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, 1996
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: 0-10980
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2738053
(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 INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and September 30, 1995 (Unaudited)
(In thousands)
ASSETS
June 30 September 30
------- ------------
Operating investment property:
Land $ 1,400 $ 1,400
Buildings, improvements and equipment 12,521 12,468
-------- ---------
13,921 13,868
Accumulated depreciation (4,754) (4,436)
-------- ---------
9,167 9,432
Cash and cash equivalents 477 129
Tax escrow deposit 232 110
Repair escrow 48 59
Investment in joint venture, at equity 259 -
Prepaid and other assets 52 57
Deferred financing costs, net 170 175
------- --------
$10,405 $ 9,962
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and other liabilities $ 65 $ 144
Accrued real estate taxes 202 101
Mortgage interest payable 37 37
Tenant security deposits 57 58
Equity in losses of unconsolidated joint ventures
in excess of investments and advances - 974
Long-term debt 4,869 4,915
Partners' capital 5,175 3,733
------- -------
$10,405 $ 9,962
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended June 30, 1996 and 1995 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rental revenues $ 514 $ 504 $ 1,567 $ 1,419
Interest and other income 6 3 18 7
------ ------ ------- -------
520 507 1,585 1,426
Expenses:
Property operating expenses 322 333 935 986
Interest expense and
related fees 113 118 339 343
Depreciation expense 106 91 318 308
Real estate taxes 34 37 101 100
General and administrative 48 109 169 200
------ ------ ------- -------
623 688 1,862 1,937
------- -------- -------- --------
Operating loss (103) (181) (277) (511)
Partnership's share of
unconsolidated
ventures' income (losses) 82 (21) 67 14
Gain on sale of joint
venture investment - - 2,166 -
------ ------ ------- -------
Net income (loss) $ (21) $ (202) $1,956 $ (497)
====== ======= ====== =======
Net income (loss) per Limited
Partnership Unit $(0.79) $ (7.78) $75.38 $(19.13)
====== ======= ====== =======
Cash distributions per
Limited Partnership Unit $ - $ - $20.00 $ -
======= ======== ====== =======
The above net income (loss) and cash distributions per Limited Partnership
Unit are based upon the 25,698 Units of Limited Partnership Interest outstanding
for each period.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended June 30, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
------ --------
Balance at September 30, 1994 $ (146) $ 4,132
Net loss (5) (492)
------ --------
Balance at June 30, 1995 $ (151) $ 3,640
====== ========
Balance at September 30, 1995 $ (150) $ 3,883
Cash distribution - (514)
Net income 19 1,937
------ --------
Balance at June 30, 1996 $ (131) $ 5,306
====== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ 1,956 $ (497)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Gain on sale of joint venture investment (2,166) -
Depreciation expense 318 308
Amortization of deferred financing fees 5 6
Partnership's share of unconsolidated
ventures' income (67) (14)
Changes in assets and liabilities:
Tax and insurance escrow deposits (122) 86
Prepaid and other assets 5 (25)
Accounts payable and other liabilities (79) 9
Accrued real estate taxes 101 (26)
Tenant security deposits (1) 8
--------- --------
Total adjustments (2,006) 352
--------- --------
Net cash used in operating activities (50) (145)
--------- ---------
Cash flows from investing activities:
Proceeds received from sale of joint
venture investment 1,000 -
Distributions from unconsolidated joint ventures - 412
Additional investments in unconsolidated
joint ventures - (41)
Additions to buildings, improvements and equipment (53) (805)
Decrease in repair escrow 11 763
--------- --------
Net cash provided by investing activities 958 329
--------- --------
Cash flows from financing activities:
Distribution to limited partners (514) -
Principal repayments on long-term debt (46) (43)
---------- --------
Net cash used in financing activities (560) (43)
---------- --------
Net increase in cash and cash equivalents 348 141
Cash and cash equivalents, beginning of period 129 25
---------- ---------
Cash and cash equivalents, end of period $ 477 $ 166
========== ========
Cash paid during the period for interest $ 334 $ 337
========== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
Notes to Consolidated 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 September 30, 1995.
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.
2. Related Party Transactions
Included in general and administrative expenses for nine months ended June
30, 1996 and 1995 is $65,000 and $66,000, respectively, representing
reimbursements to an affiliate of the Managing General Partner for providing
certain financial, accounting and investor communication services to the
Partnership.
Also included in general and administrative expenses for both the nine
months ended June 30, 1996 and 1995 is $1,000, representing fees earned by
Mitchell Hutchins Institutional Investors, Inc. for managing the
Partnership's cash assets.
3. Investments in Unconsolidated Joint Ventures
At June 30, 1996, the Partnership had an investment in one unconsolidated
joint venture (two at June 30, 1995), Charter Oak Associates, which owns an
operating investment property as more fully described in the Partnership's
Annual Report. The unconsolidated joint venture is accounted for on the
equity method in the Partnership's financial statements because the
Partnership does not have a voting control interest in the venture. Under
the equity method, the assets, liabilities, revenues and expenses of the
joint venture do not appear in the Partnership's financial statements.
Instead, the investment is carried at cost adjusted for the Partnership's
share of the venture's earnings, losses and distributions.
During the first quarter of fiscal 1996, an agreement was reached to sell
the Partnership's interest in the Braesridge joint venture to the co-venture
partner at a net sale price of $1,000,000. The purchase contract was signed
in October 1995 and required the co-venture partner to make a $200,000
non-refundable escrow deposit and to close the transaction by January 16,
1996. On December 29, 1995, the transaction closed and the Partnership
received the additional $800,000. The Partnership made a special
distribution of $513,960, or $20 per original $1,000 investment, to the
Limited Partners on February 15, 1996 from the proceeds of this transaction.
The remaining net sale proceeds of $486,040 were retained by the Partnership
for Partnership reserves and to fund potential future capital needs of its
remaining investments.
<PAGE>
Summarized operating results of the unconsolidated joint ventures for the
three and nine months ended June 30, 1996 and 1995 are as follows. The
summary of operations for the nine months ended June 30, 1996 includes the
Partnership's share of the Braesridge joint venture's net loss through
December 29, 1995. The summary of operations for the three months ended June
30, 1996 includes only the Partnership's share of the net income of the
Charter Oak joint venture:
Condensed Combined Summary of Operations
For the three and nine months ended June 30, 1996 and 1995 (in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
Rental revenues and
expense recoveries $ 630 $1,254 $2,527 $3,769
Interest and other income 26 46 118 187
------ ------ ------ ------
656 1,300 2,645 3,956
Property operating expenses 242 616 1,181 1,834
Interest expense 187 424 785 1,285
Depreciation and amortization 92 180 348 509
Real estate taxes 39 97 180 297
------ ------ ------ ------
560 1,317 2,494 3,925
------ ------ ------ ------
Net income (loss) $ 96 $ (17) $ 151 $ 31
====== ====== ====== ======
Net income (loss):
Partnership's share of
combined income (loss) $ 83 $ (20) $ 125 $ 18
Co-venturers' share of
combined income (loss) 13 3 26 13
------ ------ ------ ------
$ 96 $ (17) $ 151 $ 31
====== ====== ====== ======
Reconciliation of Partnership's Share of Operations
For the three and nine months ended June 30, 1996 and 1995 (in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
Partnership's share of
combined income (loss),
as shown above $ 83 $ (20) $ 125 $ 18
Amortization of excess basis (1) (1) (58) (4)
--------- ------ ------- --------
Partnership's share of
unconsolidated ventures'
income(losses) $ 82 $ (21) $ 67 $ 14
======= ======= ======= =======
4. Operating Investment Property
Operating investment property at June 30, 1996 and September 30, 1995
represents the land, buildings and equipment of Arlington Towne Oaks
Associates, a joint venture in which the Partnership has a controlling
interest, as described below.
As discussed further in the Annual Report, during fiscal 1991 the
Partnership's co-venture partner in Arlington Towne Oaks Associates withdrew
from the venture and assigned its interest to the Managing General Partner of
the Partnership in return for a release from any further obligations. As a
result, the Partnership assumed full control over the affairs of the joint
venture. Accordingly, the accompanying financial statements present the
financial position and results of operations of the joint venture on a
consolidated basis. The joint venture owns and operates a 320-unit apartment
complex in Arlington, Texas.
The Partnership is utilizing a local, unaffiliated property management
company to operate the property under the direction of the Managing General
Partner. The following is a summary of property operating expenses for the
three and nine months ended June 30, 1996 and 1995 (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
----------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
Property operating expenses:
Salaries and related costs $ 68 $ 67 $ 194 $ 201
Repairs and maintenance 105 136 268 314
Utilities 98 75 308 313
Management fees 21 20 63 57
Administrative and other 30 35 102 101
------ ------ ------ ------
$ 322 $ 333 $ 935 $ 986
====== ====== ====== ======
5. Long-term Debt
Long-term debt at June 30, 1996 and September 30, 1995 relates to the
consolidated joint venture, Arlington Towne Oaks Associates, and is
summarized as follows (in thousands):
June 30 September 30
------- ------------
9.08% mortgage note due March 1,
2019, payable in monthly
installments of $42, including
interest, collateralized by the
Towne Oaks operating investment
property. $4,869 $4,915
====== ======
6. Contingencies
The Partnership is involved in certain legal actions. At the present time,
the Managing General Partner is unable to determine what impact, if any,
the resolution of these matters may have on the Partnership's financial
statements, taken as a whole.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
On December 29, 1995, the Partnership sold its interest in the Braesridge
Apartments joint venture to its co-venture partner. As reported in the Annual
Report, the Partnership and its co-venture partner had been marketing Braesridge
Apartments for sale and, as part of a marketing effort coordinated by a national
brokerage firm, had received several offers from third party prospective
purchasers. During the first quarter, an agreement was reached to sell the
Partnership's interest in the Braesridge joint venture to the co-venture partner
at a net sale price of $1,000,000, which provided more net proceeds to the
Partnership than any of the third-party offers. This net sale price for the
Partnership's equity interest reflects the deduction of the outstanding first
mortgage loan and certain co-venture partner operating loans from an agreed upon
effective sale price of $11,750,000, which was supported by the most recent
independent appraisal of the property. The purchase contract was signed in
October 1995 and required the co-venture partner to make a $200,000
non-refundable escrow deposit and to close the transaction by January 16, 1996.
On December 29, 1995, the transaction closed and the Partnership received the
additional $800,000. The Partnership distributed approximately $514,000 of the
net sale proceeds, or $20 per original $1,000 investment, in a special
distribution to the Limited Partners on February 15, 1996. The remaining net
sale proceeds of approximately $486,000 were retained by the Partnership to
bolster cash reserves maintained to fund potential future capital needs of the
Charter Oak and Towne Oaks investments.
The Partnership acquired its interest in Braesridge in September 1982 for
an equity investment of $6,900,000. The property was originally secured by a
first mortgage loan of $8,500,000. In the years that followed, there was
significant overbuilding and a severe real estate recession. These factors, in
combination with a weakened Texas economy, put considerable downward pressure on
occupancy levels, rental rates and property values during the latter half of the
1980s, and was a trend that continued through the early 1990s. Due to this
severe real estate downturn, the value of the Braesridge Apartments had
decreased to approximately one-half of its debt principal. As part of its
efforts to recover some portion of the Partnership's original investment,
management was able to complete several debt restructurings beginning in the
late 1980's. These debt workouts were structured so that a major portion of the
monthly debt service could be supported from property operations. The difference
between the modified interest rate payments and the actual debt service payments
to the lender was added to loan principal. This allowed the Partnership to
retain its ownership position in the property during deteriorating economic
conditions. The effect of these interest accruals was an increase in the amount
of the first mortgage loan during the period covered by the modification
agreements to an amount of approximately $10 million. Notwithstanding the
increase in the debt obligation, these successful workouts prevented the
property from being foreclosed upon by the lender.
The recovery of the real estate markets for multi-family apartment
properties across the country over the past 2-to-3 years had allowed Braesridge
to achieve historically high occupancy levels and record levels of rental
collections in fiscal 1994 and 1995. However, the high occupancy levels in the
Houston apartment market over the past two years, combined with significantly
increased rental rates, had become sufficient to justify the construction of new
apartment units which could limit Braesridge's future performance. Because of
the potential for apartment development and the possible adverse impact on the
future operations of Braesridge, management believed that this was the
appropriate time to sell the interest in the property and recover a small
portion of the Partnership's original investment.
Due to the fiscal 1996 sale of the interest in the Braesridge joint
venture, which represented 31% of the Partnership's original investment
portfolio, for an amount which is substantially lower than the Partnership's
original investment in Braesridge, combined with the fiscal 1991 foreclosure
loss of the Yorktown investment, which represented 16% of the Partnership's
original investment portfolio, the Partnership will be unable to return the full
amount of the original capital contributed by the Limited Partners. The amount
of capital which will be returned will depend upon the proceeds received from
the final liquidation of the two remaining investments. The amount of such
proceeds will ultimately depend upon the value of the underlying investment
properties at the time of their final disposition, which cannot presently be
determined. The improving market conditions referred to above for multi-family
apartment properties, combined with the significant capital improvement programs
which are in the process of being implemented at both of the two remaining
investment properties, may result in favorable opportunities to sell the
Partnership's remaining investments within the next 2-to-3 years. The
implementation of capital improvements made possible by the recent refinancings
of the Charter Oak and Towne Oaks properties, as discussed further below, are
expected to support management's ability to increase rents and add value to
these properties in the near term. Accordingly, management will likely defer
engaging in any concerted sales efforts with respect to Charter Oak and Towne
Oaks in the near term until the respective capital improvement programs are
substantially completed and the effects of the improvements are fully reflected
in the rental rate structures for the apartment units.
As part of the refinancing of the mortgage loan secured by the Towne Oaks
Apartments in fiscal 1994, the joint venture was required to establish an escrow
account for a replacement reserve and other capital repairs. The balance of
these restricted reserves totalled approximately $1.5 million at the time of the
loan closing. Subsequent to the refinancing, the Partnership has implemented a
program to use these funds, along with cash flow from property operations, to
repair and upgrade the Towne Oaks Apartments property. To date, over $1.8
million of capital expenditures have been incurred to complete the installation
and painting of new exterior siding on all buildings and to begin the process of
upgrading the apartment interiors. The exterior portion of the capital
improvement program has been completed and apartment interiors are being
upgraded on a turnover basis, which will continue over the next 2-to-3 years
until all of the units have been upgraded. To date, 56% of the unit interiors
have been upgraded. The property improvements were necessary in order to improve
the average occupancy levels and rental rates at this 20-year old facility,
which had declined during fiscal 1993 and 1994 due to competitive conditions
existing in the property's Arlington, Texas submarket. The property's average
occupancy level for the quarter ended June 30, 1996 was 91%.
As part of the refinancing of the mortgage loan secured by the Charter Oak
Apartments in fiscal 1993, the joint venture was required to establish an
escrow account for a replacement reserve and other capital repairs which
totalled approximately $1.7 million at the time of the loan closing. Subsequent
to the refinancing, the Partnership has implemented a program to use these
funds, along with monthly escrow deposits to the replacement reserve as
required by the mortgage agreement, to provide the capital necessary to address
certain deferred maintenance and capital improvement items that have
significantly upgraded individual units and the property as a whole. As with
Towne Oaks, the work to renovate the individual apartment units is being done
on a turnover basis and will continue until all of the units have been
upgraded. To date, 28% of the unit interiors have been upgraded. The average
occupancy level at the Charter Oak Apartments for the quarter ended June 30,
1996 was 94%, up from 89% for the previous quarter. As a result of the improved
occupancy level, management is reducing the concessions being offered at the
property and increasing the rental rates.
At June 30, 1996 the Partnership and its consolidated joint venture had
available cash and cash equivalents of $477,000. Such cash and cash equivalents
will be utilized for the Partnership's working capital requirements and, if
necessary, to fund property operating deficits and capital improvements of the
two remaining joint ventures in accordance with the respective joint venture
agreements. The source of future liquidity and distributions to the partners is
expected to be through cash generated from operations of the Partnership's
investment properties and proceeds from the sale or refinancing of such
properties.
Results of Operations
Three Months Ended June 30, 1996
The Partnership reported a net loss of $21,000 for the three-month period
ended June 30, 1996, as compared to a net loss of $202,000 recognized for the
same period in the prior year. This decrease in the Partnership's net loss is
attributable to a favorable change in the Partnership's share of unconsolidated
ventures' operations of $103,000 and a decrease in the Partnership's operating
loss of $78,000. Due to the sale of the Partnership's interest in the Braesridge
joint venture, the Partnership's share of unconsolidated ventures' operations
for the current three-month period includes only the Partnership's share of the
operations of the Charter Oak joint venture and is not directly comparable to
the same period in the prior year which includes the results of both Charter Oak
and Braesridge. The Partnership's share of Charter Oak's net income increased by
$35,000 for the current three-month period, when compared to the same period in
the prior year, primarily due to an increase in rental income. Rental income at
Charter Oak improved by $54,000 for the current three-month period as a result
of an increase in rental rates.
The decrease in the Partnership's operating loss is mainly the result of a
decrease in general and administrative expenses. General and administrative
expenses decreased by $61,000 for the three months ended June 30, 1996 mainly
due to certain incremental costs incurred in the prior year in connection with
the annual independent valuation of the Partnership's operating investment
properties. In addition, rental revenue from the consolidated Towne Oaks
Apartments increased by $10,000 for the current three-month period.
Nine Months Ended June 30, 1996
The Partnership reported net income of $1,956,000 for the nine-month
period ended June 30, 1996, as compared to a net loss of $497,000 recognized for
the same period in the prior year. This favorable change in net operating
results is a result of the sale of the Braesridge joint venture interest on
December 29, 1995, as discussed further above. The Partnership accounted for its
investment in the Braesridge joint venture using the equity method because the
Partnership did not have voting control interest in the venture. Under the
equity method, the investment in a joint venture is carried at cost adjusted for
the Partnership's share of the venture's earnings or losses and distributions.
Despite recovering less than 15% of its original cash investment in Braesridge,
the Partnership recognized a gain of $2,166,000 in connection with the sale of
its venture interest because the losses recorded in prior years under the equity
method exceeded the Partnership's total investment amount.
Also contributing to the favorable change in net operating results for the
nine months ended June 30, 1996 was an increase in the Partnership's share of
unconsolidated ventures' income and a decrease in the Partnership's operating
loss. The Partnership's operating loss decreased by $234,000 primarily due to
increases in rental revenues from the consolidated Towne Oaks Apartments and a
decrease in both property operating expenses and general and administrative
expenses. Rental revenues at Towne Oaks increased by $148,000 for the current
nine-month period as a result of an increase in both average occupancy and
rental rates. Property operating expenses decreased by $51,000 primarily due to
a reduction in repairs and maintenance expenses. General and administrative
expenses decreased by $31,000 mainly due to certain incremental costs incurred
in the prior year in connection with the annual independent valuation of the
Partnership's operating investment properties.
Due to the sale of the Partnership's interest in the Braesridge joint
venture, the Partnership's share of unconsolidated ventures' income for the
current nine-month period includes the Partnership's share of the operations of
the Braesridge joint venture only through December 29, 1995 and is not directly
comparable to the same period in the prior year which includes a full nine
months of operations of both Charter Oak and Braesridge. The Partnership's share
of Charter Oak's net income increased by $83,000 during the current nine-month
period, when compared to the same period in the prior year, primarily due to an
increase in rental income and decreases in interest expense and property
operating expenses. Rental income at Charter Oak improved by $106,000 for the
current nine-month period as a result of an increase in rental rates. Mortgage
interest expense decreased by $48,000 due to certain mortgage insurance premiums
paid during the nine months ended June 30, 1995 in accordance with the terms of
the HUD financing agreement. Property operating expenses at Charter Oak
decreased by $37,000 primarily due to a decrease in certain professional fees. A
decrease in interest and other income and an increase in depreciation expense
partially offset the favorable changes in the net income of the Charter Oak
joint venture for the nine months ended June 30, 1996.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As discussed in the prior quarterly and annual reports, in November 1994 a
series of purported class actions (the "New York Limited Partnership Actions")
were filed in the United States District Court for the Southern District of New
York concerning PaineWebber Incorporated's sale and sponsorship of 70 limited
partnership investments, including those offered by the Partnership. The
lawsuits were brought against PaineWebber Incorporated and Paine Webber Group
Inc. (together "PaineWebber"), among others, by allegedly dissatisfied
partnership investors. In March 1995, after the actions were consolidated under
the title In re PaineWebber Limited Partnership Litigation, the plaintiffs
amended their complaint to assert claims against a variety of other defendants,
including Fourth Income Properties Fund, Inc. and Properties Associates ("PA"),
which are General Partners of the Partnership and affiliates of PaineWebber. On
May 30, 1995, the court certified class action treatment of the claims asserted
in the litigation.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions 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 has been preliminarily approved by the court and 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
proposed settlement has been scheduled for October 25, 1996.
The status of the other litigation involving the Partnership and its
General Partners remains unchanged from the description provided in the
Partnership's Quarterly Report on Form 10-Q for the period ended March 31, 1996.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
discussed above. At the present time, the Managing General Partner cannot
estimate the impact, if any, of the potential indemnification claims on the
Partnership's financial statements, taken as a whole. Accordingly, no provision
for any liability which could result from the eventual outcome of these matters
has been made in the accompanying financial statements of the Partnership.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FOUR LIMITED PARTNERSHIP
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.
PAINE WEBBER INCOME PROPERTIES FOUR
LIMITED PARTNERSHIP
By: FOURTH INCOME PROPERTIES FUND, INC.
Managing General Partner
By:/s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the nine months ended June 30,
1996 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> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 477
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 809
<PP&E> 14180
<DEPRECIATION> 4754
<TOTAL-ASSETS> 10405
<CURRENT-LIABILITIES> 361
<BONDS> 4869
0
0
<COMMON> 0
<OTHER-SE> 5175
<TOTAL-LIABILITY-AND-EQUITY> 10405
<SALES> 0
<TOTAL-REVENUES> 3818
<CGS> 0
<TOTAL-COSTS> 1523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 339
<INCOME-PRETAX> 1956
<INCOME-TAX> 0
<INCOME-CONTINUING> 1956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1956
<EPS-PRIMARY> 75.38
<EPS-DILUTED> 75.38
</TABLE>
