UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: MARCH 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: 0-10995
PAINE WEBBER GROWTH PROPERTIES LP
Delaware 04-2772109
(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. XIndicate 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 duringthe 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 .
----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
Prospectus of registrant dated Parts III and IV
November 15, 1982, as supplemented
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS
At March 31, 1994, there were 2,868 record holders of Units in the
Partnership. There is no public market for the Units, and it is not anticipated
that a public market for Units will develop. The Managing General Partner will
not redeem or repurchase Units.
Reference is made to Item 6 below for a discussion of cash distributions
made to the Limited Partners.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
PAINE WEBBER GROWTH PROPERTIES LP
FOR THE YEARS ENDED MARCH 31, 1994, 1993, 1992, 1991 AND 1990
(IN THOUSANDS, EXCEPT FOR PER UNIT DATA)
1994 1993(1) 1992 1991 1990
<CAPTION> <S> <S> <S> <S> <S>
Revenues $ 2,393 $ 2,235 $ 549 $ 643 $ 508
Operating income $ 30 $ 87 $ 251 $ 269 $ 77
Partnership's share of gains
on settlement of insurance
claims $ 225 $11,545 - - -
Partnership's share of
unconsolidated
ventures' losses $ (2,546) $ (498) $(1,525) $(2,360) $ (1,659)
Income (loss) before
extraordinary gain $(2,289) $ 11,136 $(1,274) $(2,091) $ (1,582)
Extraordinary gain
on extinguishment of debt - - $ 3,540 - -
Net income (loss) $ (2,289) $ 11,136 $ 2,266 $(2,091) $ (1,582)
Per Limited Partnership Unit:
Income (loss) before
extraordinary gain $ (77.63) $ 377.63 $(43.21) $(70.92) $ (53.65)
Extraordinary gain - - $120.06 - -
Net income (loss) $ (77.63) $ 377.63 $ 76.85 $ (70.92) $ (53.65)
Cash distributions
from operations - $ 19.58 $ 22.33 $ 18.80 -
Cash distributions from sale,
refinancing and other
disposition transactions - $ 154.00 - - -
Total assets $ 20,510 $ 21,436 $ 9,334 $ 7,724 $ 11,376
Note payable $ 7,029 (2) $ 5,761 - - $ 1,000
</TABLE>
(1)During fiscal 1993, as further discussed in Note 4 to the accompanying
consolidated financial statements, the Partnership assumed complete control
of the joint venture which owns and operates the Nob Hill Apartments.
Accordingly, the joint venture, which had been accounted for under the
equity method in prior years, has been consolidated in the Partnership's
financial statements beginning in fiscal 1993.
(2)The significant increase in note payable at March 31, 1994 resulted from the
refinancing of the note payable secured by the Nob Hill Apartments in
September 1993 as further discussed in Note 6 to the accompanying
consolidated financial statements of the Partnership accompanying this
Annual Report.
The above selected financial data should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
Annual Report.
The above per Limited Partnership Unit information is based upon the 29,194
Limited Partnership Units outstanding during each year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership offered limited partnership interests to the public from
November 1982 to September 1983 pursuant to a Registration Statement filed under
the Securities Act of 1933. Gross proceeds of $29,194,000 were received by the
Partnership and, after deducting selling expenses and offering costs,
approximately $24,560,000 was initially invested in joint venture interests in
six operating investment properties. As of March 31, 1994, the Partnership
retained interests in five operating investment properties and one undeveloped
parcel of land at the former site of the Parkwoods Apartments. As previously
reported, the Parkwoods complex was completely destroyed by a firestorm that
swept through the hills over Oakland, California on October 20, 1991. The
Partnership does not have any commitments for additional capital expenditures or
investments but may be called upon to advance funds to its existing investments
in accordance with the respective joint venture agreements. The Partnership's
primary objective has been to maximize the capital appreciation of its operating
investment properties.
Since shortly after the date of the Parkwoods fire, management of the
Partnership, together with the co-venturer, has worked diligently to maximize
the value of the 25-acre Parkwood Apartments site by securing the necessary
approvals and permits for the reconstruction of multi-family residential
buildings on the site while simultaneously marketing the property for sale.
During fiscal 1994, the Partnership was successful in obtaining approval for the
construction of a condominium complex on the land. The reconstruction plans are
for a project of similar size and density to that of the former Parkwoods
Apartments complex. During fiscal 1994, the joint venture paid approximately
$500,000 to secure the necessary building permits required in order to proceed
with the planned reconstruction. The joint venture has applied for a
reimbursement of such fees from a federal agency responsible for administering
federal aid in connection with the fire. There are no assurances that such
reimbursement will be granted. Management believed these condominium conversion
and site plan approvals would substantially facilitate the future sale of the
land. In connection with obtaining the site plan approvals, the joint venture
reached a settlement agreement with the former tenants of the Parkwoods
Apartments related to their rights in the condominium conversion. Under the
terms of this agreement, the venture will pay the tenants approximately $250,000
and will offer certain discounts to former tenants who wish to purchase a
condominium unit in the redeveloped project. Subsequent to year-end, on April
15, 1994, the joint venture sold the Parkwoods land to an affiliate of the
Partnership's co-venture partner for $4,750,000. Under the terms of the sale
agreement, the buyer assumed the venture's obligation to provide the
aforementioned discounts on condominium purchases to the former tenants. After
transaction costs, net proceeds from the sale totalled approximately $4,699,000.
A portion of the proceeds will be retained by the venture to pay for the ongoing
costs associated with the legal claims related to the fire which involve the
joint venture and its partners and affiliates, including the Partnership. The
remaining net proceeds from the sale of the land were distributed in accordance
with the joint venture agreement, with the Partnership receiving approximately
$4,139,000 and the co-venturer receiving approximately $49,000. On June 1,
1994, a special distribution of $4,613,000 was made to the Limited Partners,
representing the Partnership's share of the land proceeds, prior to the reserves
established for the venture's expected future operating costs. Management is
optimistic that such reserves will be recovered from the reimbursement of the
building permit fees from the federal agency, as discussed further above. With
this distribution, the Limited Partners have received liquidation proceeds from
the Parkwoods investment totalling $312 per original $1,000 investment. The
investment in Parkwoods represented approximately 33% of the Partnership's
original investment portfolio.
As previously reported, in fiscal 1993 the Partnership, along with Parkwood
Montclair Partners, became defendants in numerous lawsuits alleging damages in
excess of $100 million as a result of the Oakland Hills fire which destroyed the
Parkwoods Apartments and several thousand homes in the surrounding area in
October 1991. The insurers who provided liability coverage during the relevant
period are participating in the defense of the Partnership and the joint venture
subject to a reservation of rights. The Partnership and the joint venture
vigorously dispute the allegations made against them in the complaints that have
been filed and discovery has commenced. The ultimate outcome of the litigation
cannot presently be determined.
The Partnership completed the refinancings of the Nob Hill and Northcastle
mortgage loans in September 1993 and December 1993, respectively, with new loans
issued under the Department of Housing and Urban Development's (HUD) insured
loan program. Both new HUD loans were for amounts sufficient to retire the
existing loans and cover the HUD capital improvement reserve requirements as
well as other loan closing costs. In addition, the Partnership received
proceeds of approximately $551,000 from the Nob Hill refinancing as
reimbursement for certain amounts advanced to the venture to pay down the
principal balance on the old loan prior to the completion of the refinancing
transaction and related refinancing costs. The new Nob Hill loan is a 30-year
loan while the new Northcastle loan is a 25-year loan. Both new loans have an
effective interest rate of 7.375% per annum, a significant reduction from the
previous loan interest rates of 9% and 10%, respectively. As part of the HUD
loan requirements, a portion of the loan proceeds have been set aside for
repairs and replacements that will be utilized in capital improvement programs
to be completed during the next 18-to-24 months.
The local apartment markets where the Northcastle, Nob Hill, Chisholm Place
and Tantra Lake apartment complexes are located have experienced continuous
gradual improvement over the past 18-to-24 months, which has allowed the
respective properties to be more aggressive in seeking increased rents, while
also maintaining high occupancies. The operations of these four investment
properties reflect the generally improving conditions in the real estate markets
for multi-family residential properties. Lack of significant new construction
activity has allowed the oversupply which exists in most markets, as a result of
the overbuilding of the 1980's, to begin to be absorbed. The results of such
absorption, combined with the effects of a recovering national economy, have
been a gradual improvement in occupancy levels and effective rental rates and a
corresponding increase in property values in most markets. The California real
estate market, where the Partnership's Grouse Run Apartments property is
located, represents a notable exception to these generally improving market
conditions. Conditions in California continue to be adversely affected by the
state of the region's economy, which has been hit hard by the cutbacks in
government defense spending and by the reduced rate of growth in the high
technology industries. Operations at Grouse Run, while affected by these
conditions, appear to be holding relatively steady at the present time. The
Grouse Run joint venture operated at slightly above breakeven during calendar
1993. The improved operating performances of the other four properties,
combined with the favorable refinancings completed for the mortgages at Nob Hill
and Northcastle, are expected to result in improved cash flow to the
Partnership. Management expects to see continued improvement in the multi-
family sector of these real estate markets in the near-term as further market
corrections occur. The level of planned new construction activity in the
markets will be monitored carefully in order to determine whether favorable
sales opportunities might exist during the current market up-cycle. Because of
these improved property performances and because the Partnership currently has
sufficient reserves to meet its anticipated future capital needs, management
believes that it may be possible to reinstate a program of small operating cash
flow distributions to the Limited Partners in fiscal 1995. The Adviser will re-
evaluate expected joint venture cash flow distributions for fiscal 1995 and
beyond, and will make a formal recommendation to the Managing General Partner
regarding the Partnership's ability to resume making regular quarterly
distributions, by the end of the second quarter of fiscal 1995.
At March 31, 1994, the Partnership and its consolidated joint venture had
available cash and cash equivalents of approximately $1,625,000. Such cash and
cash equivalents, along with future cash flow distributions from the
Partnership's operating properties, will be used for the working capital needs
of the Partnership and, if necessary, for the funding of the Partnership's share
of operating deficits and certain other obligations of the investment
properties. Such sources of liquidity are expected to be adequate to cover the
Partnership's needs on both a short-term and long-term basis. The future source
of liquidity and distributions to the partners is expected to be through
proceeds received from the sales or refinancings of the investment properties.
RESULTS OF OPERATIONS
1994 Compared to 1993
The Partnership reported a net loss of approximately $2,289,000 for the
year ended March 31, 1994, as compared to net income of approximately
$11,136,000 reported for the prior year. The primary reason for this change in
net operating results is attributable to the gain of $11,545,205 realized from
the settlement of Parkwoods fire insurance claims in the prior year. In fiscal
1994, the Partnership realized another gain of $225,000 from the settlement of a
supplemental hazard insurance claim relating to the Parkwoods fire. Both gains
arose due to the fact that the net proceeds from the insurance claims exceeded
the net carrying value of the property destroyed by the fire. In addition to
the decrease in the Parkwoods insurance settlement gains, the Partnership's
share of unconsolidated ventures' losses increased by approximately $2,048,000
in the current year, mainly as a result of an increase in the operating loss of
the Parkwoods joint venture. The Partnership's share of loss from the Parkwoods
joint venture increased by approximately $2,161,000 mainly due to a $1,593,000
write down of the Parkwoods investment property to its estimated net realizable
value because the property was held for sale as of December 31, 1993. Estimated
net realizable value represented management's estimate of the sales price to be
received in the ordinary course of business, less costs of completion, holding
and disposal. As noted above, the sale of the Parkwoods land was consummated
subsequent to year-end. The sale proceeds, net of holding costs through the
date of the sale, approximated the carrying value of the investment property.
The combined operations of the other four joint ventures improved somewhat
during fiscal 1994 as compared to the prior year, mainly due to a substantial
increase in rental income at the Northcastle Apartments due to the improving
market conditions referred to above.
The Partnership's operating income decreased by approximately $57,000 during
fiscal 1994 when compared to the prior year, primarily due to an increase in
general and administrative expenses of approximately $124,000. This increase in
general and administrative expenses is mainly a result of certain costs incurred
in connection with an independent valuation of the Partnership's operating
properties, which is currently in process in conjunction with management's
ongoing portfolio management responsibilities. These costs were partially
offset by a decrease in the net loss of the consolidated Nob Hill joint venture
of approximately $26,000. These improved results were due to a significant
increase in rental income, which was partially offset by an increase in interest
expense, as a result of the larger outstanding principal balance of the
venture's long-term debt due to the refinancing of the venture's mortgage note
payable, as discussed further above.
1993 Compared to 1992
The principal components of the Partnership's net income of $11,136,000 for
the year ended March 31, 1993 are the Partnership's operating income, the gain
on the settlement of the Parkwoods insurance claims and the Partnership's share
of unconsolidated ventures' losses. In fiscal 1993, the Partnership's operating
results included the consolidated results of the Nob Hill Apartments, owned by
Nob Hill Partners. Nob Hill Apartments contributed a net loss of approximately
$125,000, after depreciation and operating expenses, to the Partnership's
operating income in fiscal 1993. As explained further in Note 4 to the
accompanying consolidated financial statements, the Partnership assumed control
over the affairs of the joint venture effective September 1, 1992 as a result of
the withdrawal of the co-venture partner and the assignment of its remaining
interest to First PW Growth Properties, Inc., the Managing General Partner of
the Partnership. In prior years, the Partnership's share of the operating
results of Nob Hill Apartments had been reflected under the equity method in the
Partnership's share of unconsolidated ventures' losses. During fiscal 1992, the
Partnership's share of the Nob Hill Partners loss from operations was
approximately $145,000.
The Partnership's net income increased by approximately $8,870,000 for
fiscal 1993, as compared to fiscal 1992, primarily due to the recognition of a
gain in the amount of $11,545,205 realized from the settlement of the Parkwoods
insurance claims. The gain arose due to the fact that the net proceeds from the
insurance claims exceeded the net carrying value of the property destroyed by
the fire. Fiscal 1992's net income also included the Partnership's share of an
extraordinary gain of approximately $3,540,000 related to the extinguishment of
debt in fiscal 1992 from the Chisholm Place debt refinancing. Excluding these
gains, the Partnership's net operating results improved by approximately
$865,000 between years primarily due to a decrease in the Partnership's share of
unconsolidated ventures' losses.
The Partnership's share of unconsolidated ventures' losses (excluding Nob
Hill Partners in fiscal 1992) decreased by approximately $882,000 in the fiscal
1993 mainly as a result of a change in the operating results of the Parkwoods
joint venture and a substantial increase in rental revenues at the Northcastle
Apartments. In fiscal 1992, the Partnership's share of the loss from the
Parkwoods joint venture was approximately $642,000. For fiscal 1993, the
Partnership's share of the operations of the Parkwoods joint venture, prior to
the gain from the insurance settlement, reflected income of approximately
$70,000. In fiscal 1992, the net operating results of the Parkwoods joint
venture reflected the operations of the apartment complex up through October 20,
1991, as well as depreciation expense on the operating property through that
date and interest expense on the venture's $19 million mortgage loan for the
entire year. In fiscal 1993, the elimination of depreciation expense, a
reduction in interest expense due to the repayment of the mortgage loan in June
of 1992, and the inclusion in revenues of approximately $1,100,000 of rental
interruption insurance proceeds accounted for the favorable change in the
venture's operating results. Subsequent to the final insurance settlement
reached in May of 1992, the venture had no source of operating revenue and was
operating at a loss which was being funded by insurance proceeds retained by the
venture. Rental revenues of the Northcastle joint venture increased by
approximately $139,000, or 17%, over fiscal 1992 due to an improvement in rental
rates made possible by aggressive property management and a strengthening
Austin, Texas market.
1992 Compared to 1991
The Partnership recognized net income of approximately $2,266,000 for the
year ended March 31, 1992, as compared to a net loss of approximately $2,091,000
for the prior fiscal year. The dramatic change in net operating results was
primarily the result of the recognition of an extraordinary gain on
extinguishment of debt in fiscal 1992 from the Chisholm Place debt refinancing.
In connection with this transaction, the Chisholm Place joint venture recorded
an extraordinary gain of approximately $3,616,000, representing the difference
between the payment made to the mortgage lender of $4,200,001 and the carrying
value of the debt and accrued interest, which aggregated approximately
$7,969,000, net of the unamortized loan fees of approximately $23,000 and a
deferred interest asset of approximately $130,000, which had resulted from the
accrual of imputed interest under a prior modification agreement. The
Partnership's share of the extraordinary gain totalled approximately $3,540,000.
The Partnership's loss before the extraordinary gain described above
decreased by approximately $817,000 in fiscal 1992 due to a decrease in the
Partnership's share of ventures' losses, which was partially offset by a slight
decline in operating income. The decrease in the Partnership's share of
ventures' losses could be attributed primarily to improved rental revenues at
the Tantra Lake, Chisholm Place, Nob Hill and Northcastle apartment complexes,
combined with a reduction in interest expense at the Chisholm Place joint
venture as a direct result of the refinancing referred to above. Operating
income declined slightly as a result of a decrease in interest income and an
increase in management fees.
Inflation
The Partnership commenced operations in 1983 and completed its eleventh full
year of operations in the current fiscal year. The effects of inflation and
changes in prices on the Partnership's operating results to date have not been
significant.
Inflation in future periods may increase revenues, as well as operating
expenses, at the Partnership's operating investment properties. Tenants at the
Partnership's apartment properties have short-term leases, generally of one year
or less in duration. Rental rates at these properties can be adjusted to keep
pace with inflation, to the extent market conditions allow, as the leases are
renewed or turned over. Such increases in rental income would be expected to at
least partially offset the corresponding increases in Partnership and property
operating expenses.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included under Item 14
of the Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 GROWTH PROPERTIES LP
By: First PW Growth Properties, Inc.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Dated: April 20, 1995
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(1) AND (2) AND 14(D)
PAINE WEBBER GROWTH PROPERTIES LP
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Reference
PAINE WEBBER GROWTH PROPERTIES LP:
Report of independent auditors F-2
Consolidated balance sheets as of March 31, 1994 and 1993 F-3
Consolidated statements of operations for the years
ended March 31, 1994, 1993 and 1992 F-4
Consolidated statements of changes in partners' capital
(deficit) for the years ended March 31, 1994, 1993 and 1992 F-5
Consolidated statements of cash flows for the years
ended March 31, 1994, 1993 and 1992 F-6
Notes to consolidated financial statements F-7
Schedule XI - Real Estate and Accumulated Depreciation F-21
1993 AND 1992 COMBINED JOINT VENTURES OF PAINE WEBBER GROWTH PROPERTIES LP:
Report of independent auditors F-22
Combined balance sheets as of December 31, 1993 and 1992 F-23
Combined statements of operations and changes in venturers'
capital for the years ended December 31, 1993 and 1992 F-24
Combined statements of cash flows for the years ended
December 31, 1993 and 1992 F-25
Notes to combined financial statements F-26
Schedule XI - Real Estate and Accumulated Depreciation F-33
991 COMBINED JOINT VENTURES OF PAINE WEBBER GROWTH PROPERTIES LP:
Report of independent auditors F-34
Combined balance sheets as of December 31, 1991 and 1990 F-35
Combined statements of operations and changes in venturers'
capital for the years ended December 31, 1991 and 1990 F-36
Combined statements of cash flows for the years ended
December 31, 1991 and 1990 F-37
Notes to combined financial statements F-38
Schedule XI - Real Estate and Accumulated Depreciation F-47
ther Financial Statement Schedules have been omitted since the required
nformation is not present or not present in amounts sufficient to require
ubmission of the schedule, or because the information required is included in
he financial statements, including the notes thereto.
REPORT OF INDEPENDENT AUDITORS
The Partners
Paine Webber Growth Properties LP:
We have audited the accompanying consolidated balance sheets of
PaineWebber Growth Properties LP as of March 31, 1994 and 1993, and the related
consolidated statements of operations, changes in partners' capital (deficit)
and cash flows for each of the three years in the period ended March 31, 1994.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Paine
Webber Growth Properties LP at March 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 5 to the financial statements, the Partnership,
along with Parkwood Montclair Partners, a joint venture in which the Partnership
has an ownership interest, are defendants in numerous lawsuits alleging various
damages as a result of a fire which destroyed the joint venture's operating
investment property in October 1991. The Partnership and the joint venture
vigorously dispute the allegations made against them and discovery has
commenced. The ultimate outcome of the litigation cannot presently be
determined. Accordingly, no provision for any liability that may result has
been made in the financial statements.
/S/ ERNST & YOUNG
ERNST & YOUNG
Boston, Massachusetts
June 20, 1994
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
March 31, 1994 and 1993
ASSETS
1994 1993
Operating investment property, at cost:
Land $ 2,028,580 $ 2,028,580
Buildings improvements and equipment 12,700,395 12,526,374
14,728,975 14,554,954
Less accumulated depreciation (4,983,656) (4,487,233)
9,745,319 10,067,721
Investments in unconsolidated joint
ventures, at equity 7,168,756 9,141,886
Cash and cash equivalents 1,624,967 2,011,104
Real estate tax and insurance escrow deposit 238,904 59,717
Capital improvement and replacement escrow deposits 1,031,498 -
Accounts receivable 85,627 -
Advances to consolidated venture - 109,073
Deferred loan costs, net of accumulated amortization
of $2,873 544,238 -
Loan refinancing deposit - 30,000
Other assets 70,267 16,923
$ 20,509,576 $21,436,424
LIABILITIES AND PARTNERS' CAPITAL
Note payable due within one year $ - $ 5,761,342
Accounts payable and accrued expenses 318,114 125,518
Accrued interest payable 6,896 76,136
Accounts payable - affiliate - 22,714
Mortgage note payable 7,028,848 -
Tenant security deposits 36,758 41,658
Other liabilities 35,825 36,814
Total liabilities 7,426,441 6,064,182
Partners' capital:
General Partners:
Capital contributions 1,000 1,000
Cumulative net losses (43,819) (20,928)
Cumulative cash distributions (26,336) (26,336)
Limited Partners ($1,000 per Unit,
29,194 Units issued in 1994 and 1993):
Capital contributions, net of offering costs 26,345,152 26,345,152
Cumulative net losses (4,338,040) (2,071,824)
Cumulative cash distributions (8,854,822) (8,854,822)
Total partners' capital 13,083,135 15,372,242
$ 20,509,576 $21,436,424
See accompanying notes.
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1994, 1993 and 1992
1994 1993 1992
REVENUES:
Rental income $1,823,311 $1,664,168 $ -
Reimbursements from affiliates 427,602 418,883 402,107
Interest and other income 141,913 151,809 147,302
2,392,826 2,234,860 549,409
EXPENSES:
Interest expense 468,236 360,328 -
Real estate taxes 201,434 198,906 -
Depreciation and amortization 499,296 485,420 -
Property operating expenses 814,058 790,826 -
Partnership management fees - 56,585 65,198
General and administrative 379,338 255,382 233,741
2,362,362 2,147,447 298,939
Operating income 30,464 87,413 250,470
Venture partner's share of
consolidated venture's loss 989 1,250 -
Partnership's share of gains on
settlement of insurance claims 225,000 11,545,205 -
Partnership's share of
unconsolidated ventures' losses (2,545,560) (497,933) (1,524,604)
Income (loss) before extraordinary gain (2,289,107) 11,135,935 (1,274,134)
Partnership's share of extraordinary gain
on extinguishment of debt - - 3,540,269
NET INCOME (LOSS) $ (2,289,107)$11,135,935 $2,266,135
Per Limited Partnership Unit:
Income (loss) before extraordinary gain $ (77.63) $377.63 $(43.21)
Extraordinary gain - - 120.06
Net income (loss) $ (77.63) $377.63 $ 76.85
Cash distributions $ - $173.58 $ 22.33
The above per Limited Partnership Unit information is based upon the 29,194
Units of Limited Partnership Interest outstanding during each year.
See accompanying notes.
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended March 31, 1994, 1993 and 1992
General Limited
Partners Partners Total
Balance at March 31, 1991 $(167,985) $ 7,864,014 $ 7,696,029
Net income 22,661 2,243,474 2,266,135
Cash distributions (6,584) (651,902) (658,486)
BALANCE AT MARCH 31, 1992 (151,908) 9,455,586 9,303,678
Net income 111,359 11,024,576 11,135,935
Cash distributions (5,715) (5,061,656) (5,067,371)
BALANCE AT MARCH 31, 1993 (46,264) 15,418,506 15,372,242
Net loss (22,891) (2,266,216) (2,289,107)
BALANCE AT MARCH 31, 1994 $ (69,155) $13,152,290 $13,083,135
See accompanying notes
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 1994, 1993 and 1992
Increase (Decrease) in Cash and Cash Equivalents
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ (2,289,107)$11,135,935 $ 2,266,135
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Reimbursements from affiliates (357,600) (247,628) (227,814)
Venture partner's share of
consolidated venture's loss (989) (1,250) -
Partnership's share of gains on
settlement of insurance claims (225,000)(11,545,205) -
Partnership's share of
unconsolidated ventures' losses 2,545,560 497,933 1,524,604
Partnership's share of extraordinary
gain on extinguishment of debt - - (3,540,269)
Depreciation and amortization 499,296 485,420 -
Amortization of forgiveness of debt (33,735) (196,216) -
Changes in assets and liabilities:
Accounts receivable (85,627) 1,691 -
Advances to consolidated venture 109,073 (109,073) -
Accounts receivable - affiliates - - 172,659
Escrow deposits (149,205) (25,187) -
Other assets (53,344) 4,900 -
Accrued interest receivable - 4,905 15,629
Accounts payable and accrued expenses 192,596 68,540 (324)
Accrued interest payable (69,240) 7,380 -
Accounts payable - affiliate (22,714) 14,225 2,052
Deferred interest payable - (54,454) -
Tenant security deposits (4,900) 2,511 -
Total adjustments 2,344,171 (11,091,508) (2,053,463)
Net cash provided by operating
activities 55,064 44,427 212,672
Cash flows from investing activities:
Distributions from unconsolidated
joint ventures 221,663 6,542,486 843,635
Additions to operating investment
property (174,021) (109,478) -
Additional investments in unconsolidated
joint ventures (211,493) (790,666) (1,674,773)
Release of cash held in escrow - - 297,352
Net cash provided by (used for)
investing activities (163,851) 5,642,342 (533,786)
Cash flows from financing activities:
Proceeds from long-term debt 7,034,200 - -
Mortgage escrow deposits funded by
debt proceeds (1,061,480) - -
Payment of financing costs (517,111) (30,000) -
Repayment of long-term debt (5,732,959) (56,182) -
Distributions to partners - (5,067,371) (658,486)
Net cash used for financing
activities (277,350) (5,153,553) (658,486)
Net increase (decrease) in cash and
cash equivalents (386,137) 533,216 (979,600)
Cash and cash equivalents, beginning of year:
Consolidated venture 13,517 12,405 -
Partnership 1,997,587 1,465,483 2,445,083
2,011,104 1,477,888 2,445,083
Cash and cash equivalents, end of year $ 1,624,967 $ 2,011,104 $ 1,465,483
Cash paid during the year for interest $ 534,910 $ 603,618 $ -
See accompanying notes.
1.General
Paine Webber Growth Properties LP (the "Partnership") is a limited
partnership organized pursuant to the laws of the State of Delaware in August
1982 for the purpose of investing in a portfolio of rental apartment
properties which have potential for near-term capital appreciation. The
Partnership authorized the issuance of Units (at $1,000 per Unit) of which
29,194 were subscribed and issued between November 15, 1982 and September 30,
1983.
2.Summary of Significant Accounting Policies
The accompanying financial statements include the Partnership's
investments in six joint venture partnerships which own five operating
properties and one undeveloped parcel of land. Except as described below,
the Partnership accounts for its investments in joint venture partnerships
using the equity method. Under the equity method the ventures are carried at
cost adjusted for the Partnership's share of the ventures' earnings, losses
and distributions and certain reimbursements receivable from the ventures
(see Note 5). The Partnership's joint venture investees are required to
maintain their accounting records on a calendar year basis for income tax
reporting purposes. As a result, the Partnership recognizes its share of the
ventures' income or losses based on financial information which is three
months in arrears to that of the Partnership. See Note 5 for a description
of the unconsolidated joint venture partnerships.
As further discussed in Note 4, the Partnership acquired complete control
of Nob Hill Partners, which owns the Nob Hill Apartments, in fiscal 1993.
Accordingly, the joint venture, which had been accounted for under the equity
method of accounting in prior years, is consolidated in the Partnership's
financial statements beginning in fiscal 1993. As discussed above, the joint
ventures have December 31 year-ends, and operations of the consolidated
venture continue to be reported on a three-month lag. All material
transactions between the Partnership and the joint venture have been
eliminated in consolidation, except for lag-period cash transfers. Such lag
period transfers are accounted for as advances to consolidated venture on the
accompanying balance sheets. The joint venture's operating investment
property is carried at the lower of cost, reduced by accumulated
depreciation, or net realizable value. The net realizable value of a
property held for long-term investment purposes is measured by the
recoverability of the Partnership's investment through expected future cash
flows on an undiscounted basis, which may exceed the property's market value.
The net realizable value of a property held for sale approximates its market
value. The Partnership's investment in the Nob Hill Apartments was
considered to be held for long-term investment purposes as of March 31, 1994
and 1993. Depreciation expense is computed using the straight-line method
over estimated useful lives of five-to-thirty years. Costs and fees
(including the acquisition fee paid to PaineWebber Properties Incorporated)
related to the acquisition of the property have been capitalized and are
included in the cost of the operating investment property. Maintenance and
repairs are charged to expense when incurred.
Deferred loan costs at March 31, 1994 consist of expenses incurred in
connection with the refinancing of the debt secured by the Nob Hill
Apartments (see Note 6). Such costs are being amortized on a straight-line
basis over the term of the loan.
For purposes of reporting cash flows, the Partnership considers all
highly liquid investments with original maturities of 90 days or less to be
cash equivalents.
No provision for income taxes is made in the accompanying financial
statements as the liability for such taxes is that of the partners rather
than the Partnership.
3.The Partnership Agreement and Related Party Transactions
The General Partners of the Partnership are First PW Growth Properties,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber Group Inc. ("PaineWebber"), and Properties Associates (the
"Associate General Partner"), a Massachusetts general partnership, certain
general partners of which are officers of PaineWebber Properties Incorporated
(the "Adviser") and the Managing General Partner. Subject to the Managing
General Partner's overall authority, the business of the Partnership is
managed by the Adviser pursuant to an advisory contract. The Adviser is a
wholly-owned subsidiary of PaineWebber Incorporated ("PWI"), a wholly-owned
subsidiary of PaineWebber. The General Partners, the Adviser and PWI receive
fees and compensation determined on an agreed upon basis, in consideration of
various services performed in connection with the sale of the Units, the
management of the Partnership and the acquisition, management, financing and
disposition of Partnership investments. The Managing General Partner and the
Adviser are reimbursed for their direct expenses relating to the offering of
Units, the administration of the Partnership and the acquisition and
operations of the Partnership's real property investments. Accounts payable-
affiliate at March 31, 1993 consisted of reimbursements of out-of-pocket
expenses of $22,714 payable to the Adviser.
All distributable cash, as defined, for each fiscal year shall be
distributed quarterly in the ratio of 99% to the Limited Partners and 1% to
the General Partners. All sale or refinancing proceeds shall be distributed
in varying proportions to the Limited and General Partners, as specified in
the Partnership Agreement.
Pursuant to the terms of the Partnership Agreement, taxable income or tax
losses of the Partnership will be allocated 99% to the Limited Partners and
1% to the General Partners. Taxable income or tax loss arising from a sale
or refinancing of investment properties will be allocated to the Limited and
General Partners in proportion to the amount of sale or refinancing proceeds
to which they are entitled; that is, as much as 99% but not less than 85% to
the Limited Partners. If there are no sale or refinancing proceeds, tax
losses and taxable income from a sale or refinancing will be allocated 99% to
the Limited Partners and 1% to the General Partners. Allocations of the
Partnership's operations between the General Partners and the Limited
Partners for financial accounting purposes have been made in conformity with
the allocations of taxable income or tax loss.
Under the advisory contract, the Adviser has specific management
responsibilities; to administer day-to-day operations of the Partnership, and
to report periodically the performance of the Partnership to the Managing
General Partner. The Adviser is due to be paid an annual management fee
equal to 1% of the gross offering proceeds. However, the cumulative amount
of acquisition fees and management fees which can be paid to the Adviser is
limited to the sum of 18% of the gross offering proceeds plus 10% of
Distributable Cash, as defined in the Prospectus. During 1986, this
limitation was reached and, as a result, future management fee payments are
limited to approximately 10% of any additional Distributable Cash. In fiscal
1993 and 1992, based on additional Distributable Cash paid to the partners,
management fees totalling $56,585 and $65,198, respectively, were paid to the
Adviser. No management fees were earned during fiscal 1994.
In connection with investing Partnership capital, the Adviser earned
acquisition fees totaling $2,247,500, of which $1,664,000 was paid to the
Adviser at the time the Partnership acquired its interests in the operating
investment properties and $583,500 was deferred, to be payable from the
distributable net cash flow of the operating investment properties. The
remaining unpaid deferred acquisition fees of $146,250 were paid to the
Adviser during fiscal 1992. Total acquisition fees to be received by the
Adviser was limited to not more than 9% of the gross offering proceeds per
the terms of the Prospectus. The Adviser may receive a real estate brokerage
commission, in an amount of up to 1% of the selling prices of properties
sold, upon the disposition of Partnership investments. Payment of such fee
will be subordinated to the payment of certain amounts to the Limited
Partners.
Included in general and administrative expenses for the years ended March
31, 1994, 1993 and 1992 is $107,373, $117,612 and $110,737, respectively,
representing reimbursements to an affiliate of the Managing General Partner
for providing certain financial, accounting and investor communication
services to the Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets.
Mitchell Hutchins is a subsidiary of Mitchell Hutchins Asset Management,
Inc., an independently operated subsidiary of PaineWebber. Mitchell Hutchins
earned fees of $3,792, $3,000 and $4,254 (included in general and
administrative expenses) for managing the Partnership's cash assets during
fiscal 1994, 1993 and 1992, respectively.
4.Operating Investment Property
As of March 31, 1994 and 1993, the Partnership owns a majority and
controlling interest in one joint venture which owns an operating investment
property as discussed below. As discussed in Note 2, the Partnership's
policy is to report the operations of the joint venture on a three-month lag.
Nob Hill Partners
On March 1, 1983 the Partnership acquired an interest in Nob Hill
Partners, a newly formed Texas general partnership organized to purchase and
operate Nob Hill Apartments, a 368-unit apartment complex in San Antonio,
Texas. The property was purchased from an entity that is an affiliate of the
original co-venturer on March 31, 1983. The Partnership is a general partner
in the joint venture. The Partnership's original co-venture partner was an
affiliate of the Trammell Crow organization. Effective September 1, 1992,
the Trammell Crow affiliate's interests and capital account were transferred
to First PW Growth Properties, Inc., the Managing General Partner of the
Partnership. As a result, the Partnership has assumed full control over the
affairs of the joint venture. Accordingly, the financial position and
results of operations of the joint venture are presented on a consolidated
basis beginning in fiscal 1993. Prior to fiscal 1993, the results of the
joint venture had been recorded on the equity method as discussed in Note 2.
The aggregate cash investment by the Partnership for its interest was
approximately $4,961,000 (including an acquisition fee of $344,000 paid to
the Adviser of the Partnership and fees aggregating $166,000 paid to
affiliates of the co-venturer). In addition, acquisition fees aggregating
$171,000 were deferred and were to be paid from distributable net cash flow
from operations to the Adviser in twelve quarterly installments through June
1986. The remaining unpaid deferred acquisition fees in the amount of
$71,250 were paid in fiscal 1992 with the proceeds of a loan from the
Partnership. The apartment complex was acquired subject to a nonrecourse
mortgage with a balance of $8,600,000 at the time of closing. In September
1993, the joint venture refinanced its mortgage with the proceeds of a new
nonrecourse mortgage note payable in the amount of $7,034,200 which is
scheduled to mature in November 2023 (see Note 6).
In addition to the consulting fees paid at closing, the joint venture
entered into a consulting agreement with the co-venturer, aggregating $57,000
to provide services to enhance the marketing and rental value of the
property. Such fees were to be paid from distributable net cash flow in
quarterly installments of $4,750 commencing June 30, 1984. Consulting fees
of $57,000 remained deferred in fiscal 1993 due to lack of distributable net
cash flow and were forfeited by the co-venturer upon withdrawal from the
joint venture. The forfeiture was treated as a capital contribution by the
co-venturer on the financial statements of the joint venture.
The joint venture agreement provides that net cash flow, as defined, will
be allocated first to the payment of the deferred acquisition fees payable to
the Partnership, then to the payment of interest and principal on certain
interim borrowings, if such borrowings have been made, then to the payment of
deferred consulting fees payable to the co-venturer, and then any remaining
amounts are to be distributed 99% to the Partnership and 1% to the
co-venturer. The distributions to the Partnership are first used to
reimburse the Partnership for the joint venture's share of management fees
and out-of-pocket expenses paid by the Partnership.
Taxable income and tax loss from operations is allocated 99% to the
Partnership and 1% to the co-venturer. Allocations of the joint venture
operations between the partners for financial accounting purposes have been
made in conformity with the actual allocations of taxable income or tax loss.
Any distribution of proceeds resulting from the sale or refinancing of
the property will be distributed to the Partnership and the co-venturer for
payment of accrued interest and principal on interim borrowings, as defined,
payment of capital contributions not previously distributed, and in
percentages ranging from 100% to 80% for the Partnership and 0% to 20% for
the co-venturer as specified by the terms of the joint venture agreement.
Profits resulting from the sale or refinancing of the property will be
first allocated to the Partnership and the co-venturer on a proportionate
basis to restore any negative capital accounts to zero. Any remaining gain
will be allocated to the Partnership and the co-venturer in a manner similar
to cash distributions described above. Losses from the sale or refinancing
of the property will be first allocated to the Partnership and the co-
venturer on a proportionate basis to any positive capital balances after
giving effect to the distribution of proceeds described above, and then 99%
to the Partnership and 1% to the co-venturer.
The joint venture has entered into a property management agreement with
an affiliate of the original co-venturer, cancellable at the Partnership's
option upon the occurrence of certain events. The management fee is equal to
4% of gross receipts, as defined in the agreement.
If additional cash is required for any reason in connection with the
joint venture, it will be provided 90% by the Partnership and 10% by the co-
venturer as additional capital contributions or interim borrowings in
accordance with the terms of the joint venture agreement. Additional
contributions made by the Partnership from inception through March 31, 1994
total $2,553,544, including $262,294 in fiscal 1994. The contributions made
by the Partnership during fiscal 1994 were primarily used to pay modification
and extension fees and to make principal payments on the prior mortgage (see
Note 6).
The following is a summary of operating expenses for the years ended
December 31, 1993 and 1992:
1993 1992
Property operating expenses:
Salaries and related costs $298,223 $280,443
Repairs and maintenance 139,745 140,447
Utilities 110,450 110,098
Insurance 43,682 29,492
Management fees 74,819 73,285
Administrative and other 147,139 157,061
$814,058 $790,826
5.Investments in Unconsolidated Joint Ventures
The Partnership has investments in five unconsolidated joint ventures at
March 31, 1994 and 1993. As explained in Note 4, the Partnership acquired
control of the joint venture which owns the Nob Hill Apartments during fiscal
1993 and, accordingly, this joint venture is presented on a consolidated
basis beginning in fiscal 1993. The unconsolidated joint ventures are
accounted for on the equity method in the Partnership's financial
statements. As discussed in Note 2, these joint ventures report their
operations on a calendar year basis.
Condensed combined financial statements of the unconsolidated joint
ventures, for the periods indicated, are as follows:
CONDENSED COMBINED BALANCE SHEETS
December 31, 1993 and 1992
Assets
1993 1992
Current assets $ 2,045,969 $ 2,443,942
Operating investment properties, net 25,922,701 27,590,490
Other assets 1,002,049 216,870
$28,970,719 $30,251,302
Liabilities and Partners' Capital
Current liabilities $ 1,976,322 $ 5,083,440
Other liabilities 2,476,260 2,092,116
Long-term mortgage debt, less current portion 20,266,389 16,097,873
Partnership's share of combined capital 4,239,675 6,760,148
Co-venturers' share of combined capital 12,073 217,725
$28,970,719 $30,251,302
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
1993 1992 1991
Rental revenue (1) $ 5,509,024 $ 6,263,422 $ 9,688,115
Interest and other income 305,946 481,284 1,027,926
Gains on settlement of
insurance claims 250,000 11,802,387 -
6,064,970 18,547,093 10,716,041
Property operating expenses 3,586,483 3,197,919 5,505,767
Depreciation and amortization 1,098,705 1,105,425 2,366,250
Interest expense 1,990,567 2,932,022 4,116,613
Other expenses 321,715 55,499 246,629
Write down of investment property
to net realizable value 1,592,712 - -
8,590,182 7,290,865 12,235,259
Income (loss) before
extraordinary gain (2,525,212) 11,256,228 (1,519,218)
Extraordinary gain on
extinguishment of debt - - 3,616,475
Net income (loss) $ (2,525,212)$11,256,228 $ 2,097,257
Net income (loss):
Partnership's share
of net income (loss) $ (2,320,560)$11,047,272 $ 2,044,181
Co-venturers' share of
net income (loss) (204,652) 208,956 53,076
$ (2,525,212)$11,256,228 $ 2,097,257
(1) See discussion below concerning the insurance recoverable and insurance
proceeds included in rental income for 1992 and 1991 related to Parkwood
Montclair Partners.
Reconciliation of Partnership's Investment
March 31, 1994 and 1993
1994 1993
Partnership's share of
capital at December 31, as shown above $ 4,239,675 $ 6,760,148
Partnership's share of ventures'
current liabilities and long-term debt 437,118 199,000
Reimbursements of management fees
and expenses receivable
from joint ventures (1) 2,540,223 2,182,622
Timing differences due to
contributions made and
distributions received subsequent
to December 31 (see Note 2) (48,260) 116
Investments in joint
ventures, at equity at March 31 $ 7,168,756 $ 9,141,886
(1)The Partnership records as income reimbursements due from the joint ventures
for the Partnership management fee and certain out-of-pocket expenses as
specified in the respective joint venture agreements. The Partnership
earned reimbursements totalling $427,602, $418,883 and $402,107 for the
years ended March 31, 1994, 1993 and 1992, respectively. The Partnership's
joint venture investees record comparable reimbursement expenses in their
statements of operations, which are reflected in the Partnership's share of
ventures' losses. Accordingly, the accounting for these reimbursements has
no significant effect on the Partnership's net capital or its results of
operations. These reimbursements will be paid from cash flow of the joint
ventures as available, or from sale or refinancing proceeds, and are
cumulative to the extent not paid currently. In fiscal 1994 the Partnership
received $70,000 from the Northcastle joint venture and in fiscal 1993 and
1992 $171,255 and $174,294, respectively, from the Parkwoods joint venture
as partial payments of reimbursements owed, leaving cumulative totals of
$2,540,223 and $2,182,622 unpaid at March 31, 1994 and 1993, respectively.
These amounts have been included in the balance of investments in joint
ventures on the accompanying balance sheets.
Reconciliation of Partnership's Share of Operations
For the years ended March 31, 1994, 1993 and 1992
1994 1993 1992
Partnership's share of net
income (loss) $ (2,320,560)$11,047,272 $ 2,044,181
Amortization of excess basis - - (28,516)
Partnership's share of ventures'
net income (loss) $ (2,320,560)$11,047,272 $ 2,015,665
The Partnership's share of ventures' net income (loss) is presented as
follows on the accompanying statements of operations:
1994 1993 1992
Partnership's share of ventures'
losses $ (2,545,560) $ (497,933) $(1,524,604)
Partnership's share of
gains on settlement of insurance
claims 225,000 11,545,205 -
Partnership's share of extraordinary
gain on extinguishment of debt - - 3,540,269
Partnership's share of ventures'
net income (loss) $ (2,320,560) $11,047,272 $ 2,015,665
Investments in unconsolidated joint ventures, at equity is the Partnership's
net investment in the unconsolidated joint venture partnerships. These joint
ventures are subject to partnership agreements which determine the
distribution of available funds, the disposition of the venture's assets and
the rights of the partners, regardless of the Partnership's percentage
ownership interest in the venture. Substantially all of the Partnership's
investments in these joint ventures are restricted as to distributions.
Investments in unconsolidated joint ventures, at equity on the balance sheet
is comprised of the following investment carrying values:
1994 1993
Rocky Mountain Partners $ (659,725)$ (487,237)
Grouse Run Associates I and II 761,706 854,247
Plano Chisholm Place Associates 1,649,855 1,857,721
Austin Northcastle Partners 765,761 576,962
Parkwood Montclair Partners 4,651,159 6,340,193
$ 7,168,756 $ 9,141,886
Cash distributions received from the Partnership's unconsolidated joint venture
investments during the years ended March 31, 1994, 1993 and 1992 are as follows:
1994 1993 1992
Rocky Mountain Partners $ 99,000 $ 371,250 $ 193,050
Grouse Run Associates I and II - 64,883 138,600
Parkwood Montclair Partners - 6,045,055 411,319
Nob Hill Partners - - 27,000
Plano Chisholm Place Associates 122,663 61,298 73,666
$ 221,663 $ 6,542,486 $ 843,635
A description of the ventures' properties and the terms of the joint venture
agreements are summarized below:
(a)Rocky Mountain Partners
On February 1, 1983 the Partnership acquired an interest in Rocky
Mountain Partners, a Colorado limited partnership which owns and operates
Tantra Lake Apartments, a 301-unit apartment complex in Boulder, Colorado.
The Partnership is a general partner in the joint venture. The
Partnership's co-venture partner is an affiliate of Sares Regis Group
(formerly Regis Homes Corporation). The property was purchased on February
17, 1983.
The aggregate cash investment by the Partnership for its interest was
approximately $4,698,000 (including an acquisition fee of $300,000 and a
consulting fee of $20,000 paid to the Adviser of the Partnership, and fees
totalling $210,000 paid to affiliates of the co-venturer). In addition,
deferred acquisition fees aggregating $95,000 have been paid to the Adviser
from distributable net cash flow. The apartment complex was acquired subject
to mortgages totalling $6,582,000 at the time of closing. On June 4, 1986,
the joint venture refinanced the property by replacing the original
mortgages which had remaining balances of approximately $6,299,000 with an
$8,900,000 new first mortgage. The Partnership received a distribution
totalling $2,274,797 from the refinancing proceeds in 1986. The new first
mortgage loan is nonrecourse to the venture, had a balance of $8,703,303 as
of December 31, 1993 and is scheduled to mature on June 1, 1996.
The joint venture agreement provides that distributable net cash flow, as
defined, will be allocated first to the payment of interest and principal on
certain interim borrowings, if such borrowings have been made, and then any
remaining amounts are to be distributed 99% to the Partnership and 1% to the
co-venturer. This joint venture agreement has been informally modified by
the partners resulting in distributions to the Partnership and the co-
venturer totalling $738,298 and $6,700, respectively, from inception through
March 31, 1994.
Taxable income and tax loss from operations is allocated 99% to the
Partnership and 1% to the co-venturer. Allocations of the joint venture
operations between the partners for financial accounting purposes have been
made in conformity with the allocations of taxable income or loss.
Upon sale or refinancing the Partnership will receive an amount equal to
its initial investment in the property plus $732,000 as a first priority,
after payment of mortgage debt and other indebtedness of the joint venture.
The remaining proceeds will be split between the Partnership and the co-
venturer in varying proportions, in accordance with the joint venture
agreement.
Taxable income and tax loss resulting from a sale of the property will
generally be allocated between the Partnership and the co-venturer as sales
proceeds are distributed.
The joint venture entered into a property management agreement with an
affiliate of the co-venturer, cancellable at the Partnership's option upon
the occurrence of certain events. The management fee is equal to 5% of
gross receipts, as defined in the agreement.
In the event the joint venture requires additional funds, the first
$100,000 will be provided by the Partnership. Thereafter, funds will be
provided 90% by the Partnership and 10% by the co-venturer as capital
contributions or interim borrowings in accordance with the terms of the
joint venture agreement. The agreement has been informally modified by the
partners resulting in additional contributions by the Partnership and the
Co-Venturer from inception through March 31, 1994 totalling approximately
$818,000 and $8,000, respectively.
(b)Grouse Run Associates I and II
On December 15, 1982 the Partnership acquired an interest in Grouse Run
Associates I and Grouse Run Associates II, two newly formed California
general partnerships organized to purchase and operate Grouse Run
Apartments, a 158-unit apartment complex in Stockton, California. The
Partnership is a general partner in each of the joint ventures. The
Partnership's co-venture partner is an affiliate of Sares Regis Group
(formerly Regis Homes Corporation). The property was acquired on March 31,
1983.
The aggregate cash investment by the Partnership for its interests was
approximately $2,192,000 (including an acquisition fee of $125,000 and a
consulting fee of $10,000 paid to the Adviser of the Partnership and fees
aggregating $90,000 paid to affiliates of the co-venturer). In addition,
deferred acquisition fees aggregating $37,500 have been paid from
distributable net cash flow to the Adviser. The apartment complex was
acquired subject to institutional nonrecourse first mortgages with balances
totalling $3,557,000 at the time of closing. The mortgage loans had an
aggregate balance of $3,245,777 as of December 31, 1993 and are scheduled to
mature in February 2019 and February 2020.
The joint venture agreement provides that the net cash flow, as defined,
will be allocated first to the payment of interest and principal on certain
interim borrowings, if such borrowings have been made, and then any
remaining amounts are to be distributed 99% to the Partnership and 1% to the
co-venturer. This joint venture agreement has been informally modified by
the partners resulting in distributions to the Partnership totalling
$493,473 from inception through March 31, 1994.
Taxable income and tax loss from operations is allocated 99% to the
Partnership and 1% to the co-venturer. Allocations of the joint venture
operations between the partners for financial accounting purposes have been
made in conformity with the allocations of taxable income or loss.
Upon sale or refinancing, the Partnership will receive an amount equal to
its initial investment in the property plus $310,000 as a first priority,
after payment of mortgage debt and other indebtedness of the joint venture.
Remaining proceeds will be split between the Partnership and the co-venturer
in varying proportions in accordance with the joint venture agreement.
Taxable income and tax loss resulting from a sale of the apartment
complex will be allocated between the Partnership and the co-venturer
generally as sales proceeds are distributed.
The joint venture entered into a property management agreement with an
affiliate of the co-venturer, cancellable at the Partnership's option upon
the occurrence of certain events. The management fee is equal to 5% of
gross receipts, as defined in the agreement.
In the event the joint venture requires additional funds, the first
$40,000 will be provided by the Partnership. Thereafter, funds will be
provided 90% by the Partnership and 10% by the co-venturer as capital
contributions or interim borrowing in accordance with the terms of the joint
venture agreement. Additional contributions from inception through March
31, 1994 totalling approximately $380,000 have been made 100% by the
Partnership.
(c)Plano Chisholm Place Associates
On March 1, 1983 the Partnership acquired an interest in Plano Chisholm
Place Associates, a newly formed Texas general partnership organized to
purchase and operate Chisholm Place Apartments, a 142-unit apartment complex
in Plano, Texas. The Partnership is a general partner in the joint venture.
The Partnership's co-venture partner is an affiliate of The Horn-Barlow
Companies. The property was acquired on May 31, 1983.
On September 9, 1991, an Amended and Restated Partnership Agreement was
entered into in connection with a refinancing of the venture's mortgage
debt. The mortgage lender agreed to accept a discount on an immediate
repayment of the outstanding obligations, which included a principal balance
of $6,993,229. In return for a payment of $4,200,001, the lender forgave
the resulting principal balance of $2,793,228 and accrued interest of
$975,408. An extraordinary gain of $3,616,475 was recorded by the venture
in connection with this transaction, representing the difference between the
payment made to the lender and the outstanding principal and accrued
interest owed to the lender, net of deferred loan fees written off of
$22,657 and a deferred interest asset of $129,504, which related to the
accrual of imputed interest under a prior debt modification agreement. The
Partnership's share of the extraordinary gain amounted to $3,540,269. The
payment to the lender and transaction closing costs were funded by a new
mortgage loan in the amount of $4,160,000 and contributions totalling
$210,652 from the Partnership and its co-venture partner made in the ratios
of 80% and 20%, respectively. The new mortgage loan is nonrecourse to the
venture and is scheduled to mature on October 1, 2001. The co-venturer was
not obligated under the terms of the original joint venture agreement to
make additional contributions in connection with the refinancing, but agreed
to do so in return for the Partnership's agreement to certain modifications
to the venture agreement which would allow the co-venturer to recover its
additional investment, plus earn a current return thereon.
The original aggregate cash investment by the Partnership for its
interest was approximately $2,233,000 (including an acquisition fee of
$150,000 paid to the Adviser of the Partnership and consulting fees
aggregating $20,000 paid to an affiliate of the co-venturer). In addition,
acquisition fees aggregating $75,000 were deferred and were to be paid from
distributable net cash flow from operations to the Adviser in twelve
quarterly installments commencing June 1984. Unpaid acquisition fees were
to be payable no later than the earlier of September 30, 1989 or upon the
sale or refinancing of the investment property. During fiscal 1992, the
joint venture paid the remaining deferred acquisition fee of $75,000 to the
Adviser from the proceeds of a capital contribution by the Partnership.
In addition to the consulting fees paid at closing, the joint venture
entered into a consulting agreement with the co-venturer to provide services
to the joint venture with respect to marketing and enhancement of the value
of the property. Fees aggregating $20,000 are payable in eight quarterly
installments of $2,500 each and were to have commenced on June 30, 1984.
The agreement provides such quarterly payments will be payable only out of
distributable net cash flow as defined, and shall be cumulative to the
extent not paid. Unpaid consulting fees were to be payable no later than
the earlier of January 1, 1989 or upon the sale or refinancing of the
investment property. Due to a lack of distributable cash flows, no
consulting fees have been paid to date.
The amended joint venture agreement provides that net cash flow, as
defined, will be allocated first, to the partners until they have received
an aggregate amount equal to the deferred fees payable to the partners as of
January 1, 1991; second, to the payment of interest and principal on certain
interim borrowings, if such borrowings have been made; third, 80% to the
Partnership and 20% to the co-venturer until each has received the amount of
its contribution of New Net Equity, as defined, plus a 10% simple return
thereon; fourth, to the payment of any reimbursements of management fees and
expenses owed to the Partnership; and fifth, any remaining amounts are to be
allocated 80% to the Partnership and 20% to the co-venturer.
Taxable income and tax loss from operations in each year are allocated
80% to the Partnership and 20% to the co-venturer. Allocations of the joint
venture operations between the partners for financial accounting purposes
have been made in conformity with the allocations of taxable income or tax
loss.
Sale or refinancing proceeds will be distributed to the Partnership and
the co-venturer in varying proportions in accordance with the terms of the
amended joint venture agreement.
Profits resulting from the sale or refinancing of the property will be
first allocated to the Partnership and the co-venturer on a proportionate
basis to restore any negative capital accounts to zero. Any remaining gain
will be allocated to the Partnership and the co-venturer in a manner similar
to cash distributions. Losses from the sale or refinancing of the property
will be first allocated to the Partnership and the co-venturer on a
proportionate basis to any positive capital balances after giving effect to
the distribution of proceeds described above, and then 95% to the
Partnership and 5% to the co-venturer.
The joint venture entered into a property management agreement with an
affiliate of the co-venturer, cancellable at the Partnership's option upon
the occurrence of certain events. The terms of the management fee were
modified upon modification of the long-term debt on October 31, 1986. The
management fee is equal to 5% of gross receipts, as defined. In addition,
the management agreement provides for an incentive management fee of 1% of
gross receipts, as defined. The 1% incentive management fee is payable only
from distributable net cash flow, as defined.
If additional cash is required for any reason in connection with the
joint venture, it will be provided by the Partnership and the co-venturer as
additional capital contributions or operating or default loans in accordance
with the terms of the amended joint venture agreement. Additional
contributions made by the Partnership from inception through March 31, 1994
total approximately $254,000.
(d)Austin Northcastle Partners
On September 15, 1983 the Partnership acquired an interest in Austin
Northcastle Partners, a newly formed Texas general partnership organized to
purchase and operate Northcastle Apartments, a 170-unit apartment complex in
Austin, Texas. The Partnership is a general partner in the joint
venture. The Partnership's co-venture partner is an affiliate of Sares Regis
Group (formerly Regis Homes Corporation). The property was acquired on
September 30, 1983.
The aggregate cash investment by the Partnership for its interest was
approximately $2,323,000 (including an initial acquisition fee of $175,000
and a consulting fee of $15,000 paid to the Adviser of the Partnership and
fees aggregating $100,000 paid to an affiliate of the co-venturer). In
addition, acquisition fees aggregating $70,000 and $10,000 were deferred and
have been paid from distributable net cash flow to the Adviser and an
affiliate of the co-venturer, respectively. The apartment complex was
acquired subject to a nonrecourse wraparound mortgage granted by the seller
with a balance of $3,675,000 at the time of closing. On December 1, 1993,
the joint venture refinanced its mortgage through the issuance of a
nonrecourse mortgage note payable to a third party which is secured by the
operating investment property. The new mortgage payable is insured by the
U.S. Department of Housing and Urban Development. The new mortgage note was
issued in the original principal amount of $4,372,900 and bears interest on
the unpaid balance at a rate of 7.375% per annum. The principal and
interest of the note are to be paid in monthly installments of $31,961
through December 1, 2018. The excess proceeds from the financing were used
to pay the financing costs and to fund certain required escrow reserves.
The joint venture agreement provides that the net cash flow, as defined,
will be allocated first to the payment of interest and principal on certain
interim borrowings, if such borrowings have been made, and then any
remaining amounts are to be distributed 99% to the Partnership and 1% to the
co-venturer. During 1989, through an informal agreement, the Partnership
and the co-venture partner loaned the joint venture $199,000 and $23,169,
respectively. During fiscal 1994, the Partnership loaned the joint venture
$211,493 in connection with the mortgage note refinancing referred to above.
Loans outstanding at December 31, 1993 bear interest at 12% per annum and
are due on demand subject to the restrictions of the joint venture
agreement. Accrued interest at December 31, 1993 for these notes payable to
partners totals $123,104.
Taxable income and tax loss from operations is allocated 99% to the
Partnership and 1% to the co-venturer. Allocations of the joint venture
operations between the partners for financial accounting purposes have been
made in conformity with the allocations of taxable income or tax loss.
Upon sale or refinancing, the Partnership will receive an amount equal to
its initial investment in the property plus $380,000 as a first priority,
after payment of mortgage debt and other indebtedness of the joint venture.
Remaining proceeds will be split between the Partnership and the co-venturer
in varying proportions, in accordance with the joint venture agreement.
Taxable income and tax loss resulting from a sale of the property will be
allocated between the Partnership and the co-venturer generally as sales
proceeds are distributed.
The joint venture originally entered into a property management agreement
with an affiliate of the co-venturer which was cancellable at the Part-
nership's option upon the occurrence of certain events. The management fee
under that agreement was equal to 5% of gross receipts, as defined in the
agreement. In February of 1990, the Partnership cancelled the management
agreement and executed a new property management agreement with an
unaffiliated third party to manage the property. Effective January 1, 1990,
the management fee is equal to 4.5% of gross receipts, as defined.
(e)Parkwood Montclair Partners
On September 30, 1983 the Partnership acquired an interest in Parkwood
Montclair Partners, a newly formed California general partnership organized
to purchase and operate Parkwoods Apartments, a 433-unit apartment complex
in Oakland, California. The Partnership is a general partner in the joint
venture. The Partnership's co-venture partner is an affiliate of Sares
Regis Group (formerly Regis Homes Corporation). The property was purchased
on October 31, 1983. The aggregate cash investment by the Partnership for
its interest was approximately $8,153,000 (including an acquisition fee of
$570,000 and a consulting fee of $45,000 paid to the Adviser of the
Partnership and fees totalling $307,500 paid to an affiliate of the co-
venturer). In addition, acquisition fees aggregating $135,000 and $52,500
were deferred and paid to the Adviser and an affiliate of the co-venturer,
respectively, from the cash flow of the venture.
On October 20, 1991, the Parkwoods Apartments was completely destroyed by
a firestorm that swept through the hills over Oakland, California.
Subsequent to the fire, on May 27, 1992, the joint venture reached a full
and final insurance settlement which called for the venture to receive a
total of approximately $29,361,000 for coverage on the damage to the
buildings and the loss of rental income. Additionally, in September of
1993, the joint venture entered into a cash settlement of $250,000 with
another insurance carrier related to supplemental hazard insurance.
Management estimated for financial statement purposes that the amount of the
settlement proceeds received from the primary issuer which related to rental
interruption insurance was approximately $1,783,000. Approximately $673,000
of these rental interruption proceeds was received prior to December 31,
1991. In June 1992, the venture partners decided not to rebuild the
operating property and agreed to distribute the net insurance proceeds after
the repayment of the outstanding mortgage loan and certain other
liabilities. The mortgage loan balance of $19,000,000 was repaid in full on
June 24, 1992 with a portion of the proceeds from the insurance settlement.
Approximately $5 million of the remaining net insurance proceeds was used or
set aside to pay for post-fire clean up and operating expenses of the
Parkwoods joint venture and the costs associated with pursuing the
redevelopment permits discussed further below. The remaining $5 million of
net proceeds was paid to the Partnership under the terms of the venture
agreement. Approximately $4,500,000 of the proceeds received by the
Partnership was distributed to the Limited Partners in August 1992.
The net book value of the operating property, excluding land, at the date
of the fire was $14,108,072. The excess of the net settlement proceeds (net
of rental interruption proceeds) over the net book value of the property and
unamortized loan fees resulted in gains of $250,000 in calendar 1993 and
$11,802,387 in calendar 1992. The Partnership's share of such gains
amounted to $225,000 for fiscal 1994 and $11,545,205 for fiscal 1993.
Certain costs incurred directly related to the fire, including site clean
up, property management and legal fees aggregating $1,443,778, were offset
in deriving the gain in calendar 1992. In calendar 1993, the carrying value
of the land was written down to management's estimate of net realizable
value based on the estimated sales price to be received in the ordinary
course of business, less costs of completion, holding and disposal. A loss
of approximately $1,593,000 was recognized in connection with such write
down. The Partnership's share of such loss is included in Partnership's
share of unconsolidated ventures' losses for fiscal 1994.
Management has been working diligently to maximize the value of the 25-
acre Parkwood apartment site by securing the necessary approvals and permits
for the reconstruction of multi-family residential buildings on the site
while simultaneously marketing the land for sale. During fiscal 1994, the
joint venture was successful in obtaining approval for the construction of a
condominium complex on the land. The reconstruction plans are for a project
of similar size and density to that of the former Parkwood Apartment
complex. Management believed these condominium conversion and site plan
approvals would substantially facilitate the future sale of the land.
Subsequent to December 31, 1993, the joint venture paid approximately
$500,000 to secure certain building permits required in order to proceed
with the planned reconstruction. In connection with obtaining the site plan
approvals, the joint venture entered into a settlement agreement with the
former tenants of the operating investment property related to their rights
in the condominium conversion. Under the terms of this agreement, the joint
venture will pay the former tenants approximately $250,000 and will offer
certain discounts to former tenants who wish to purchase a condominium unit
in the redeveloped project.
On April 15, 1994, subsequent to obtaining the building permits, the
joint venture sold the Parkwoods land to an affiliate of the co-venture
partner for $4,750,000. Terms of the sale allow for the aforementioned
discounts to be provided to the former tenants. After transaction costs,
net proceeds from the sale totalled approximately $4,699,000. The sale
proceeds, net of the building permit costs referred to above, approximated
the carrying value of the investment property at the date of the sale. A
portion of the proceeds will be retained by the joint venture to pay for the
ongoing costs associated with the claims described below. The remaining
portion of the proceeds were distributed to the venture partners in
accordance with the terms of the joint venture agreement, with the
Partnership receiving approximately $4,139,000 and the co-venturer receiving
approximately $49,000. Due to the outstanding legal claims involving the
joint venture, there are no plans to liquidate the joint venture in the
immediate future.
During fiscal 1993, the Partnership, along with Parkwood Montclair
Partners, became defendants in numerous lawsuits alleging various damages in
excess of $100 million as a result of the Oakland Hills fire which destroyed
the investment property and several thousand homes in the surrounding area.
The insurers who provided liability coverage during the relevant period are
participating in the defense of the Partnership and the joint venture
subject to a reservation of rights. The Partnership and the venture
vigorously dispute the allegations made against them in the complaints that
have been filed and discovery has commenced. The ultimate outcome of the
litigation cannot presently be determined. Accordingly, no provision for
any liability that may result has been made in either the financial
statements of the Partnership or the joint venture.
Taxable income or tax loss from operations is allocated 99% to the
Partnership and 1% to the co-venturer. Taxable income or tax loss resulting
from a sale or other disposition of the apartment complex is allocated
between the Partnership and the co-venturer generally as proceeds are
distributed. Allocations of the joint venture operations between the
partners for financial accounting purposes have been made in conformity with
the allocations of taxable income or tax loss.
The joint venture entered into a property management agreement with an
affiliate of the co-venturer, cancellable at the Partnership's option upon
the occurrence of certain events. The management fee was equal to 5% of
gross receipts, as defined in the agreement. The venture paid $300,000 to
the property manager in fiscal 1993 in connection with the termination of
the agreement.
6. Mortgage Note Payable
Mortgage note payable at March 31, 1994 and 1993 consists of the following
debt of Nob Hill Partners, the Partnership's consolidated joint venture.
1994 1993
Mortgage note payable secured by the Nob
Hill operating property. The loan bears
interest at 7.375% with monthly principal
and interest payments of $48,583 through
November 1, 2023. $ 7,028,848 $ -
Mortgage note payable secured by the Nob
Hill operating property. The loan bore
interest at 9% (see discussion below):
Principal balance - 5,727,607
Unamortized debt forgiveness - 33,735
$7,028,848 $ 5,761,342
The principal balance of the mortgage note at March 31, 1993 included the
unpaid principal balance of a certain promissory note (Prior Lien Note)
dated September 1, 1976. The principal balance of the Prior Lien Note
included the unpaid principal balances of (i) a promissory note dated
October 30, 1972, and (ii) a promissory note dated November 27, 1974. On
December 1, 1986, the terms of this mortgage note payable were modified.
The modification agreement required the joint venture to make a principal
payment in the amount of $2,000,000 and required the noteholder to reduce
the principal amount of the note by an additional $1,250,000. The
modification agreement also reduced the interest rate on the note from 9-
7/8% to 9% and changed the repayment terms. The new repayment terms
required the joint venture to pay to the note holder the greater of (a) net
cash flow or (b) the amount of the next installment of principal and
interest due under the Prior Lien Note, or, if the Prior Lien Note is paid,
then the next installments of principal and interest due under the
promissory notes dated October 30, 1972, and November 27, 1974. The joint
venture was required to make a principal payment of $1,168,136 on October 1,
1992, which represented the balloon payment due on the October 30, 1972
promissory note (see discussion below). In accordance with Statement of
Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors
for Troubled Debt Restructurings", the above modification, as it related to
the $1,250,000 principal reduction, was accounted for prospectively at the
effective interest rate of 4.6%. Effective November 1, 1992, the terms of
the mortgage note payable were again modified, and the balloon payment due
October 1, 1992 was deferred. The interest rate was modified to be the
lesser of (i) the maximum rate permitted by applicable law or (ii) the
stated rate per the 1986 modification agreement. The new repayment terms
required the joint venture to remit monthly payments of $55,000 through
March 1993 and a balloon payment equal to the outstanding unpaid principal
balance and unpaid accrued interest on April 1, 1993. At that time, the
Partnership made a $317,000 payment and extended the loan to September 30,
1993.
In addition to the above-noted interest on the original note, according
to the terms of the modified mortgage note payable, contingent interest was
due beginning in 1987 on the excess of gross revenue from Phase I of the
operating investment property over $366,240, at an annual rate of 15%.
Contingent interest totalled $36,302, $37,043 and $29,664 for the years
ended December 31, 1993, 1992 and 1991, respectively.
On September 20, 1993 the Nob Hill joint venture paid off the remaining
principal balance on its long-term debt due to a third party of $5,310,912.
The debt was refinanced through a nonrecourse mortgage note payable to a
third party and insured by the U.S. Department of Housing and Urban
Development (HUD). The new mortgage note, in the original principal amount
of $7,034,200 is secured by the Nob Hill operating property and bears
interest on the unpaid balance at a rate of 7.375% per annum. The excess
proceeds from the refinancing were used to pay financing costs, which
totalled $547,111, and to fund certain required escrow reserves. The
principal and interest of the note are to be paid in monthly installments of
$48,583 commencing December 1, 1993, until November 1, 2023. In addition,
the property submits monthly escrow deposits of $28,534 for taxes, insurance
and a replacement reserve required under the terms of the HUD regulatory
agreement.
7. Subsequent Event
On June 1, 1994, the Partnership made a special distribution of
$4,612,652 to the Limited Partners. This was a distribution of the
Partnership's portion of the proceeds (prior to the reserves for ongoing
operating costs) received from the sale of land by the Parkwood Montclair
Partners joint venture on April 15, 1994 (see Note 5).
.
<TABLE>
Schedule XI - Real Estate and Accumulated Depreciation
PAINE WEBBER GROWTH PROPERTIES LP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 1994
Life
Cost on Which
Capitalized Depreciation
Initial Cost to (Removed) in Latest
Partnership Subsequent to Gross Amount at Which Income
Venture Acquisition Carried at End of Year Statement
Buildings & Buildings & Buildings & Accumulated Date of Date is
Description Encumbrances Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired Computed
<CAPTION> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S>
Apartment
Complex
San Antonio,
TX $ 7,028,848 $ 2,028,580 $11,518,149 $1,182,246 $2,028,580 $12,700,395 $14,728,975 $4,983,656 1972 -
1974 3/31/83 5-30 yrs
Notes:
(A) The aggregate cost of real estate owned at December 31, 1993 for Federal income tax purposes is approximately $13,489,000.
(B) See Note 6 of Notes to Financial Statements.
(C) Reconciliation of real estate owned:
1994 1993
Balance at beginning of year $14,544,954 $14,445,476
Acquisitions and improvements 174,021 109,478
Balance at end of year $14,728,975 $14,554,954
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 4,487,233 $ 4,001,813
Depreciation expense 496,423 485,420
Balance at end of year $ 4,983,656 $ 4,487,233
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Paine Webber Growth Properties LP:
We have audited the accompanying combined balance sheets of the 1993 and
1992 Combined Joint Ventures of PaineWebber Growth Properties LP as of December
31, 1993 and 1992, and the related combined statements of operations and changes
in partners' capital and cash flows for the years then ended. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Combined Joint
Ventures of PaineWebber Growth Properties LP at December 31, 1993 and 1992, and
the combined results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
As more fully described in Note 2 to the financial statements, Parkwood
Montclair Partners and its partners are defendants in numerous lawsuits alleging
various damages as a result of the fire which destroyed the venture's investment
property. The joint venture and its partners vigorously dispute the allegations
and discovery has commenced. The ultimate outcome of the litigation cannot
presently be determined. Accordingly, no provision for any liability that may
result has been made in the combined financial statements.
/S/ ERNST & YOUNG
ERNST & YOUNG
Boston, Massachusetts
February 10, 1994
except for Note 6, as to which the date is April 15, 1994
1993 AND 1992 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED BALANCE SHEETS
December 31, 1993 and 1992
Assets
1993 1992
Current assets:
Cash and cash equivalents $ 1,920,184 $ 2,309,503
Accounts receivable - 2,237
Prepaid expenses 125,785 132,202
Total current assets 2,045,969 2,443,942
Operating investment properties:
Land 9,546,993 9,546,993
Buildings, improvements and equipment 27,343,185 27,147,500
Construction in progress 1,691,233 894,363
38,581,411 37,588,856
Less: Accumulated depreciation (11,065,998) (9,998,366)
Allowance to reduce operating property to
net realizable value (1,592,712) -
25,922,701 27,590,490
Reserves for repairs and capital improvements 536,028 20,635
Deferred expenses, net of accumulated amortization
of $224,953 in 1993 ($193,880 in 1992) 466,021 196,235
$28,970,719 $30,251,302
Liabilities and Venturers' Capital
Current liabilities:
Accounts payable and other liabilities $ 572,209 $ 352,258
Accrued real estate taxes 238,543 310,380
Accrued interest 272,093 153,949
Accrued management fee 17,868 21,232
Tenant security deposits 199,571 181,739
Current portion of long-term debt 215,591 3,841,713
Notes payable to venturers 460,447 222,169
Total current liabilities 1,976,322 5,083,440
Reimbursements payable to venturer 2,456,260 2,072,116
Deferred fees payable to affiliates 20,000 20,000
Long-term debt 20,266,389 16,097,873
Venturers' capital 4,251,748 6,977,873
$28,970,719 $30,251,302
See accompanying notes.
1993 AND 1992 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL
For the years ended December 31, 1993 and 1992
1993 1992
REVENUES:
Rental income $ 5,509,024 $ 5,153,736
Rental interruption insurance proceeds - 1,109,686
Interest and other income 305,946 481,284
Gains on settlement of insurance claims 250,000 11,802,387
6,064,970 18,547,093
EXPENSES:
Interest expense 1,990,567 2,932,022
Write down of investment property to net
realizable value 1,592,712 -
Depreciation and amortization 1,098,705 1,105,425
Salaries 599,451 586,628
Maintenance 750,921 701,003
Property operating expenses 473,132 449,075
Real estate taxes 409,113 379,144
General and administrative 210,828 209,453
Management fees 289,059 339,700
Reimbursements to partner 454,144 413,727
Professional fees 399,835 119,189
Tenant compensation expense 250,000 -
Other 71,715 55,499
8,590,182 7,290,865
Net income (loss) (2,525,212) 11,256,228
Recharacterization of prior year capital contribution
to operating loan payable to venturer - (175,000)
Distributions to venturers (200,913) (5,185,596)
Venturers' capital, beginning of year 6,977,873 1,082,241
Venturers' capital, end of year $ 4,251,748 $ 6,977,873
See accompanying notes.
1993 AND 1992 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993 and 1992
Increase (Decrease) in Cash and Cash Equivalents
1993 1992
Cash flows from operating activities:
Net income (loss) $ (2,525,212) $11,256,228
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Gains on settlement of insurance claims (250,000) (11,802,387)
Depreciation and amortization 1,098,705 1,105,425
Write down of investment property
to net realizable value 1,592,712 -
Changes in assets and liabilities:
Accounts receivable 2,237 96,296
Prepaid expenses 6,417 21,969
Other assets - 10,499
Accounts payable and other liabilities 219,951 (123,673)
Accrued interest 118,144 29,139
Accrued real estate taxes (71,837) (90,857)
Accrued management fees (3,364) 5,638
Tenant security deposits 17,832 21,681
Reimbursements payable to partner 384,144 242,472
Total adjustments 3,114,941 (10,483,798)
Net cash provided by operating activities 589,729 772,430
Cash flows from investment activities:
Additions to operating investment properties (992,555) (825,467)
Decrease (increase) in reserve for
capital expenditures (14,348) 19,302
Expenditures related to fire - (1,443,778)
Net cash used for investing activities (1,006,903) (2,249,943)
Cash flows from financing activities:
Proceeds from issuance of long-term debt
net of $300,859 debt issuance costs and
$501,045 capital improvement escrow 3,570,996 -
Proceeds from insurance settlements 250,000 27,578,227
Repayment of long-term debt (3,830,506) (19,220,753)
Distributions to venturers (200,913) (5,185,596)
Proceeds from operating loans payable
to venturers 238,278 1,088,881
Repayments of operating loans payable
to venturers - (1,353,881)
Net cash provided by financing activities 27,855 2,906,878
Net increase (decrease) in cash and cash equivalents (389,319) 1,429,365
Cash and cash equivalents, beginning of year 2,309,503 880,138
Cash and cash equivalents, end of year $ 1,920,184 $ 2,309,503
Cash paid during the year for interest $ 1,872,423 $ 2,902,883
See accompanying notes.
1. Summary of significant accounting policies
Organization
The accompanying financial statements of the 1993 and 1992 Combined
Joint Ventures of PaineWebber Growth Properties, LP (1993 and 1992 Combined
Joint Ventures) include the accounts of Rocky Mountain Partners, a Colorado
general partnership; Grouse Run Associates I and II, California general
partnerships; Plano Chisholm Place Associates, a Texas general partnership;
Austin Northcastle Partners, a Texas general partnership; and Parkwood
Montclair Partners, a California general partnership. The financial
statements of the 1993 and 1992 Combined Joint Ventures are presented in
combined form due to the nature of the relationship between each of the co-
ventures and PaineWebber Growth Properties, LP (PWGP) which owns a majority
interest in each of the joint ventures mentioned below.
The dates of PWGP's acquisition of interests in the joint ventures are as
follows:
Date of Acquisition
Joint Venture of Interest
Rocky Mountain Partners February 17, 1983
Grouse Run Associates I and II March 31, 1983
Plano Chisholm Place Associates May 31, 1983
Austin Northcastle Partners September 30, 1983
Parkwood Montclair Partners October 31, 1983
Basis of presentation
Certain of the records of the 1993 and 1992 Combined Joint Ventures are
maintained on the income tax basis of accounting and are adjusted,
principally for depreciation, to conform with generally accepted accounting
principles for financial reporting purposes.
Operating investment properties
The operating investment properties are carried at the lower of cost,
reduced by accumulated depreciation, or net realizable value. The net
realizable value of a property held for long-term investment purposes is
measured by the recoverability of the investment through expected future
cash flows on an undiscounted basis, which may exceed the property's current
market value. The net realizable value of a property held for sale
approximates its market value. The operating investment property owned by
the Parkwood Montclair Partners was destroyed by fire on October 20, 1991.
Subsequent to the fire, the investment property consists of land and
construction in process which include capitalized real estate taxes and
various other costs to ready the property for sale including zoning,
grading, engineering and consulting studies. The land and construction in
progress of Parkwood Montclair Partners was being held for sale as of
December 31, 1993 and was written down to estimated net realizable value at
December 31, 1993. Estimated net realizable value represents management's
estimates, based on management's present plans and intentions, of the sales
price in the ordinary course of business, less costs of completion, holding
and disposal. The operating investment properties owned by the other joint
ventures were considered to be held for long-term investment purposes as of
December 31, 1993 and 1992. Depreciation expense is computed on a straight-
line basis over the estimated useful lives of the buildings, improvements
and equipment, generally, five to thirty years. Professional fees
(including deferred acquisition fees paid to an affiliate of the general
partner, see Note 3), and other costs incurred in connection with the
acquisition of the properties have been capitalized and are included in the
cost of the land and buildings.
Deferred expenses
Deferred expenses consist primarily of organization costs and loan fees
which are being amortized over five years and the terms of the related
loans, respectively.
Income tax matters
The 1993 and 1992 Combined Joint Ventures are comprised of entities
which are not taxable and accordingly, the results of their operations are
included on the tax returns of the various partners. Accordingly no income
tax provision is reflected in the accompanying combined financial
statements.
Cash and cash equivalents
For purposes of the statement of cash flows, the 1993 and 1992 Combined
Joint Ventures consider all highly liquid investments with original maturity
dates of 90 days or less to be cash equivalents.
In accordance with the joint venture agreements, certain cash balances
are restricted for insurance, real estate taxes and tenant security
deposits. However, should cash be required for operating expenditures, the
partners may modify the joint venture agreements. Included in the cash and
cash equivalents balance are the following restricted amounts:
December 31, December 31
1993 1992
Reserve for tenant security deposits $ 199,571 $ 181,739
Reserve for insurance and tax deposits 274,061 336,282
$ 473,632 $ 518,021
In addition, the mortgage loan of one of the joint ventures provides
that, effective July 1991, the venture must maintain a cash balance in the
amount of $100,000 restricted for the payment of future capital
expenditures. To the extent that the venture does not expend a minimum of
$100,000 in annual capital improvements, the loan agreement requires an
increase in the amount to be held in the restricted account. Such
restricted cash amounts aggregate $100,000 at December 31, 1993 and 1992 and
are included in the balance of cash and cash equivalents on the accompanying
balance sheet.
Reclassifications
Certain 1992 amounts have been reclassified to conform to the 1993
presentation.
2. Joint Ventures
See Note 5 to the financial statements of PWGP in this Annual Report for a
more detailed description of the joint venture partnerships. Descriptions
of the ventures' properties are summarized below:
a. Rocky Mountain Partners
The joint venture owns and operates Tantra Lake Apartments, a 301-unit
apartment complex located in Boulder, Colorado
b. Grouse Run Associates I and II
The joint venture owns and operates Grouse Run Apartments - Phases I and
II, a 158-unit apartment complex located in Stockton, California.
c. Plano Chisholm Place Associates
The joint venture owns and operates Chisholm Place Apartments, a 142-unit
apartment complex located in Plano, Texas.
d. Austin Northcastle Partners
The joint venture owns and operates Northcastle Apartments, a 170-unit
apartment complex located in Austin, Texas.
e. Parkwood Montclair Partners
The joint venture owned and operated Parkwoods Apartments, a 433-unit
apartment complex located in Oakland, California. The operating
investment property was entirely destroyed by fire on October 20, 1991.
The net book value of the operating investment property at that date,
excluding land, was $14,108,072. The Joint Venture had in place
sufficient insurance coverage on the investment property as of the date
of the fire. In May 1992, the Joint Venture and the insurance carrier
agreed on the extent of the losses and entered into a cash settlement of
$29,360,989. In September 1993, the Joint Venture and another insurance
carrier entered into a cash settlement of $250,000 related to
supplemental hazard insurance. Management has estimated for financial
statement purposes that the amount of the settlement related to rental
interruption insurance was $1,782,762, of which $673,076 was received
prior to December 31, 1991. The net settlement proceeds were used as
follows: (i) $19,000,000 in full payment of first mortgage loan, (ii)
$1,418,459 ($64,578 of accrued interest) in full payment of operating
loans payable to PWGP, (iii) $171,255 in payment of reimbursements
payable to PWGP, (iv) $4,691,174 distributed to PWGP, and (v) $2,547,339
retained by the Joint Venture.
The excess of the net settlement proceeds (net of rental interruption
proceeds) over the net book value of the property and unamortized loan
fees resulted in gains of $250,000 in 1993 and $11,802,387 in 1992.
Certain costs incurred directly related to the fire including site
cleanup, property management and legal fees aggregating $1,443,778 were
offset in deriving the gain in 1992.
Management has been working diligently to maximize the value of the 25-
acre Parkwood apartment site by securing the necessary approvals and
permits for the reconstruction of mult-family residential buildings on
the site while simultaneously marketing the property for sale. During
1993, the joint venture was successful in obtaining approval for the
construction of a condominium complex on the land. The reconstruction
plans are for a project of similar size and density to that of the former
Parkwood Apartment complex. Management believed these condominium
conversion and site plan approvals would substantially facilitate the
future sale of the land (see Note 6). Subsequent to December 31, 1993,
the joint venture paid approximately $500,000 to secure certain building
permits required in order to proceed with the planned reconstruction. In
connection with obtaining the site plan approvals, the joint venture
entered into a settlement agreement with the former tenants of the
operating investment property related to their rights in the condominium
conversion. Under the terms of this agreement, the venture will pay the
former tenants approximately $250,000 and will offer certain discounts to
former tenants who wish to purchase a condominium unit in the redeveloped
project.
During 1992, Parkwood Montclair Partners and its partners became
defendants in numerous lawsuits alleging damages in excess of $100
million as a result of the Oakland Hills fire which destroyed the
investment property and several thousand homes in the surrounding area in
October 1991. The joint venture's insurers who provided liability
coverage during the relevant period are participating in the venture's
defense subject to a reservation of rights. The joint venture and its
partners vigorously dispute the allegations in the complaints that have
been filed as they relate to the joint venture and discovery has
commenced. The ultimate outcome of the litigation cannot presently be
determined. Accordingly, no provision for any liability that may result
has been made in the financial statements.
The following description of the joint venture agreements provides
certain general information.
Allocations of net income and loss
The joint venture agreements provide that taxable income and tax loss
from operations in each year are generally to be allocated 99% to PWGP and
1% to the co-venturers. During 1991, the terms of the Chisholm Place joint
venture agreement were amended in conjunction with the debt refinancing
described in Note 5. Taxable income and tax loss from operations are now
allocated 80% to PWGP and 20% to the co-venturer. Gains or losses resulting
from sales or other dispositions of the projects shall be allocated as
specified in the joint venture agreements. Allocations of income and loss
for financial reporting purposes have been made in accordance with the
allocations of taxable income or loss.
Distributions
The joint venture agreements provide that distributable net cash flow, as
defined, will generally be allocated first to the payment of the deferred
acquisition and consulting fees payable to affiliates of the general
partners, then to the payment of interest and principal on certain interim
borrowings, if such borrowings have been made, and then any remaining
amounts are to be distributed 99% to PWGP and 1% to the co-venturers. In
accordance with the amendment to the Chisholm Place joint venture agreement
referred to above, beginning in 1991, cash flow of this venture, after the
payment of certain priority distributions, is to be distributed 80% to PWGP
and 20% to the co-venturer.
Distribution of proceeds resulting from the sale or refinancing of the
property shall be made in accordance with formulas provided in the joint
venture agreements.
Additional cash
Additional cash required by the Joint Ventures is generally to be
provided, either in the form of capital contributions or as loans to the
joint ventures, 90% by PWGP and 10% by the co-venturers.
3. Related party transactions
The 1993 and 1992 Combined Joint Ventures originally executed property
management agreements with affiliates of the co-venturers, cancellable at
the joint ventures' option upon the occurrence of certain events. The
management fees are equal to 4 to 5% of gross receipts, as defined in the
agreements. In February of 1990 the management agreement for the
Northcastle Apartments was terminated and an unaffiliated third party was
hired to manage the property. In 1992, Parkwood Montclair Partners paid
$300,000 to the manager in connection with the termination of the existing
management agreement.
The joint venture agreements provide that the co-venturers will reimburse
PWGP for their proportionate share of PWGP's management fees and certain
out-of-pocket expenses incurred by PWGP in connection with the general
management of the joint ventures. Such reimbursements are payable only to
the extent of available cash flow from operations and are cumulative to the
extent not paid. The 1993 and 1992 Combined Joint Ventures owed PWGP
reimbursements totalling $454,144 and $413,727 for the years ended December
31, 1993 and 1992, respectively. Cumulative unpaid reimbursements
aggregated $2,456,260 and $2,072,116 at December 31, 1993 and 1992,
respectively.
Certain of the joint ventures entered into consulting agreements with
affiliates of their partners for the purpose of enhancement of the marketing
and rental value of the property. The joint ventures began paying quarterly
consulting fees commencing in 1983 and 1984, of which the total amount to be
paid was $530,000. Quarterly payments were payable only out of
distributable net cash flow or capital proceeds in accordance with the terms
of the joint venture agreements. Consulting fees of $20,000 remained unpaid
at December 31, 1993 and 1992 due to a lack of distributable net cash flow.
Included in accounts payable at December 31, 1993 and 1992 is $20,551 and
$24,577, payable to the partners of Parkwood Montclair Partners for the
reimbursement of disbursements made on behalf of the joint venture.
Notes payable to venturers at December 31, 1993 consists of $437,278 owed
to PWGP and $23,169 owed to the co-venturer in the Northcastle joint venture
for advances made to the venture. Notes payable to partners at December 31,
1992 consists of $199,000 owed to PWGP and $23,169 owed to the co-venturer
in the Northcastle joint venture for advances made to the venture. The
loans bear interest at 12% per annum and are due on demand subject to the
restrictions of the joint venture agreement.
4. Reserves for repairs and capital improvements
Under the terms of certain joint venture agreements, the joint ventures
are required to maintain a cash reserve for capital expenditures consisting
of an initial amount to be increased for each month of operations of the
operating investment property by the joint ventures by an amount equal to 2%
of the gross rents. Unless otherwise determined by the joint ventures, the
principal amount of funds in the capital reserve shall only be expended for
capital repairs to, or replacement of, portions of the operating properties
as set forth in a budget or approved by the joint ventures. The balance of
reserves for repairs and capital improvements at December 31, 1993 consists
primarily of debt proceeds held by the lender of the mortgage secured by the
Northcastle Apartments to pay for future property improvements to the
apartment complex as required under the terms of a HUD regulatory agreement
(see Note 5). In January 1994, the joint venture which owns and operates
the Northcastle Apartments contracted for $157,000 of roofing improvements.
5. Long-term debt
Long-term debt at December 31, 1993 and 1992 consists of the following:
1993 1992
Nonrecourse mortgage note secured by a
first deed of trust on the Tantra Lake
Apartments. The loan bears interest at
10.5% per annum, monthly payments of
principal and interest of $84,105 will be
made through June 1, 1996 when the
remaining unpaid balance is due. $ 8,703,303 $8,783,097
Nonrecourse mortgage note secured by an all
inclusive trust deed on the Northcastle
operating property. The loan bears
interest at a rate of 7.375% per annum and
is payable in monthly principal and
interest installments of $31,961 through
2018. 4,372,900 -
Promissory note secured by an all-inclusive
trust deed on the Northcastle operating
property which wrapped around an underlying
first deed of approximately $2,000,000.
The loan was nonrecourse, bore interest at
a rate of 10% per annum, interest only to
be payable monthly through maturity on
December 31, 1993 (see discussion below). - 3,710,366
Nonrecourse mortgage note secured by a deed
of trust on the Grouse Run I operating
property and guaranteed by the Federal
Housing Administration. The loan bears
interest at a rate of 7.5% per annum and is
payable in monthly principal and interest
installments of $10,634. The remaining
unpaid balance is due February 1, 2019. 1,440,684 1,459,464
Nonrecourse mortgage note secured by a deed
of trust on the Grouse Run II operating
property and guaranteed by the Federal
Housing Administration. The loan bears
interest at a rate of 7.5% per annum and is
payable in monthly principal and interest
installments of $13,153 with the remaining
unpaid balance due February 1, 2020. 1,805,093 1,826,659
Real estate lien note payable secured by
the Chisholm Place operating property and
an assign-ment of rents. The note is
nonrecourse, bears interest on the unpaid
principal balance at a rate of 10% per
annum and is payable in monthly principal
and interest installments, with the entire
principal balance due on October 1, 2001. 4,160,000 4,160,000
Total long-term debt 20,481,980 19,939,586
Less: current portion (215,591) (3,841,713)
$20,266,389 $16,097,873
On December 1, 1993, the Northcastle joint venture refinanced its
outstanding mortgage note through the issuance of a nonrecourse mortgage note
payable to a third party which is insured by the U.S. Department of Housing
and Urban Development (HUD). The excess proceeds from the refinancing were
used to pay the financing costs, which totalled $300,859, and to fund certain
required escrow reserves.
Maturities of long-term debt for each of the next five years and thereafter
are as follows:
1994 $ 215,591
1995 226,964
1996 8,605,820
1997 133,137
1998 143,367
Thereafter 11,157,101
$20,481,980
6. Subsequent Event
On April 15, 1994, Parkwood Montclair Partners sold the land at the former
site of the Parkwoods Apartments (see Note 2) to an affiliate of the co-venture
partner for $4,750,000. After transaction costs, net proceeds of approximately
$4,699,000 were received by the venture. The sale proceeds, net of the building
permit costs referred to above, approximated the carrying value of the
investment property at the date of the sale. A portion of the proceeds will be
retained by the joint venture to pay for the ongoing costs associated with the
claims described in Note 2. Remaining net proceeds were distributed to the
venture partners in accordance with the terms of the joint venture agreement,
with PWGP receiving approximately $4,139,000 and the co-venturer receiving
approximately $49,000. Due to the outstanding legal claims involving the joint
venture, there are no plans to liquidate the joint venture in the immediate
future.
<TABLE>
Schedule XI - Real Estate and Accumulated Depreciation
COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
Life
Costs on Which
(Removed) Depreciation
Capitalized in Latest
Initial Cost to Subsequent to Gross Amount at Which Income
Partnership Acquisition Carried at End of Year Statement
Buildings & Buildings & Buildings & Accumulated Date of Date is
Description Encumbrances(C) Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired Computed
COMBINED JOINT VENTURES:
<CAPTION> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S>
Apartment
Complex
Plano, TX $4,160,000 $1,743,593 $6,249,650 $ 154,818 $1,743,593 $6,404,468 $8,148,061 $2,376,667 1982 5/31/83 5-30 yrs
Apartment
Complex
Stockton,
CA 3,245,777 545,392 4,914,414 457,338 545,392 5,371,752 5,917,144 2,215,448 1980 3/31/83 5-30 yrs
Apartment
Complex
Boulder,
CO 8,703,303 2,035,845 8,746,515 1,699,709 2,035,845 10,446,224 12,482,069 4,477,393 1974 2/17/83 5-30 yrs
Apartment
Complex
Oakland,
CA (A) - 4,101,479 17,231,066(15,539,833)4,101,479 1,691,233 5,792,712 - (A) 10/31/83 (A)
Apartment
Complex
Austin,
TX 4,372,900 1,120,684 4,474,186 646,555 1,120,684 5,120,741 6,241,425 1,996,490 1971 9/30/83 5-30 yrs
$20,481,980 $9,546,993$41,615,831$(12,581,413)$9,546,993$29,034,418$38,581,411 $11,065,998
Notes:
(A) See Note 2 of Notes to Financial Statements for further information regarding the Parkwoods Apartments, which was completely
destroyed by fire on October 20, 1991. As described in Note 6, the land on which the Parkwood Apartments were located was
sold on April 15, 1994.
(B) The aggregate cost of real estate owned at December 31, 1993 for Federal income tax purposes is approximately $36,624,000.
(C) See Note 5 of Notes to Financial Statements.
(D) Reconciliation of real estate owned:
December 31, December 31,
1993 1992
Balance at beginning of year $37,588,856 $36,763,389
Acquisitions and improvements 992,555 825,467
Balance at end of year $ 38,581,411 $37,588,856
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 9,998,366 $ 8,948,576
Depreciation expense 1,067,632 1,049,790
Balance at end of year $11,065,998 $ 9,998,366
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Paine Webber Growth Properties LP:
We have audited the accompanying combined balance sheets of the 1991
Combined Joint Ventures of PaineWebber Growth Properties LP as of December 31,
1991 and 1990, and the related combined statements of operations and changes in
venturers' capital and cash flows for the years then ended. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the 1991 Combined
Joint Ventures of Paine Webber Growth Properties LP at December 31, 1991 and
1990 and the combined results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole presents fairly
in all material respects the information set forth therein.
/S/ ERNST & YOUNG
ERNST & YOUNG
Boston, Massachusetts
February 12, 1992, except for
the second paragraph of
Note 2f, as to which the date
is June 24, 1992
1991 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED BALANCE SHEETS
December 31, 1991 and 1990
Assets
1991 1990
CURRENT ASSETS:
Cash and cash equivalents $ 892,543 $ 1,534,100
Escrow deposits 34,530 14,878
Accounts receivable 100,224 2,392
Prepaid expenses 154,171 153,130
Other current assets 21,823 13,097
Total current assets 1,203,291 1,717,597
Operating investment properties:
Land 11,575,573 11,575,573
Buildings, improvements and equipment 39,358,518 58,563,684
50,934,091 70,139,257
Less accumulated depreciation (12,950,389) (16,868,426)
37,983,702 53,270,831
Insurance recoverable 14,108,072 -
Other assets 274,774 -
Reserve for capital expenditures 39,937 63,595
Deferred expenses, net of accumulated amortization
of $231,898 and $486,124 in 1991 and 1990,
respectively 486,359 427,131
$ 54,096,135 $ 55,479,154
Liabilities and Venturers' Capital
CURRENT LIABILITIES:
Accounts payable and other liabilities $ 520,628 $ 504,463
Accrued real estate taxes 396,539 270,258
Accrued interest 193,551 130,163
Accrued management fee 11,194 32,096
Tenant security deposits 199,205 339,264
Current portion of long-term debt 1,328,615 84,953
Notes payable to venturers 383,419 222,169
Total current liabilities 3,033,151 1,583,366
Reimbursements payable to venturer 1,829,644 1,592,324
Deferred fees payable to affiliates 77,000 223,250
Deferred interest payable 54,454 1,128,536
Long-term debt 43,845,464 48,168,440
Venturers' capital 5,256,422 2,783,238
$ 54,096,135 $ 55,479,154
See accompanying notes.
1991 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL
For the years ended December 31, 1991 and 1990
1991 1990
REVENUES:
Rental income $ 9,688,115 $ 9,820,671
Interest income 58,397 75,928
Other income 969,529 398,746
10,716,041 10,295,345
EXPENSES:
Interest expense 4,116,613 4,452,068
Depreciation and amortization 2,366,250 2,409,916
Salaries 1,246,207 1,126,524
Maintenance 1,049,366 936,969
Property operating expenses 791,111 894,363
Real estate taxes 731,388 762,523
General and administrative 607,804 552,927
Management fees 505,505 494,314
Reimbursements to partner 411,614 418,267
Professional fees 162,772 326,477
Other 246,629 303,015
12,235,259 12,677,363
Loss before extraordinary gain (1,519,218) (2,382,018)
Extraordinary gain on extinguishment of debt 3,616,475 -
Net income (loss) 2,097,257 (2,382,018)
Contributions from venturers 1,230,652 146,467
Distributions to venturers (854,725) (3,879,635)
Venturers' capital, beginning of year 2,783,238 8,898,424
Venturers' capital, end of year $5,256,422 $ 2,783,238
See accompanying notes.
1991 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1991 and 1990
Increase (Decrease) in Cash and Cash Equivalents
1991 1990
Cash flows from operating activities:
Net income (loss) $ 2,097,257 $(2,382,018)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Extraordinary gain on extinguishment of debt (3,616,475) -
Depreciation and amortization 2,366,250 2,409,916
Amortization of debt forgiveness (233,183) (222,928)
Changes in assets and liabilities:
Escrow deposits (19,652) 67,682
Accounts receivable (97,832) 14,976
Prepaid expenses (1,041) (10,196)
Other current assets (8,726) (9,766)
Other assets (274,774) -
Deferred expenses 650 (12,650)
Accounts payable and other liabilities 16,165 281,156
Accrued real estate taxes 126,281 63,192
Accrued interest 63,388 95,034
Accrued management fees (20,902) 1,834
Tenant security deposits (140,059) 34,529
Reimbursements payable to venturer 237,320 250,737
Deferred interest payable (171,385) 467,403
Total adjustments (1,773,975) 3,430,919
Net cash provided by operating activities 323,282 1,048,901
Cash flows from investment activities:
Additions to operating investment properties (1,099,075) (1,385,442)
Payments of deferred acquisition fees (146,250) -
Decrease in reserve for capital expenditures 23,658 19,400
Net cash used for investing activities (1,221,667) (1,366,042)
Cash flows from financing activities:
Repayment of long-term debt (4,269,697)(13,306,175)
Proceeds from the issuance of long-term debt 4,160,000 19,000,000
Capital contributions 1,230,652 146,467
Distributions to venturers (854,725) (3,879,635)
Financing fees (170,652) (317,643)
Borrowings from venturers 161,250 -
Net cash provided by financing activities 256,828 1,643,014
Net increase (decrease) in cash and cash equivalents (641,557) 1,325,873
Cash and cash equivalents, beginning of year 1,534,100 208,227
Cash and cash equivalents, end of year $ 892,543 $ 1,534,100
Cash paid during the year for interest $ 4,487,461 $ 4,220,965
See accompanying notes.
1. Summary of significant accounting policies
Organization
The accompanying financial statements of the 1991 Combined Joint
Ventures of PaineWebber Growth Properties, LP (1991 Combined Joint Ventures)
include the accounts of Rocky Mountain Partners, a Colorado general
partnership; Grouse Run Associates I and II, a California general
partnership; Nob Hill Partners, a Texas general partnership; Plano Chisholm
Place Associates, a Texas general partnership; Austin Northcastle Partners,
a Texas general partnership; and Parkwood Montclair Partners, a California
general partnership. The financial statements of the 1991 Combined Joint
Ventures are presented in combined form due to the nature of the
relationship between each of the co-ventures and PaineWebber Growth
Properties, LP (PWGP) which owns a majority interest in each of the joint
ventures mentioned below.
The dates of PWGP's acquisition of interests in the joint ventures are as
follows:
Date of Acquisition
Joint Venture of Interest
Rocky Mountain Partners February 17, 1983
Grouse Run Associates I and II March 31, 1983
Nob Hill Partners March 31, 1983
Plano Chisholm Place Associates May 31, 1983
Austin Northcastle Partners September 30, 1983
Parkwood Montclair Partners October 31, 1983
Basis of presentation
Certain of the records of the 1991 Combined Joint Ventures are
maintained on the income tax basis of accounting and are adjusted,
principally for depreciation, to conform with generally accepted accounting
principles for financial reporting purposes.
Operating investment properties
The operating investment properties are recorded at cost less
accumulated depreciation. Depreciation expense is computed on a straight-
line basis over the estimated useful lives of the buildings, improvements
and equipment, generally, five to thirty years. Professional fees
(including deferred acquisition fees paid to an affiliate of the general
partner, see Note 3), and other costs incurred in connection with the
acquisition of the properties have been capitalized and are included in the
cost of the land and buildings.
The operating investment property owned by Parkwood Montclair Partners
was completely destroyed by fire on October 20, 1991 (see Note 2). The
joint venture incurred costs to remove debris and perform engineering and
consulting studies in order to prepare the land for future development.
These costs, totalling $274,774, have been capitalized as other assets on
the accompanying balance sheet at December 31, 1991, pending management's
decision on whether to rebuild the operating property, which had not been
made as of year-end.
Deferred expenses
Deferred expenses consist primarily of organization costs and loan fees
which are being amortized over five years and the terms of the related
loans, respectively.
Income tax matters
The 1991 Combined Joint Ventures are comprised of entities which are not
taxable and accordingly, the results of their operations are included on the
tax returns of the various partners. Accordingly no income tax provision is
reflected in the accompanying combined financial statements.
Cash and cash equivalents
For purposes of the statement of cash flows, the 1991 Combined Joint
Ventures consider all highly liquid investments with original maturity dates
of 90 days or less to be cash equivalents.
In accordance with the joint venture agreements, certain cash balances
are restricted for insurance, real estate taxes and tenant security
deposits. However, should cash be required for operating expenditures, the
partners generally may so modify the joint venture agreements. Included in
the cash and cash equivalents balance are the following restricted amounts:
December 31, December 31,
1991 1990
Reserve for tenant security deposits $ 199,205 $ 313,116
Reserve for insurance and tax deposits 210,401 86,023
$ 409,606 $ 399,139
In addition, the mortgage loan of one of the joint ventures provides
that, effective July 1991, the venture must maintain a cash balance in the
amount of $100,000 restricted for the payment of future capital
expenditures. To the extent that the venture does not expend a minimum of
$100,000 in annual capital improvements, the loan agreement requires an
increase in the amount to be held in the restricted account. Such
restricted cash amounts aggregate $100,000 at December 31, 1991 and are
included in the balance of cash and cash equivalents on the accompanying
balance sheet.
2. Joint Ventures
See Notes 4 and 5 to the financial statements of PWGP in this Annual Report
for a more detailed description of the joint venture partnerships.
Descriptions of the ventures' properties are summarized below:
a. Rocky Mountain Partners
The joint venture owns and operates Tantra Lake Apartments, a 301-unit
apartment complex located in Boulder, Colorado
b. Grouse Run Associates I and II
The joint venture owns and operates Grouse Run Apartments - Phases I and
II, a 158-unit apartment complex located in Stockton, California.
c. Nob Hill Partners
The joint venture owns and operates Nob Hill Apartments, a 368-unit
apartment complex located in San Antonio, Texas.
d. Plano Chisholm Place Associates
The joint venture owns and operates Chisholm Place Apartments, a 142-unit
apartment complex located in Plano, Texas.
e. Austin Northcastle Partners
The joint venture owns and operates Northcastle Apartments, a 170-unit
apartment complex located in Austin, Texas.
f. Parkwood Montclair Partners
The joint venture owned and operated Parkwoods Apartments, a 433-unit
apartment complex located in Oakland, California.
The operating investment property was completely destroyed by a fire on
October 20, 1991. The net book value of the property at that date,
excluding land, was $14,108,072. The Joint Venture was fully covered by
property, liability and rental interruption insurance for the losses as a
result of this catastrophe. Subsequent to year-end, in May of 1992, the
joint venture reached a settlement agreement with the property insurer.
The settlement calls for the insurance carrier to pay the venture an
amount of approximately $29,361,000 to cover the loss of the operating
property. As of May 28, 1992, cash of approximately $29,361,000 has been
funded by the insurance carrier in accordance with the settlement terms,
in full satisfaction of the venture's claim. Of this amount, $28 million
was placed in an escrow account in the name of the venture and the
mortgage lender on the property pending management's decision on whether
to rebuild the operating property or pay off the outstanding $19 million
mortgage loan and distribute the net proceeds to the venture partners.
In addition to the $28 million, the Joint Venture accepted $1,360,898 as
part of its rental interruption claim. As of December 31, 1991, the
joint venture had received from the insurance carrier amounts totalling
$576,780 for lost rents relating to the period from October 20, 1991 to
December 31, 1991; this amount has been included in other revenues on the
accompanying 1991 statement of operations. Subsequent to December 31,
1991, the joint venture received additional amounts, of which $96,296
relates to 1991 and is included in receivables at December 31, 1991. The
joint venture still has outstanding claims against one of its insurance
carriers, but does not expect to receive any significant additional
insurance proceeds.
The joint venture is subject to certain claims filed by former tenants of
the Parkwoods Apartments arising as a result of the fire. While
management believes it has valid defenses against all of these claims, it
will be up to the liability insurance carrier to decide whether to
vigorously defend against such actions or seek monetary settlements with
the former tenants. Management is confident that the venture's liability
insurance coverage is adequate to cover any potential losses resulting
from such claims.
In June of 1992, the venture partners agreed not to rebuild and to
distribute the net insurance proceeds, after the payment of the
outstanding mortgage loan obligation and certain other liabilities.
Furthermore, management is currently evaluating the available
alternatives with regard to the remaining land at the former site of the
Parkwoods Apartments and may initiate efforts to sell the land and
liquidate the joint venture. Management believes it would be able to
recover the full carrying value of the land plus any additional
capitalized costs from the proceeds of a sale transaction. The net book
value of the operating investment property has been reclassified as an
insurance recoverable asset at December 31, 1991. Based on management's
decision to distribute the net insurance proceeds, the joint venture will
recognize a gain in 1992 in the amount of the excess of the insurance
proceeds over the sum of the net book value of the operating investment
property and certain costs capitalized subsequent to the fire.
The following description of the joint venture agreements provides
certain general information.
Allocations of net income and loss
The joint venture agreements provide that taxable income and tax loss
from operations in each year are generally to be allocated 99% to PWGP and
1% to the co-venturers. During 1991, the terms of the Chisholm Place joint
venture agreement were amended in conjunction with the debt refinancing
described in Note 5. Taxable income and tax loss from operations are now
allocated 80% to the PWGP and 20% to the co-venturer. Gains or losses
resulting from sales or other dispositions of the projects shall be
allocated as specified in the joint venture agreements. Allocations of
income and loss for financial reporting purposes have been made in
accordance with the allocations of taxable income or loss.
Distributions
The joint venture agreements provide that distributable net cash flow, as
defined, will generally be allocated first to the payment of the deferred
acquisition and consulting fees payable to affiliates of the general
partners, then to the payment of interest and principal on certain interim
borrowings, if such borrowings have been made, and then any remaining
amounts are to be distributed 99% to PWGP and 1% to the co-venturers. In
accordance with the amendment to the Chisholm Place joint venture agreement
referred to above, beginning in 1991, cash flow of this venture, after the
payment of certain priority distributions, is to be distributed 80% to PWGP
and 20% to the co-venturer.
Distribution of proceeds resulting from the sale or refinancing of the
property shall be made in accordance with formulas provided in the joint
venture agreements.
Additional cash
Additional cash required by the Joint Ventures is generally to be
provided, either in the form of capital contributions or as loans to the
joint ventures, 90% by PWGP and 10% by the co-venturers.
Other
The Northcastle Apartments property has suffered recurring losses from
operations which, to date, have been funded by the venture partners. The
ability of the joint venture to continue its operations is contingent upon
its achieving profitable operations and/or the continued financial support
of the partners. Management of PWGP currently plans to fund the venture's
operations, to the extent necessary, for at least the next year.
In addition, as discussed in Note 5, the debt secured by the Nob Hill
Apartments requires a balloon payment of approximately $1,168,000 during
1992. The venture does not currently have any source of funds other than
additional partner capital contributions to finance operations or retire
principal on the outstanding debt obligations. However, the venture is
attempting to refinance the long-term debt with another lending source. In
the event that a refinancing transaction cannot be completed by the due date
of the balloon payment, management of PWGP is prepared to use PWGP's cash
resources to prevent a default under the venture's loan agreement.
3. Related party transactions
The 1991 Combined Joint Ventures originally entered into property
management agreements with affiliates of the co-venturers, cancellable at
the joint ventures' option upon the occurrence of certain events. The
management fees are equal to 4 to 5% of gross receipts, as defined in the
agreements. In February of 1990 the management agreement for the
Northcastle Apartments was terminated and an unaffiliated third party was
hired to manage the property.
The joint venture agreements provide that the co-venturers will reimburse
PWGP for their proportionate share of PWGP's management fees and certain
out-of-pocket expenses incurred by PWGP in connection with the general
management of the joint ventures. Such reimbursements are payable only to
the extent of available cash flow from operations and are cumulative to the
extent not paid. The Combined Joint Ventures owed PWGP reimbursements
totalling $411,614 and $418,267 for the years ended December 31, 1991 and
1990, respectively. Cumulative unpaid reimbursements aggregated $1,829,644
and $1,592,324 at December 31, 1991 and 1990, respectively.
PWGP and the co-venturers have earned acquisition fees of $2,247,500 and
$936,000, respectively, in connection with the investments in the joint
ventures and the acquisitions of the investment properties. Of PWGP's fees,
$583,500 was deferred and was payable to the extent of net cash flow, as
defined, in quarterly installments. The remaining deferred acquisition
fees, aggregating $146,250, was paid in full during 1991.
Certain of the joint ventures entered into consulting agreements with
affiliates of their partners for the purpose of enhancement of the marketing
and rental value of the property. The joint ventures began paying quarterly
consulting fees commencing in 1983 and 1984, of which the total amount to be
paid was $587,000. Quarterly payments were payable only out of
distributable net cash flow or capital proceeds in accordance with the terms
of the joint venture agreements. Consulting fees of $77,000 remained unpaid
at December 31, 1991 and 1990 due to a lack of distributable net cash flow.
Included in accounts payable at December 31, 1991 and 1990 is $46,095 and
$231,170, respectively, payable to the partners of Parkwood Montclair
Partners for the reimbursement of disbursements made on behalf of the joint
venture.
Notes payable to venturers at December 31, 1991 and 1990 includes
$199,000 owed to PWGP and $23,169 owed to the co-venturer in the Northcastle
joint venture for advances made to the venture during 1989. In addition,
notes payable to venturers at December 31, 1991 also includes a $71,250
operating loan owed to PWGP in connection with advances to the Nob Hill
Partners joint venture and a $90,000 operating loan owed to PWGP in
connection with advances to the Parkwood Montclair Partners joint venture.
The loans generally bear interest at 12% per annum and are due on demand
subject to the restrictions of the joint venture agreement.
4. Reserve for capital expenditures
Under the terms of certain joint venture agreements, the joint ventures
are required to maintain a cash reserve for capital expenditures consisting
of an initial amount to be increased for each month of operations of the
operating investment property by the joint ventures by an amount equal to 2%
of the gross rents. Unless otherwise determined by the joint ventures, the
principal amount of funds in the capital reserve shall only be expended for
capital repairs to, or replacement of, portions of the operating properties
as set forth in a budget or approved by the joint ventures. The capital
reserves at December 31, 1991 and 1990 of $39,937 and $63,595, respectively,
as calculated under the terms of the joint venture agreements, are
maintained in escrow accounts with financial institutions.
5. Long-term debt
Long-term debt at December 31, 1991 and 1990 consists of the following:
1991 1990
Promissory note secured by an
all-inclusive trust deed on the
Northcastle operating property
which wraps around an underlying
first deed of approximately
$2,000,000. The loan was
modified in 1989. The loan
bears interest at 10% per annum,
interest only to be payable
monthly through maturity of
December 31, 1993. See
discussion below regarding debt
modification. $ 3,811,711 $ 3,754,918
Mortgage note secured by a first
deed of trust on the Tantra Lake
Apartments. The loan bears
interest at 9-3/4% per annum,
interest only to be payable
monthly through June 1991 and
thereafter, monthly payments of
principal and interest of
$84,105 will be made through
June 1, 1996 when the remaining
unpaid balance is due. 8,865,055 8,900,000
Mortgage note secured by a deed
of trust on the Grouse Run I
operating property and
guaranteed by the Federal
Housing Administration. The
loan bears interest at a rate of
7.5% per annum and is payable in
monthly principal and interest
installments of $10,634. The
remaining unpaid balance is due
February 1, 2019. 1,476,902 1,493,082
Mortgage note secured by a deed
of trust on the Grouse Run II
operating property and
guaranteed by the Federal
Housing Administration. The
loan bears interest at a rate of
7.5% per annum and is payable in
monthly principal and interest
installments of $13,153 with the
remaining unpaid balance is
due February 1, 2020. 1,846,671 1,865,242
Mortgage loan secured by a
first deed of trust on the
Parkwood Apartment property.
The loan bears interest at a
rate of 10.25% per annum and is
payable in monthly principal
and interest installments of
$162,292 from August 1990
through to July 1992 and
$170,367 thereafter until July
1, 1997, when the remaining
unpaid balance becomes due.
See
discussion below regarding debt
refinancing and retirement. 19,000,000 19,000,000
Real estate lien note payable
secured by the Chisholm Place
operating property and
assignment of rents. The note
bears interest on the unpaid
principal balance at a rate of
10% per annum and is payable in
monthly principal and interest
installments, with the entire
principal balance due on
October 1, 2001. See discussing
below regarding debt retirement
and refinancing 4,160,000 -
First real estate lien note
payable to a bank and secured by
the Chisholm Place operating
property and assignment of
rents. The loan bears interest
at the greater of 7-1/2% or the
prime rate. See discussion below
regarding
1991 refinancing. - 4,314,074
Second real estate lien note
payable to a bank and secured by
the Chisholm Place operating
property and assignment of
rents. The loan bears interest
at the greater of 7-1/2% or the
prime rate. See discussion
below regarding
1991 refinancing. - 2,679,154
Mortgage note payable secured by
the Nob Hill operating property.
The loan bears interest at
9%. See discussion below
regarding debt
modification.
Principal balance 5,783,789 5,783,789
Unamortized debt forgiveness 229,951 463,134
6,013,740 6,246,923
Total long-term debt 45,174,079 48,253,393
Less: current portion (1,328,615) (84,953)
$43,845,464 $48,168,440
On September 9, 1991, Plano Chisholm Place Associates refinanced its
mortgage loan obligations. The lender released the joint venture from its
obligations under the First and Second notes in return for a payment of
$4,200,001. The resulting balance of $2,793,228 and accrued interest
forgiven of $975,408, net of deferred loan fees written off of $22,657 and a
deferred interest asset of $129,504 (which related to the accrual of imputed
interest under a prior modification agreement) was recorded as an
extraordinary gain on extinguishment of debt. The $4,200,001 payment was
funded in part by a $4,160,000 real estate lien note payable issued by a new
lender. The new loan has certain prepayment penalties and is collateralized
by the Chisholm Place Apartments and an assignment of rents.
On June 28, 1990, Parkwood Montclair Partners refinanced its mortgage
debt. The joint venture obtained a $19 million mortgage note payable,
bearing interest at 10.25% per annum, with interest only payments of $162,292
due monthly for the first two years and monthly payments of principal and
interest of $170,367 due for the next five years, until maturity in July of
1997, at which time a balloon payment of $18,370,547 will be due. Proceeds
from the refinancing, after payment of transaction costs, were used to repay
the existing debt of the venture of approximately $13.5 million (including
accrued interest and a prepayment penalty aggregating approximately $380,000)
and to fund an escrow account of approximately $1.5 million, which had been
reserved for certain planned capital improvements to the Parkwoods operating
property, prior to the fire described in Note 2. The remaining net proceeds
of approximately $3.7 million were distributed to PWGP, in accordance with
the joint venture agreement.
On December 1, 1989, the Austin Northcastle Partners joint venture
modified the promissory note secured by the operating property. The
modification increased the principal balance by $27,417 of accrued but unpaid
interest at September 1, 1989, extended the maturity date from September 30,
1990 to December 31, 1993, postponed principal payments until maturity, and
reduced the required monthly interest payments to the bank. The note now
requires monthly interest payments of $21,265 in 1990, $24,304 in 1991,
$27,341 in 1992 and $30,380 in 1993, as well as quarterly payments of
interest equal to net income less the monthly interest and payments for
qualified expenditures (as defined in the note). If the quarterly payment is
not large enough to pay the remaining interest for that specific quarter, the
unpaid interest is added to the principal balance of the note. If the
quarterly payments are larger than the remaining interest for that specific
quarter, the excess is to be applied to interest previously added to the
principal balance of the note. The quarterly payments are not to exceed the
total of: (1) all accrued unpaid interest, and (2) all interest that was
previously added to the principal balance of the note. During 1991, such
quarterly payments totalling $33,060 were made. The remaining unpaid
interest at the end of each quarter during 1991, which totalled $52,747, was
added to the principal balance of the note. During 1990, no quarterly
payments were made and the unpaid interest at the end of each quarter, which
totalled $113,413, was added to the principal of the note.
On December 1, 1986, the terms of the Nob Hill Joint Venture mortgage note
payable were modified. The modification agreement required the Partnership
to make a principal payment in the amount of $2,000,000 and required the
noteholder to reduce the principal amount of the note by an additional
$1,250,000. The modification agreement also reduced the interest rate on the
note from 9-7/8% to 9% and changed the repayment terms. The new repayment
terms require the Partnership to pay to the note holder the greater of (a)
net cash flow or (b) the amount of the next installment of principal and
interest due under the Prior Lien Note, or, if the Prior Lien Note is paid,
then the next installments of principal and interest due under the promissory
notes dated October 30, 1972, and November 27, 1974. The Partnership is
required to make a principal payment of $1,168,136 on October 1, 1992, which
represents the balloon payment due on the October 30, 1972 promissory note.
Upon maturity of the October 30, 1972 promissory note, the Partnership has
the option to (i) pay to the noteholder the difference between the principal
and interest due on the all-inclusive promissory mortgage note payable and
the unpaid principal balance and accrued interest on the November 27, 1974
promissory note, in which event the all-inclusive promissory mortgage note
payable would be cancelled and all liens would be discharged or (ii) pay the
entire unpaid principal balance due plus the 1% prepayment penalty on the
November 27, 1974 promissory note, in which event the all-inclusive
promissory mortgage note payable would be cancelled and all liens would be
discharged. Except for the balloon payment and the prepayment options, cash
flow required to be paid to the note holder will not exceed an amount equal
to the interest on the note at the rate of 9% per annum. The difference, if
any, between the amount payable on the note, as described above, and interest
on the note at 9% per annum shall be accrued and payable on April 1, 1993.
On April 1, 1993, all accrued interest and all unpaid principal is due. In
accordance with Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings", the
above modification, as it relates to the $1,250,000 principal reduction, is
accounted for prospectively at the effective interest rate of 4.6%. Interest
will accrue at a constant rate over the life of the loan.
Maturities of long-term debt for each of the next five years and
thereafter are as follows:
1992 $ 1,328,615
1993 12,824,709
1994 261,894
1995 289,017
1996 8,673,416
Thereafter 21,566,477
$ 44,944,128
<TABLE>
Schedule XI - Real Estate and Accumulated Depreciation
1991 COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
Schedule of Real Estate and Accumulated Depreciation
December 31, 1991
Life
Costs on Which
Capitalized Depreciation
Initial Cost to Subsequent to Gross Amount at Which in Latest
Partnership Acquisition Carried at End of Year Income
Buildings & Buildings & Buildings & Statement
Accumulated Date of Date is
Description Encumbrances (B) Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired Computed
COMBINED JOINT VENTURES:
<CAPTION> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S>
Apartment
Complex
Plano, TX $ 4,160,000 $1,743,593 $ 6,249,650 $ 149,641 $ 1,743,593 $ 6,399,291 $ 8,142,884 $ 1,956,356 1982 5/31/83 5-30 yrs
Apartment
Complex
San Antonio,
TX 5,783,789 2,028,580 11,518,149 898,747 2,028,580 12,416,896 14,445,476 4,001,813 1972-
1974 3/31/83 5-30 yrs
Apartment
Complex
Stockton,
CA 3,323,573 545,392 4,914,414 450,179 545,392 5,364,593 5,909,985 1,809,394 1980 3/31/83 5-30 yrs
Apartment
Complex
Boulder,
CO 8,865,055 2,035,845 8,746,515 1,383,570 2,035,845 10,130,085 12,165,930 3,577,031 1974 2/17/83 5-30 yrs
Apartment
Complex
Oakland,
CA (A) 19,000,000 4,101,479 17,231,066 3,073,175 4,101,479 - 4,101,479 - (A) 10/31/83 (A)
Apartment
Complex
Austin, TX 3,811,711 1,120,684 4,474,186 573,467 1,120,684 5,047,653 6,168,337 1,605,795 1971 9/30/83 5-30 yrs
$44,944,128$11,575,573 $53,133,980 $6,528,779 $11,575,573 $39,358,518 $50,934,091 $12,950,389
Notes:
(A) See Note 2 of Notes to Financial Statements for further information regarding the Parkwoods Apartments, which was completely
destroyed by fire on October 20, 1991.
(B) The aggregate cost of real estate owned at December 31, 1991 for Federal income tax purposes is approximately $48,467,000.
(C) See Note 5 of Notes to Financial Statements.
(D) Reconciliation of real estate owned:
December 31, December 31,
1991 1990
Balance at beginning of year $70,139,257 $68,753,815
Acquisitions and improvements 1,099,075 1,385,442
Write-off of property destroyed by fire (20,304,241) -
Balance at end of year $50,934,091 $70,139,257
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $16,868,426 $14,646,663
Depreciation expense 2,278,132 2,221,763
Write-off of accumulated depreciation on
property destroyed by fire (6,196,169) -
Balance at end of year $12,950,389 $16,868,426
</TABLE>
