
nine-month period ended May 31, 1996. This $186,000 decline in net income is the
result of a $143,000 decrease in income from operations of investment property
held for sale and a $96,000 increase in the Partnership's operating loss, which
were partially offset by a $53,000 gain on the sale of operating investment
property. The increase in the Partnership's operating loss is primarily
attributable to the additional liquidation-related expenses recognized during
the period ended April 17, 1997 in connection with the change in the
Partnership's basis of accounting. The additional liquidation expenses were
partially offset by a decrease in general and administrative expenses and an
increase in interest income. General and administrative expenses decreased due
to a decline in certain required professional services during the period
September 1, 1996 to April 17, 1997 while interest income increased due to a
higher average invested cash reserve balance during the current period. Income
from operations of investment property held for sale decreased primarily due to
the shorter period in which the operating investment property was held prior to
its sale on April 17, 1997 compared to the full nine months of operations for
the nine-month period ended May 31, 1996. The Partnership realized a gain on the
sale of Harwood Village of $53,000, which represents the excess of the net sale
proceeds over the cost basis of the Partnership's investment in the Harwood
Village property.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously reported, the Partnership's General Partners were named as
defendants in a class action lawsuit against PaineWebber Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct investment offerings of interests in various limited partnership
investments and REIT stocks, including those offered by the Partnership. In
January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the class action outlining the terms under which the parties have
agreed to settle the case. Pursuant to that memorandum of understanding,
PaineWebber irrevocably deposited $125 million into an escrow fund under the
supervision of the United States District Court for the Southern District of New
York to be used to resolve the litigation in accordance with a definitive
settlement agreement and plan of allocation. On July 17, 1996, PaineWebber and
the class plaintiffs submitted a definitive settlement agreement which provides
for the complete resolution of the class action litigation, including releases
in favor of the Partnership and the General Partners, and the allocation of the
$125 million settlement fund among investors in the various partnerships at
issue in the case. As part of the settlement, PaineWebber also agreed to provide
class members with certain financial guarantees relating to some of the
partnerships. The details of the settlement are described in a notice mailed
directly to class members at the direction of the court. A final hearing on the
fairness of the settlement was held in December 1996, and in March 1997 the
court issued a final approval of the settlement. The release of the $125 million
of settlement proceeds has not occurred to date pending the resolution of an
appeal of the settlement agreement by two of the plaintiff class members. As
part of the settlement agreement, PaineWebber has agreed not to seek
indemnification from the related partnerships and real estate investment trusts
at issue in the litigation (including the Partnership) for any amounts that it
is required to pay under the settlement.
Based on the settlement agreement discussed above covering all of the
outstanding unitholder litigation, and notwithstanding the appeal of the class
action settlement referred to above, management does not expect that the
resolution of this matter will have a material impact on the Partnership's
financial statements, taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: NONE
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
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.
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND, LP
By: FIRST QUALIFIED PROPERTIES, INC.
General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: July 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended May 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 4,507
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,507
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,507
<CURRENT-LIABILITIES> 176
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,331
<TOTAL-LIABILITY-AND-EQUITY> 4,507
<SALES> 0
<TOTAL-REVENUES> 385
<CGS> 0
<TOTAL-COSTS> 168
<OTHER-EXPENSES> 124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 93
<INCOME-TAX> 0
<INCOME-CONTINUING> 93
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93
<EPS-PRIMARY> 4.89
<EPS-DILUTED> 4.89
</TABLE>
