U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: AUGUST 31, 1994
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: 0-17146
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND TWO, LP
(Exact name of registrant as specified in its charter)
Delaware 04-2752249
(State of organization) (I.R.S.Employer
Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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
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DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
Prospectus of registrant Parts III and IV
dated July 1, 1982,
as supplementedended
August 31, 1994. The distribution rate is expected to reach 2.5% per
annum on remaining invested capital by the third quarter of fiscal 1995. The
source of future liquidity and distributions to the partners is expected to be
through cash generated from the operations of the Partnership's real estate
investments, repayment of the Partnership's mortgage loans receivable and the
proceeds from the sales or refinancings of the underlying land, the operating
investment property and the joint venture investment property. Such sources of
liquidity are expected to be adequate to meet the Partnership's needs on a
short-term and long-term basis.
RESULTS OF OPERATIONS
1994 Compared to 1993
For the year ended August 31, 1994, the Partnership reported a net loss of
approximately $384,000 as compared to net income of approximately $759,000
recognized in the prior year. This unfavorable change in the Partnership's net
operating results was primarily due to a decline in mortgage interest income and
land rent, along with an increase in property operating expenses at the
Mercantile Tower property which is reflected in the income (loss) from
investment property held for sale. The decrease in mortgage interest income and
land rent resulted primarily from the foreclosure of the Mercantile Tower Office
Building on April 12 of the previous fiscal year. This resulted in a combined
reduction in interest income and land rent of approximately $426,000 for the
year ended August 31, 1994. Also contributing to the decrease in mortgage
interest and ground rent was the sale of the Howard Johnson's Motor Lodge
effective April 1, 1994. The Partnership recorded only seven months of mortgage
interest and ground rent in the current fiscal year as compared to twelve months
in fiscal 1993. The net operating results of the Mercantile Tower Office
Building in the current year include the costs of the improvements implemented
by the management company prior to obtaining the line of credit discussed above,
as well as certain leasing costs incurred in the fourth quarter subsequent to
obtaining the credit line. As a result of the Partnership's accounting policy
with regard to its investment properties acquired through foreclosures, all
costs associated with holding the asset are expensed as incurred. The
Partnership also recognized a provision for possible investment loss of
$1,200,000 in fiscal 1994 due to a decline in management's estimate of the fair
value of the Mercantile Tower property. Such provision exceeded the $1 million
loss recorded in fiscal 1993 to write down the carrying value of the property as
of the date of foreclosure. In addition, the Partnership's share of venture's
income decreased by approximately $32,000 in the current year due to a decline
in rental revenues at Marshall's at East Lake as a result of the decline in
occupancy and effective rental rates discussed further above.
The unfavorable changes in the Partnership's operations were partially
offset by the receipt of accrued interest owed on the Howard Johnson's mortgage
loan in the amount of approximately $292,000 at the time of the repayment in
fiscal 1994. The accrued interest had been fully reserved for in the prior year
and, accordingly, was recorded as a recovery of bad debt in fiscal 1994.
Furthermore, the provision for possible uncollectible amounts decreased by
approximately $253,000 in fiscal 1994 due to the foreclosure of the Mercantile
Tower Office Building and the sale of the Howard Johnson's Motor Lodge. During
fiscal 1993, the Partnership was reflecting interest income and a corresponding
reserve due to the default status of the mortgage loans secured by these
investments. Also offsetting the adverse change in net operating results were
declines in management fees and general and administrative expenses during
fiscal 1994. General and administrative expenses decreased by approximately
$59,000 mainly due to a decline in legal fees. Legal fees were higher in the
prior year due to costs incurred in connection with the borrower defaults on the
Mercantile Tower and Howard Johnson's investments.1993 Compared to 1992
The Partnership's net income decreased by approximately $1,463,000 for the
year ended August 31, 1993 in comparison to the prior year mainly because the
Partnership recorded a loss on foreclosure of the Mercantile Tower Office
Building of $1,000,000 and experienced a decline in mortgage interest income and
land rent in fiscal 1993. The loss on foreclosure represented an adjustment to
reduce the carrying value of the investment in the Mercantile Tower property to
management's estimate of its fair value, net of selling expenses, at the time of
foreclosure. The combined balance of the Partnership's mortgage loan and land
investments in Mercantile Tower was $10,500,000 prior to foreclosure. Based on
an independent appraisal of the property, management estimated that the
property's fair value, net of selling expenses, was approximately $9,500,000.
The decrease in mortgage interest income and land rent resulted primarily from
the foreclosure of the Mercantile Tower Office Building on April 12, 1993, as
discussed above. This resulted in a combined reduction in interest income and
land rent of approximately $829,000. Also, contributing to the decrease was the
third modification agreement of the Howard Johnson's mortgage loan effective in
May of 1993. The agreement reduced the effective interest rate on the note from
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAINE WEBBER QUALIFIED PLAN
PROPERTY FUND TWO, LP
By: Second Qualified Properties, Inc.
Managing General Partner
By: s/s Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Date: March 20, 1995
