UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: MARCH 31, 1995
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. X
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
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 Part IV
November 15, 1982, as supplemented
Current Report on Form 8-K Part IV
of registrant dated December 23, 1994
PAINE WEBBER GROWTH PROPERTIES LP
1995 FORM 10-K
TABLE OF CONTENTS
PART I Page
Item 1 Business I-1
Item 2 Properties I-3
Item 3 Legal Proceedings I-3
Item 4 Submission of Matters to a Vote of Security Holders I-4
PART II
Item 5 Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters II-1
Item 6 Selected Financial Data II-1
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations II-2
Item 8 Financial Statements and Supplementary Data II-6
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure II-6
PART III
Item 10 Directors and Executive Officers of the Partnership III-1
Item 11 Executive Compensation III-3
Item 12 Security Ownership of Certain Beneficial Owners
and Management III-3
Item 13 Certain Relationships and Related Transactions III-3
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K IV-1
SIGNATURES IV-2
INDEX TO EXHIBITS IV-3
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1 to F-33
PART I
ITEM 1. BUSINESS
Paine Webber Growth Properties LP (the "Partnership") is a limited
partnership formed in August 1982, under the Uniform Limited Partnership Act of
the State of Delaware, for the purpose of investing in a portfolio of rental
apartment properties which had potential for near-term capital appreciation. It
is the Partnership's intention to enhance the value of the properties through
the use of capital reserves and by reinvesting cash flow from operations. The
Partnership sold $29,193,000 in Limited Partnership units (29,193 units at
$1,000 per unit) from November 15, 1982 through September 30, 1983 pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933
(Registration No. 2-78818). In addition, the Initial Limited Partner
contributed $1,000 for one unit (a "Unit") of Limited Partnership Interest.
Limited Partners will not be required to make any additional capital
contributions.
As of March 31, 1995, the Partnership owned, through joint venture
partnerships, interests in the operating properties set forth in the following
table:
Name of Joint Venture Date of
Name and Type of Property Acquisition Type of
Location Size of Interest Ownership (1)
Rocky Mountain Partners 301 2/17/83 Fee ownership of land and
Tantra Lake Apartments Units improvements
Boulder, Colorado (through joint venture)
Grouse Run
Associates I & II 158 3/31/83 Fee ownership of land and
Grouse Run Apartments Units improvements
Stockton, California (through joint venture)
Nob Hill Partners 368 3/31/83 Fee ownership of land and
Nob Hill Apartments Units improvements
San Antonio, Texas (through joint venture)
Plano Chisholm Place 142 5/31/83 Fee ownership of land and
Associates Units improvememts
Chisholm Place Apartments (through joint venture)
Plano, Texas
(1)See Notes to the Financial Statements of the Partnership filed in Item
14(a)(1) of this Annual Report for a description of the long-term mortgage
indebtedness secured by the Partnership's operating property investments and
for a description of the agreements through which the Partnership has
acquired these real estate investments.
The Partnership originally owned interests in six operating investment
properties. In addition to the properties listed above, the Partnership owned
interests in the Parkwoods Apartments and the Northcastle Apartments. On
October 20, 1991, the 433-unit Parkwoods Apartments complex was completely
destroyed by a fire which devastated a large section of the hills over Oakland,
California. On May 27, 1992, the joint venture received a full and final
insurance settlement of approximately $29,361,000 for coverage on the damage to
the buildings and the loss of rental income. On April 15, 1994, the land at the
former Parkwoods site was sold to an affiliate of the Partnership's co-venture
partner for $4,750,000. See the discussion in Item 7 and the notes to the
financial statements of the Partnership accompanying this Annual Report for a
further discussion of these events. On December 23, 1994, Austin Northcastle
Partners, a joint venture in which the Partnership had an interest, sold its
operating investment property (Northcastle Apartments) to an unaffiliated third
party for $6,100,000. Final approval of the sale, which involved the assumption
of the outstanding first mortgage loan secured by the property, was received
from the Department of Housing and Urban Development on April 26, 1995. After
transaction costs and the assumption of the outstanding first mortgage loan, the
joint venture received net proceeds of approximately $1,620,000 from the sale.
The Partnership's share of such proceeds was $1,581,000, in accordance with the
terms of the joint venture agreement. See the discussion in Item 7 and the
notes to the financial statements of the Partnership accompanying this Annual
Report for a further discussion of this transaction.
The Partnership's principal investment objectives are to invest the net cash
proceeds from the offering of limited partnership units in rental apartment
properties with the goals of obtaining:
(1)capital appreciation;
(2)tax losses during the early years of operations from deductions generated by
investments;
(3)equity build-up through principal repayments of mortgage loans on
Partnership properties; and
(4)cash distributions from rental income.
The primary investment objective of the Partnership is capital appreciation.
The Partnership may sacrifice attainment of its other objectives to the extent
required to achieve the capital appreciation objective. Through March 31, 1995,
the Limited Partners had received cumulative cash distributions totalling
$13,651,000, or approximately $467 per original $1,000 investment, including
distributions of $4,796,000 paid during fiscal 1995. As noted above, on April
15, 1994 the Parkwoods land was sold to an affiliate of the Partnership's co-
venture partner for $4,750,000. The Partnership received net proceeds from this
sale (prior to certain reserves), of approximately $4,613,000, which were
distributed to the Limited Partners in June 1994. The cumulative cash returns
described above include $372 per original $1,000 investment from sale,
refinancing or other disposition transactions, consisting of proceeds from the
Parkwoods insurance settlement, the subsequent land sale and the 1986
refinancing of the Tantra Lake Apartments. The remaining cash distributions
have been paid from operating cash flow of the Partnership. The Partnership
resumed regular quarterly distributions with the payment made on November 15,
1994 for the quarter ended September 30, 1994. Such distributions are being
paid at a rate of 2% per annum on a Limited Partner's remaining capital account.
As noted above, the Partnership received the required approval of the sale of
the Northcastle Apartments subsequent to year-end. On June 15, 1995, the
Partnership made a special distribution to the Limited Partners of $90 per
original $1,000 investment, consisting of the Partnership's share of the net
proceeds of the Northcastle sale and the release of certain excess reserve
funds. Subsequent to this distribution, Limited Partners have a remaining
capital account balance of $538 per original $1,000 investment. As of March 31,
1995, the Partnership had retained an ownership interest in four of its six
original investment properties. The Partnership's success in meeting its
capital appreciation objective will depend upon the proceeds received from the
final liquidation of the remaining investments. The amount of such proceeds
will ultimately depend upon the value of the underlying investment properties at
the time of such liquidations, which cannot presently be determined.
The Partnership has generated tax losses from operations since inception.
However, the benefits of such losses to investors have been significantly
reduced by changes in federal income tax law subsequent to the organization of
the Partnership.
All of the Partnership's investment properties are located in real estate
markets in which they face significant competition for the revenues they
generate. The apartment complexes compete with numerous projects of similar
type generally on the basis of price and amenities. Apartment properties in all
markets also compete with the local single family home market for prospective
tenants. Despite this competition, the lack of new construction of multi-family
housing has allowed the oversupply which exists in most markets to begin to be
absorbed, with the result being a gradual improvement in occupancy levels and
effective rental rates and a corresponding increase in property values. The
California real estate market, where the Partnership's Grouse Run Apartments
property is located, represents an exception to these generally improving market
conditions. Conditions in California continue to be adversely affected by the
state of region's economy, which has been hit hard by cutbacks in government
defense spending and by the reduced rate of growth in the high technology
industries. Management of the Partnership expects to continue to see
improvement in the multi-family sector of most real estate markets in the near-
term.
The Partnership has no real property investments located outside the United
States. The Partnership is engaged solely in the business of real estate
investment, therefore, presentation of information about industry segments is
not applicable.
The Partnership has no employees; it has, however, entered into an Advisory
Contract with PaineWebber Properties Incorporated (the `Adviser''), which is
responsible for the day-to-day operations of the Partnership. The Adviser is a
wholly-owned subsidiary of PaineWebber Incorporated (`PWI''), a wholly-owned
subsidiary of PaineWebber Group Inc. (`PaineWebber'').
The general partners of the Partnership (the ``General Partners') are First
PW Growth Properties, Inc. and Properties Associates. First PW Growth
Properties, Inc. (the `Managing General Partner''), a wholly-owned subsidiary
of PaineWebber Group Inc., is the managing general partner of the Partnership.
Properties Associates (the `Associate General Partner''), a Massachusetts
general partnership, certain general partners of which are officers of the
Adviser and the Managing General Partner, is the associate general partner of
the Partnership.
The terms of transactions between the Partnership and affiliates of the
Managing General Partner of the Partnership are set forth in Items 11 and 13
below to which reference is hereby made for a description of such terms and
transactions.
ITEM 2. PROPERTIES
The Partnership has acquired interests in operating properties through joint
venture partnerships. The joint venture partnerships and the related properties
are referred to under Item 1 above to which reference is made for the name,
location, and description of each property.
Occupancy figures for each fiscal quarter during 1995, along with an average
for the year, are presented below for each property:
Percent Occupied At
Fiscal 1995
Property 6/30/94 9/30/94 12/31/94 3/31/95 Average
Tantra Lake
Apartments 94% 95% 97% 97% 96%
Grouse Run
Apartments 95% 92% 96% 97% 95%
Nob Hill
Apartments 93% 90% 92% 90% 91%
Chisholm Place
Apartments 97% 98% 98% 98% 98%
ITEM 3. LEGAL PROCEEDINGS
The Partnership, along with Parkwood Montclair Partners, one of the joint
ventures in which the Partnership has an interest, became defendants in numerous
lawsuits alleging damages in excess of $100 million as a result of the Oakland
Hills fire which destroyed the joint venture's investment property 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. Preliminary court proceedings during fiscal 1995 with
respect to this litigation included certain court-supervised mediation hearings.
Based on such preliminary proceedings, management now believes that the amount
of any legal defense costs, award judgements and negotiated settlements will be
covered under the venture's liability insurance policies. However, there can be
no assurances regarding the ultimate outcome of these matters.
In November 1994, a series of purported class actions (the `New York
Limited Partnership Actions') were filed in the United States District Court
for the Southern District of New York concerning PaineWebber Incorporated's sale
and sponsorship of various limited partnership investments, including those
offered by the Partnership. The lawsuits were brought against PaineWebber
Incorporated and Paine Webber Group Inc. (together `PaineWebber''), among
others, by allegedly dissatisfied partnership investors. In March 1995, after
the actions were consolidated under the title In re PaineWebber Limited
Partnership Litigation, the plaintiffs amended their complaint to assert claims
against a variety of other defendants, including First PW Growth Properties,
Inc. and Properties Associates, which are the General Partners of the
Partnership and affiliates of PaineWebber. On May 30, 1995, the court certified
class action treatment of the claims asserted in the litigation.
The amended complaint in the New York Limited Partnership Actions alleges
that, in connection with the sale of interests in Paine Webber Growth Properties
LP, PaineWebber, First PW Growth Properties, Inc. and Properties Associates (1)
failed to provide adequate disclosure of the risks involved; (2) made false and
misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs, who
purport to be suing on behalf of all persons who invested in Paine Webber Growth
Properties LP, also allege that following the sale of the partnership interests,
PaineWebber, First PW Growth Properties, Inc. and Properties Associates
misrepresented financial information about the Partnerships value and
performance. The amended complaint alleges that PaineWebber, First PW Growth
Properties, Inc. and Properties Associates violated the Racketeer Influenced and
Corrupt Organizations Act (`RICO'') and the federal securities laws. The
plaintiffs seek unspecified damages, including reimbursement for all sums
invested by them in the partnerships, as well as disgorgement of all fees and
other income derived by PaineWebber from the limited partnerships. In addition,
the plaintiffs also seek treble damages under RICO. The defendants' time to
move against or answer the complaint has not yet expired.
Pursuant to provisions of the Partnership Agreement and other contractual
obligations, under certain circumstances the Partnership may be required to
indemnify First PW Growth Properties, Inc., Properties Associates and their
affiliates for costs and liabilities in connection with this litigation. The
General Partners intend to vigorously contest the allegations of the action, and
believe that the action will be resolved without material adverse effect on the
Partnership's financial statements, taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS
At March 31, 1995, there were 2,857 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 during fiscal 1995.
ITEM 6. SELECTED FINANCIAL DATA
PAINE WEBBER GROWTH PROPERTIES LP
FOR THE YEARS ENDED MARCH 31, 1995, 1994, 1993, 1992 AND 1991
(IN THOUSANDS, EXCEPT FOR PER UNIT DATA)
1995 1994 1993 (1) 1992 1991
Revenues $ 2,471 $ 2,393 $ 2,235 $ 549 $ 643
Operating income
(loss) $ (324) $ 31 $ 88 $ 251 $ 269
Partnership's share
of gains
on settlement
of insurance
claims - $ 225 $11,545 - -
Partnership's share of
unconsolidated
ventures' income
(losses) $ 644 $ (2,546) $ (498) $(1,525) $(2,360)
Income (loss) before
extraordinary gain $ 325 $(2,289) $ 11,136 $(1,274) $(2,091)
Extraordinary gain
on extinguishment
of debt - - - $ 3,540 -
Net income (loss) $ 325 $ (2,289) $ 11,136 $ 2,266 $(2,091)
Per Limited Partnership Unit:
Income (loss) before
extraordinary gain $ 8.70 $ (77.63) $ 377.63 $(43.21) $(70.92)
Extraordinary gain - - - $120.06 -
Net income (loss) $ 8.70 $ (77.63) $ 377.63 $ 76.85 $ (70.92)
Cash distributions
from operations $ 6.28 - $ 19.58 $ 22.33 $ 18.80
Cash distributions
from sale,
refinancing and other
disposition
transactions $158.00 - $ 154.00 - -
Total asset $ 16,086 $ 20,510 $ 21,436 $ 9,334 $ 7,724
Mortgage note
payable $ 6,962 $ 7,029 $ 5,761 - -
(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.
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, 1995, the Partnership
retained interests in four operating investment properties. As discussed
further below, during fiscal 1995 the Partnership completed sales transactions
with respect to the Northcastle Apartments and the land at the former site of
the Parkwoods Apartments. 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.
On April 15, 1994, the Parkwoods joint venture sold the land at the site of
the former Parkwoods Apartments to an affiliate of the Partnership's co-venture
partner for $4,750,000 after extensive marketing efforts did not produce a
better offer. Under the terms of the sale agreement, the buyer assumed the
venture's obligation to provide certain discounts to former tenants who wish to
purchase a condominium unit in the redeveloped project. After transaction
costs, net proceeds from the sale totalled approximately $4.7 million. A
portion of the proceeds was 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 approximately $4,613,000 was made to the Limited
Partners, representing the Partnership's share of the land sale proceeds, prior
to the reserves established for the venture's expected future operating costs.
Between this distribution and the fiscal 1993 distribution from the insurance
proceeds, the Limited Partners received proceeds from the Parkwoods investment,
which represented approximately 33% of the Partnership's original investment
portfolio, totalling $312 per original $1,000 investment. The Parkwoods joint
venture was not liquidated subsequent to the sale of the land due to certain
outstanding business matters which have yet to be completed. In addition to the
litigation issues referred to above, management has filed for a refund of
approximately $450,000 in costs incurred to secure the necessary building
permits required to proceed with the planned reconstruction of the Parkwoods
property from a federal agency responsible for administering federal aid in
connection with the Oakland fire. Management continues to pursue the collection
of these reimbursements; however, it is uncertain at this time how much, if any,
of the Partnership's reimbursement claims will be recovered. The discovery
process on the outstanding litigation related to the Oakland fire continued
during fiscal 1995. Based on these preliminary proceedings, which included
certain court-supervised mediation hearings, management now believes that the
amount of any legal defense costs, award judgements and negotiated settlements
will be covered under the venture's liability insurance policies. However,
there can be no assurances regarding the ultimate outcome of these matters.
Management began to market the Northcastle Apartments property for sale
during the summer of 1994 in response to increases in apartment development
activity in the local Austin, Texas market, as well as the attractive, assumable
financing obtained by the Northcastle joint venture in November 1993. During
the quarter ended September 30, 1994, the Partnership signed a letter of intent
with a third party to sell the Northcastle Apartments for $6.1 million. The
sale closed on December 23, 1994, and the Partnership received net proceeds from
the sale of approximately $1.6 million. In addition, the venture had excess
working capital of approximately $250,000 at the time of the sale.
Substantially all of the net proceeds and excess working capital were due to the
Partnership under the terms of the joint venture agreement. The Partnership's
original investment in the Northcastle joint venture totalled approximately $2.3
million. While the Northcastle property was 98% leased at the time of the sale
it was soon to have had strong competition from a significant number of new
multi-family units which were under development. This increase in the supply of
apartment units was expected to result in pressure to limit rental rate
increases or use rent concessions as leasing incentives to maintain occupancy
levels and market share. As a result of these conditions, management believed
that values for this 23-year-old, 170-unit apartment complex were at or near
their peak for the current market cycle. Accordingly, while the Partnership
failed to recover its full original investment in the Northcastle joint venture,
management believes that accepting this offer resulted in the maximum potential
return to the Limited Partners based on current market factors. Subsequent to
the closing date, the proceeds were held pending the approval of the sale and
the assumption of the mortgage loan from the Secretary of Housing and Urban
Development ("HUD"), which was received on April 26, 1995. Subsequent to year-
end, on June 15, 1995, management made a special distribution of $2,627,000, or
$90 per Unit, to the Limited Partners which included the net proceeds from the
Northcastle sale and certain excess Partnership reserves. Based on an
assessment of the Partnership's future liquidity needs, management determined
that the cash reserve levels exceeded such expected future requirements.
The local apartment markets where the Nob Hill, Chisholm Place and Tantra
Lake apartment complexes are located have experienced continuous gradual
improvement over the past 2 to 3 years, which has allowed the respective
properties to be more aggressive in seeking increased rents, while also
maintaining high occupancies. The operations of these three investment
properties reflect the generally improving conditions in the real estate markets
for multi-family residential properties across the country. Lack of significant
new construction activity over this period has allowed the oversupply which
existed in many markets as a result of the overbuilding of the 1980's to be
absorbed. The results of such absorption, combined with the effects of a
recovering national economy, have been a gradual improvement in economic
occupancy levels and effective rental rates and a corresponding increase in
property values in most markets. Management expects to see continued
improvement in the multi-family sector of these real estate markets in the near-
term and may seek favorable opportunities to sell certain of its remaining
operating investment properties if the magnitude of such improvement suggests
that a current sale may be in the Partnership's best interests. The California
real estate market, where the Partnership's Grouse Run Apartments property is
located, represents an exception to the aforementioned market conditions.
Conditions in California continue to be adversely affected by the condition 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,
continue to hold relatively steady at the present time. The improved operating
performances of the other three properties are expected to result in an overall
improvement in cash flow to the Partnership. Because of these improved property
performances and because the Partnership currently has sufficient reserves to
meet its anticipated future capital needs, management reinstated the payment of
quarterly cash distributions at the annual rate of 2% on remaining capital
beginning with a payment made on November 15, 1994 for the quarter ended
September 30, 1994. Subsequent to the June 1995 distribution of Northcastle
sale proceeds and excess reserves, Limited Partners had a remaining capital
account of $538 per original $1,000 investment. Distributions will continue at
the 2% level as long as actual results of operations produce sufficient earnings
to support such distributions.
As previously reported, the Partnership completed the refinancing of the Nob
Hill mortgage loan in September 1993 with a new loan issued under the Department
of Housing and Urban Development's (HUD) insured loan program. The new HUD
loan, in the initial principal amount of approximately $7 million was
sufficient to retire the existing loans of approximately $5.3 million and cover
the HUD capital improvement reserve requirement of approximately $1 million, as
well as other escrow requirements and closing costs. Management plans to use
the HUD reserve funds to substantially upgrade this 23 year-old property. A
major capital improvement project commenced in fiscal 1995 which included
significant exterior renovations. Management plans to focus on upgrading the
property's apartment unit interiors in early fiscal 1996. These improvements
will include updated light fixtures in the dining rooms as well as new floor
tiling. These improvements will permit Nob Hill to remain competitive as new
properties are constructed and as older properties undergo similar renovations.
As a result of the recently completed improvements, the property's attractive
assumable financing and the increased competition in the San Antonio market,
management has decided to actively market Nob Hill for sale in fiscal 1996.
Through mid-June 1995, several preliminary offers had been received on the
property. Management is presently in the process of analyzing the offers and
negotiating with prospective buyers in an effort to determine if a sale can be
completed on favorable terms. Management's hold/sell decisions with respect to
Nob Hill, as well as the other remaining investment properties, will be based on
an assessment of the impact on the overall returns to the Limited Partners.
At March 31, 1995, the Partnership and its consolidated joint venture had
available cash and cash equivalents of approximately $3,493,000. This amount
includes the proceeds from the sale of the Northcastle Apartments and the excess
working capital which were distributed to the Limited Partners subsequent to
year-end, as discussed above. The remaining 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, for the funding
of the Partnership's share of capital improvements or operating deficits of the
investment properties, if necessary, and for distributions to the partners.
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 source of future liquidity
and distributions to the partners is expected to be through proceeds received
from the sales or refinancings of the four remaining investment properties.
RESULTS OF OPERATIONS
1995 Compared to 1994
The Partnership reported net income of $325,000 for the year ended March
31, 1995, as compared to a net loss of $2,289,000 reported for the prior year.
The primary reason for the improvement in net operating results is a favorable
change in the Partnership's share of unconsolidated ventures' operations. The
Partnership realized net income from its share of unconsolidated ventures'
operations of $644,000 in fiscal 1995 as compared to net losses of $2,546,000 in
the prior year. The net income of the unconsolidated joint ventures for fiscal
1995 results from the net gain on the sales of the Northcastle Apartments and
the Parkwoods land. The sale of the Northcastle Apartments resulted in a gain
of $1,204,000 because the net sales proceeds exceeded the net carrying value of
the operating investment property. The Parkwoods sale proceeds were less than
the net carrying value of the land by $163,000. The Partnership's share of the
net gain from these two transactions was $1,043,000. The Partnership's share of
the unconsolidated ventures' operating losses prior to the net gain described
above decreased to $399,000 in fiscal 1995 from $2,546,000 in fiscal 1994. This
decrease was primarily the result of the $1,593,000 write down of the Parkwoods
investment property to its net realizable value which was recognized in the
prior year. In addition, increased rental income at the Chisholm Place and
Tantra Lake Apartments, lower repairs and maintenance expenses at Grouse Run and
a decrease in professional fees at the Parkwoods joint venture all contributed
to the improved net operating results of the unconsolidated joint ventures for
fiscal 1995. Rental income at both Chisholm Place and Tantra Lake improved by
6% over the prior year primarily due to increased rental rates. Average
occupancies at both properties remained relatively stable, in the mid-90's,
throughout both years. Repairs and maintenance expenses at Grouse Run were
higher by $75,000 in the prior year due to the painting of the building
exteriors. Professional fees incurred by the Parkwoods joint venture declined
by $174,000 in the current year due to a decrease in required legal services.
The improvement in the Partnership's share of unconsolidated ventures'
operations was offset by decreases in gain on settlement of insurance claims and
an unfavorable change in the Partnership's operating income (loss). The
Partnership realized a gain of $225,000 from the settlement of a supplemental
hazard insurance claim relating to the Parkwoods joint venture in the prior
year. The Partnership had an operating loss of $324,000 in fiscal 1995 as
compared to operating income of $31,000 in fiscal 1994. This unfavorable change
is primarily due to an increase in the loss of the Partnership's consolidated
joint venture, Nob Hill Partners, of $433,000. Nob Hill's net loss increased
mainly due to an increase in interest expense of $250,000 and an increase in
repairs and maintenance expenses of $118,000. Interest expense increased due to
the September 1993 refinancing of the venture's long-term debt which increased
the outstanding principal balance of the debt by approximately $1.3 million.
Repairs and maintenance expenses increased as a result of the start of a major
improvement program at the property subsequent to the refinancing transaction,
as discussed further above. The increase in the net loss of the Nob Hill joint
venture was partially offset by an increase in interest income of $245,000 due
to an increase in average cash balances for the year due to the receipt of the
proceeds from the sales of the Parkwoods and Northcastle properties and an
increase in interest rates earned on such investments during the year.
1994 Compared to 1993
The Partnership reported a net loss of $2,289,000 for the year ended March
31, 1994, as compared to net income of $11,136,000 reported for the prior year.
The primary reason for this change in net operating results was attributable to
the gain of $11,545,000 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 $2,048,000 during fiscal 1994, 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
$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 in April 1994. 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 improving market conditions in the
Austin, Texas area for apartment properties.
The Partnership's operating income decreased by $57,000 during fiscal 1994
when compared to the prior year, primarily due to an increase in general and
administrative expenses of $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 was commissioned 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 $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 September 1993 refinancing of the venture's mortgage note payable.
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 $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 $145,000.
The Partnership's net income increased by $8,870,000 for fiscal 1993, as
compared to fiscal 1992, primarily due to the recognition of a gain in the
amount of $11,545,000 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 $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 $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 $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 $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 $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 $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
$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.
Inflation
The Partnership commenced operations in 1983 and completed its twelfth 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Managing General Partner of the Partnership is First PW Growth
Properties, Inc., a Delaware corporation, which is a wholly-owned subsidiary of
PaineWebber. The Associate General Partner of the Partnership is Properties
Associates, a Massachusetts general partnership, certain general partners of
which are officers of the Adviser and the Managing General Partner. The
Managing General Partner has overall authority and responsibility for the
Partnership's operations, however, the day-to-day business of the Partnership is
managed by the Adviser pursuant to an advisory contract.
(a) and (b) The names and ages of the directors and principal executive
officers of the Managing General Partner of the Partnership are as follows:
Date elected
Name Office Age to Office
Lawrence A. Cohen President and
Chief Executive Officer 41 5/15/91
Albert Pratt Director 84 7/20/82 *
J. Richard Sipes Director 48 6/9/94
Walter V. Arnold Senior Vice President
and Chief Financial
Officer 47 10/29/85
James A. Snyder Senior Vice President 49 7/6/92
John B. Watts III Senior Vice President 42 6/6/88
David F. Brooks First Vice President and
Assistant Treasurer 52 7/20/82 *
Timothy J. Medlock Vice President and Treasurer 33 6/1/88
Thomas W. Boland Vice President 32 12/1/91
* The date of incorporation of the Managing General Partner
(c) There are no other significant employees in addition to the directors
and executive officers mentioned above.
(d) There is no family relationship among any of the foregoing directors or
executive officers of the Managing General Partner of the Partnership. All of
the foregoing directors and officers have been elected to serve until the annual
meeting of the Managing General Partner.
(e) All of the directors and officers of the Managing General Partner hold
similar positions in affiliates of the Managing General Partner, which are the
corporate general partners of other real estate limited partnerships sponsored
by PWI, and for which PaineWebber Properties Incorporated ("PWPI") serves as the
Adviser. The business experience of each of the directors and principal
executive officers of the Managing General Partner is as follows:
Lawrence A. Cohen is President and Chief Executive Officer of the Managing
General Partner and President and Chief Executive Officer of the Adviser which
he joined in January 1989. He is a also member of the Board of Directors and
the Investment Committee of the Adviser. From 1984 to 1988, Mr. Cohen was First
Vice President of VMS Realty Partners where he was responsible for origination
and structuring of real estate investment programs and for managing national
broker-dealer relationships. He is a member of the New York Bar and is a
Certified Public Accountant.
Albert Pratt is a Director of the Managing General Partner, a Consultant of
PWI and a general partner of the Associate General Partner. Mr. Pratt joined
PWI as Counsel in 1946 and since that time has held a number of positions
including Director of both the Investment Banking Division and the International
Division, Senior Vice President and Vice Chairman of PWI and Chairman of
PaineWebber International, Inc.
J. Richard Sipes is a Director of the Managing General Partner and a Director
of the Adviser. Mr. Sipes is an Executive Vice President at PaineWebber. He
joined the firm in 1978 and has served in various capacities within the Retail
Sales and Marketing Division. Before assuming his current position as Director
of Retail Underwriting and Trading in 1990, he was a Branch Manager, Regional
Manager, Branch System and Marketing Manager for a PaineWebber subsidiary,
Manager of Branch Administration and Director of Retail Products and Trading.
Mr. Sipes holds a B.S. in Psychology from Memphis State University.
Walter V. Arnold is a Senior Vice President and Chief Financial Officer of
the Managing General Partner and a Senior Vice President and Chief Financial
Officer of the Adviser which he joined in October 1985. Mr. Arnold joined PWI
in 1983 with the acquisition of Rotan Mosle, Inc. where he had been First Vice
President and Controller since 1978, and where he continued until joining the
Adviser. He began his career in 1974 with Arthur Young & Company in Houston.
Mr. Arnold is a Certified Public Accountant licensed in the state of Texas.
James A. Snyder is a Senior Vice President of the Managing General Partner
and a Senior Vice President and Member of the Investment Committee of the
Adviser. Mr. Snyder re-joined PWPI in July 1992 having served previously as an
officer of the Adviser from July 1980 to August 1987. During the period August
1987 to February 1989, Mr. Snyder was Executive Vice President and Chief
Financial Officer of Southeast Regional Management Inc., a real estate
development company. From February 1989 to October 1990, he was President of
Kan Am Investors, Inc. a real estate investment company. From January 1991 to
July 1992, Mr. Snyder was with the Resolution Trust Corporation, most recently
as the Vice President of Asset Sales.
John B. Watts III is a Senior Vice President of the Managing General
Partner and a Senior Vice President of the Adviser which he joined in June
1988. Mr. Watts has had over 16 years of experience in acquisitions,
dispositions and finance of real estate. He received degrees of Bachelor of
Architecture, Bachelor of Arts and Master of Business Administration from the
University of Arkansas.
David F. Brooks is a First Vice President and Assistant Treasurer of the
Managing General Partner and a First Vice President and Assistant Treasurer of
the Adviser. Mr. Brooks joined the Adviser in March 1980. From 1972 to 1980,
Mr. Brooks was an Assistant Treasurer of Property Capital Advisors, Inc. and
also, from March 1974 to February 1980, the Assistant Treasurer of Capital for
Real Estate, which provided real estate investment, asset management and
consulting services.
Timothy J. Medlock is a Vice President and Treasurer of the Managing
General Partner and Vice President and Treasurer of the Adviser which he joined
in 1986. From June 1988 to August 1989, Mr. Medlock served as the Controller
of the Managing General Partner and the Adviser. From 1983 to 1986, Mr.
Medlock was associated with Deloitte Haskins & Sells. Mr. Medlock graduated
from Colgate University in 1983 and received his Masters in Accounting from New
York University in 1985.
Thomas W. Boland is a Vice President of the Managing General Partner and a
Vice President and Manager of Financial Reporting of the Adviser which he
joined in 1988. From 1984 to 1987 Mr. Boland was associated with Arthur Young
& Company. Mr. Boland is a Certified Public Accountant licensed in the state
of Massachusetts. He holds a B.S. in Accounting from Merrimack College and an
M.B.A. from Boston University.
(f) None of the directors and officers was involved in legal proceedings
which are material to an evaluation of his or her ability or integrity as a
director or officer.
(g) Compliance With Exchange Act Filing Requirements: The Securities
Exchange Act of 1934 requires the officers and directors of the Managing
General Partner, and persons who own more than ten percent of the Partnership's
limited partnership units, to file certain reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
ten-percent beneficial holders are required by SEC regulations to furnish the
Partnership with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Partnership believes that, during the year ended March 31, 1995, all filing
requirements applicable to the officers and directors of the Managing General
Partner and ten-percent beneficial holders were complied with.
ITEM 11. EXECUTIVE COMPENSATION
The directors and officers of the Partnership's Managing General Partner
receive no current or proposed remuneration from the Partnership.
The Partnership is required to pay certain fees to the Adviser and the
General Partners are entitled to receive a share of Partnership cash
distributions, and a share of profits and losses. These items are described in
Item 13.
The Partnership resumed paying regular quarterly distributions with the
payment made on November 15, 1994 for the quarter ended September 30, 1994 at a
rate of 2% per annum on remaining invested capital. Prior to such
reinstatement, the Partnership had not made regular distributions from
operating cash flow over the previous two years. Regular quarterly
distributions, which had been made since June of 1990, were suspended effective
August 15, 1992. Furthermore, the Partnership's Limited Partnership Units are
not actively traded on any organized exchange, and no efficient secondary
market exists. Accordingly, no accurate price information is available for
these Units. Therefore, a presentation of historical unitholder total returns
would not be meaningful.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The Partnership is a limited partnership issuing Units of limited
partnership interest, not voting securities. All the outstanding stock of the
Managing General Partner, First PW Growth Properties, Inc. is owned by
PaineWebber. Properties Associates, the Associate General Partner, is a
Massachusetts general partnership, certain general partners of which are also
officers of the Adviser and the Managing General Partner. Properties
Associates is also the Initial Limited Partner of the Partnership and owns one
Unit of Limited Partnership interest. No limited partner is known by the
Partnership to own beneficially more than 5% of the outstanding interests of
the Partnership.
(b) Neither directors and officers of the Managing General Partner nor the
general partners of the Associate General Partner, individually, own any Units
of limited partnership interest of the Partnership. No director or officer of
the Managing General Partner, nor any general partner of the Associate General
Partner, possesses a right to acquire beneficial ownership of Units of Limited
Partnership Interest of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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, the Adviser and their affiliates 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.
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. However, the General Partners shall be allocated an amount
of taxable income from a capital transaction at least sufficient to eliminate
their deficit capital account balance. 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 1995, based on additional
Distributable Cash paid to the partners, management fees totalling $18,000 were
paid to the Adviser.
In connection with investing Partnership capital, the Adviser earned
acquisition fees totaling $2,248,000, of which $1,664,000 was paid to the
Adviser at the time the Partnership acquired its interests in the operating
investment properties and $584,000 was deferred and was payable from the
distributable net cash flow of the operating investment properties, as defined.
As of March 31, 1992, all deferred acquisition fees had been paid in full.
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.
An affiliate of the Managing General Partner performs certain accounting,
tax preparation, securities law compliance and investor communications and
relations services for the Partnership. The total costs incurred by this
affiliate in providing such services are allocated among several entities,
including the Partnership. Included in general and administrative expenses for
the years ended March 31, 1995 is $96,000, representing reimbursements to this
affiliate of the Managing General Partner for providing such 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 $6,000 (included in general and administrative expenses) for managing the
Partnership's cash assets during fiscal 1995. Fees charged by Mitchell Hutchins
are based on a percentage of invested cash reserves which varies based on the
total amount of invested cash which Mitchell Hutchins manages on behalf of the
Adviser.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) and (2) Financial Statements and Schedules:
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
(3) Exhibits:
The exhibits listed on the accompanying index to exhibits at
page IV-3 are filed as part of this Report.
(b) The Partnership filed a Current Report on Form 8-K in January 1995 to
report the sale of the Northcastle Apartments on December 23, 1994.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this Report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
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/ Lawrence A. Cohen
Lawrence A. Cohen
President and
Chief Executive Officer
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
By: /s/ Thomas W. Boland
Thomas W. Boland
Vice President
Dated: June 23, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Partnership and
in the capacities and on the dates indicated.
By:/s/ Albert Pratt Date: June 23, 1995
Albert Pratt
Director
By: /s/ J. Richard Sipes Date: June 23, 1995
J. Richard Sipes
Director
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(3)
PAINE WEBBER GROWTH PROPERTIES LP
INDEX TO EXHIBITS
Page Number in the Report
Exhibit No. Description of Document Or Other Reference
(3) and (4) Prospectus of the Partnership Filed with the Commission
dated November 15, 1982, as pursuant to Rule 424(c) and
supplemented, with particular incorporated herein by
reference to the Restated reference.
Certificate and Agreement of
Limited Partnership
(10) Material contracts previously Filed with the Commission
filed as exhibits to registration pursuant to Section 13 or
statements and amendments thereto 15(d) of the Securities Act of
of the registrant together with 1934 and incorporated
all such contracts filed as herein by reference.
exhibits of previously filed
Forms 8-K and Forms 10-K are
hereby incorporated herein
by reference.
(13) Annual Report to Limited Partners No Annual Report for fiscal year
1995 has been sent to the
Limited Partners. An Annual
Report will be sent to the
Limited Partners subsequent
to this filing.
(22) List of subsidiaries Included in Item I of Part I of
this Report Page I-1, to which
reference is hereby made.
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, 1995 and 1994 F-3
Consolidated statements of operations for the years
ended March 31, 1995, 1994 and 1993 F-4
Consolidated statements of changes in partners' capital
(deficit) for the years ended March 31, 1995, 1994 and 1993 F-5
Consolidated statements of cash flows for the years
ended March 31, 1995, 1994 and 1993 F-6
Notes to consolidated financial statements F-7
Schedule III - Real Estate and Accumulated Depreciation F-21
COMBINED JOINT VENTURES OF PAINE WEBBER GROWTH PROPERTIES LP:
Report of independent auditors F-22
Combined balance sheets as of December 31, 1994 and 1993 F-23
Combined statements of operations and changes in venturers'
capital (deficit) for the years ended December 31, 1994,
1993 and 1992 F-24
Combined statements of cash flows for the years ended
December 31, 1994, 1993 and 1992 F-25
Notes to combined financial statements F-26
Schedule III - Real Estate and Accumulated Depreciation F-33
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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1995 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
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 LLP
ERNST & YOUNG LLP
Boston, Massachusetts
June 28, 1995
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and 1994
(In Thousands, except for per Unit data)
ASSETS
1995 1994
Operating investment property, at cost:
Land $ 2,029 $ 2,029
Buildings improvements and equipment 13,678 12,700
15,707 14,729
Less accumulated depreciation (5,577) (4,984)
10,130 9,745
Investments in unconsolidated joint
ventures, at equity 1,329 7,169
Cash and cash equivalents 3,493 1,625
Real estate tax and insurance escrow deposit 244 239
Capital improvement and replacement escrow deposits 329 1,032
Accounts receivable 8 86
Deferred loan costs, net of accumulated amortization
of $21 ($3 in 1994) 513 544
Other assets 40 70
$ 16,086 $ 20,510
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 304 $ 318
Accrued interest payable 155 7
Mortgage note payable 6,962 7,029
Tenant security deposits 24 37
Other liabilities 31 36
Total liabilities 7,476 7,427
Partners' capital:
General Partners:
Capital contributions 1 1
Cumulative net income (losses) 27 (44)
Cumulative cash distributions (28) (26)
Limited Partners ($1,000 per Unit,
29,194 Units issued in 1995 and 1994):
Capital contributions, net of offering costs 26,345 26,345
Cumulative net losses (4,084) (4,338)
Cumulative cash distributions (13,651) (8,855)
Total partners' capital 8,610 13,083
$ 16,086 $ 20,510
See accompanying notes.
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1995, 1994 and 1993
(In Thousands, except for per Unit data)
1995 1994 1993
REVENUES:
Rental income $ 1,869 $ 1,823 $ 1,664
Reimbursements from affiliates 215 428 419
Interest and other income 387 142 152
2,471 2,393 2,235
EXPENSES:
Interest expense 718 471 360
Real estate taxes 214 201 199
Depreciation expense 593 496 485
Property operating expenses 975 814 791
Partnership management fees 18 - 57
General and administrative 277 380 255
2,795 2,362 2,147
Operating income (loss) (324) 31 88
Venture partner's share of
consolidated venture's loss 5 1 1
Partnership's share of gains on
settlement of insurance claims - 225 11,545
Partnership's share of unconsolidated
ventures' income (losses) 644 (2,546) (498)
NET INCOME (LOSS) $ 325 $ (2,289) $11,136
Per Limited Partnership Unit:
Net income (loss) $ 8.70 $ (77.63) $377.63
Cash distributions $ 164.28 $ - $173.58
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, 1995, 1994 and 1993
(In Thousands)
General Limited
Partners Partners Total
Balance at March 31, 1992 $ (152) $ 9,455 $ 9,303
Net income 112 11,025 11,137
Cash distributions (6) (5,062) (5,068)
BALANCE AT MARCH 31, 1993 (46) 15,418 15,372
Net loss (23) (2,266) (2,289)
BALANCE AT MARCH 31, 1994 (69) 13,152 13,083
Net income 71 254 325
Cash distributions (2) (4,796) (4,798)
BALANCE AT MARCH 31, 1995 $ - $ 8,610 $ 8,610
See accompanying notes
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
(In Thousands)
1995 1994 1993
Cash flows from operating activities:
Net income (loss) $ 325 $ (2,289) $11,136
Adjustments to reconcile net
income (loss) to net cash
provided by (used for) operating activities:
Reimbursements from affiliates (215) (428) (419)
Venture partner's share of
consolidated venture's loss (5) (1) (1)
Partnership's share of gains
on settlement of
insurance claims - (225) (11,545)
Partnership's share of unconsolidated
ventures' income (losses) (644) 2,546 498
Depreciation expense 593 496 485
Amortization of deferred loan costs 18 3 -
Amortization of forgiveness of debt - (34) (196)
Changes in assets and liabilities:
Accounts receivable 78 (86) 2
Advances to consolidated venture - 109 (109)
Escrow deposits 698 (149) (25)
Deferred loan costs 13 - -
Other assets 30 (53) 5
Accrued interest receivable - - 5
Accounts payable and accrued expenses (14) 193 69
Accrued interest payable 148 (69) 7
Accounts payable - affiliate - (23) 14
Deferred interest payable - - (54)
Tenant security deposits (13) (5) 3
Total adjustments 687 2,274 (11,261)
Net cash provided by (used for)
operating activities 1,012 (15) (125)
Cash flows from investing activities:
Distributions from unconsolidated
joint ventures 6,699 292 6,713
Additions to operating investment property (978) (174) (109)
Additional investments in
unconsolidated joint ventures - (212) (791)
Net cash provided by (used for)
investing activities 5,721 (94) 5,813
Cash flows from financing activities:
Proceeds from long-term debt - 7,034 -
Mortgage escrow deposits
funded by debt proceeds - (1,061) -
Payment of deferred financing costs - (517) (30)
Repayment of long-term debt (67) (5,733) (56)
Distributions to partners (4,798) - (5,068)
Net cash used for
financing activities (4,865) (277) (5,154)
Net increase (decrease) in cash
and cash equivalents 1,868 (386) 534
Cash and cash equivalents,
beginning of year 1,625 2,011 1,477
Cash and cash equivalents, end of year $ 3,493 $ 1,625 $ 2,011
Cash paid during the year for interest $ 516 $ 535 $ 604
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 five joint venture partnerships which own four operating
properties. Except as described below, the Partnership accounts for its
investments in joint venture partnerships using the equity method because the
Partnership does not have majority voting control. 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 accompanying financial statements present the financial
position, results of operations and cash flows of Nob Hill Partners on a
consolidated basis. 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 operating investment property of the consolidated joint venture 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, 1995 and 1994. Subsequent to year-end,
management decided to actively market the Nob Hill Apartments for sale.
However, because the property's current market value is estimated to be equal
to or greater than its net carrying value, no changes to the Partnership's
financial statement presentation will be required. 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.
The Partnership has reviewed FAS No. 121 ``Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of'' which is
effective for financial statements for years beginning after December 15,
1995, and believes this new pronouncement will not have a material effect on
the Partnership's financial statements.
The consolidated joint venture leases apartment units under leases with
terms generally of one year or less. Rental income is recorded monthly as
earned.
Deferred loan costs at March 31, 1995 and 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. Amortization of deferred loan costs is
included in interest expense on the accompanying statements of operations.
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.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
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, the
Adviser and their affiliates 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.
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. However, the General Partners shall be allocated an
amount of taxable income from a capital transaction at least sufficient to
eliminate their deficit capital account balance. 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
1995 and 1993, based on additional Distributable Cash paid to the partners,
management fees totalling $18,000 and $57,000, 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 $2,248,000, of which $1,664,000 was paid to the
Adviser at the time the Partnership acquired its interests in the operating
investment properties and $584,000 was deferred and was payable from the
distributable net cash flow of the operating investment properties, as
defined. As of March 31, 1992, all deferred acquisition fees had been paid
in full. 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, 1995, 1994 and 1993 is $96,000, $107,000 and $118,000, 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 $6,000, $4,000 and $3,000 (included in general and
administrative expenses) for managing the Partnership's cash assets during
fiscal 1995, 1994 and 1993, respectively.
4.Operating Investment Property
As of March 31, 1995 and 1994, 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 assumed full control over the
affairs of the joint venture. An affiliate of Trammell Crow was retained as
property manager to conduct the day-to-day operations of the property under
the direction of the Managing General Partner.
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
$71,000 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 $7,034,000 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 $5,000 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, 1995
total $2,554,000.
The following is a summary of operating expenses for the years ended
December 31, 1994, 1993 and 1992.
1994 1993 1992
Property operating expenses:
Salaries and related costs $274 $298 $281
Repairs and maintenance 257 140 141
Utilities 91 110 110
Insurance 53 44 29
Management fees 79 75 73
Administrative and other 221 147 157
$975 $814 $791
5.Investments in Unconsolidated Joint Ventures
The Partnership has investments in five unconsolidated joint ventures at
March 31, 1995 and 1994. 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, 1994 and 1993
Assets
(in thousands)
1994 1993
Current assets $ 2,778 $ 2,046
Operating investment properties, net 16,841 25,923
Other assets 184 1,002
$ 19,803 $28,971
Liabilities and Partners' Capital (Deficit)
Current liabilities $ 2,611 $ 1,977
Other liabilities 1,629 2,476
Long-term mortgage debt, less current portion 15,798 20,266
Partnership's share of combined capital (deficit) (168) 4,240
Co-venturers' share of combined capital (deficit) (67) 12
$ 19,803 $28,971
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the years ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
Rental revenue (1) $ 5,726 $ 5,509 $ 6,263
Interest and other income 205 306 481
Gains on settlement of insurance claims - 250 11,803
5,931 6,065 18,547
Property operating expenses 2,612 2,592 2,511
Depreciation and amortization 1,110 1,068 1,050
Interest expense 2,010 2,022 2,987
Administrative and other 644 1,065 742
Tenant compensation expense - 250 -
Write down of investment property
to net realizable value - 1,593 -
6,376 8,590 7,290
Income (loss) before gain
on sale of property (445) (2,525) 11,257
Net gain on sales of
investment properties 1,041 - -
Net income (loss) $ 596 $ (2,525) $11,257
Net income (loss):
Partnership's share of
net income (loss) $ 644 $ (2,321) $11,047
Co-venturers' share of
net income (loss) (48) (204) 210
$ 596 $ (2,525) $11,257
(1)See discussion below concerning the insurance recoverable and insurance
proceeds included in rental income for 1992 related to Parkwood Montclair
Partners.
Reconciliation of Partnership's Investment
March 31, 1995 and 1994
(in thousands)
1995 1994
Partnership's share of capital (deficit)
at December 31, as shown above $ (168) $ 4,240
Partnership's share of ventures'
current liabilities
and long-term debt - 437
Reimbursements of management fees
and expenses receivable from joint ventures (1) 1,676 2,540
Timing differences due to contributions
made and distributions received subsequent
to December 31 (see Note 2) (179) (48)
Investments in joint ventures, at equity
at March 31 $ 1,329 $ 7,169
(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 $215,000, $428,000 and $419,000 for the
years ended March 31, 1995, 1994 and 1993, 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 are 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 1995, the
Partnership received $413,000 from the Northcastle joint venture and
$393,000 from the Parkwoods joint venture as full payments of reimbursements
owed through the date of the sales of the investment properties of the
respective joint ventures. In addition, the Partnership also received
$16,000 from the Tantra Lake joint venture and $105,000 from the Chisholm
Place joint venture during fiscal 1995 as partial payments of reimbursements
owed. In fiscal 1994, the Partnership received $70,000 from the Northcastle
joint venture, and in fiscal 1993, the Partnership received $171,000 from
the Parkwoods joint venture as partial payments of reimbursements owed,
leaving cumulative totals of $1,676,000 and $2,540,000 at March 31, 1995 and
1994, respectively. These amounts have been included in the balance of
investments in joint ventures on the accompanying balance sheets.
The Partnership's share of ventures' net income (loss) is presented as
follows on the accompanying statements of operations (in thousands):
1995 1994 1993
Partnership's share of ventures'
losses $ 644 $ (2,546) $ (498)
Partnership's share of
gains on settlement of
insurance claims - 225 11,545
Partnership's share of
ventures' net income (loss) $ 644 $ (2,321) $11,047
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 (in thousands):
1995 1994
Rocky Mountain Partners $ (876) $ (660)
Grouse Run Associates I and II 576 762
Plano Chisholm Place Associates 1,490 1,650
Austin Northcastle Partners - 766
Parkwood Montclair Partners 139 4,651
$ 1,329 $ 7,169
Cash distributions received (including reimbursements of management fees and
out-of-pocket expenses) from the Partnership's unconsolidated joint venture
investments during the years ended March 31, 1995, 1994 and 1993 are as follows
(in thousands):
1995 1994 1993
Rocky Mountain Partners $ 313 $ 99 $ 371
Grouse Run Associates I and II 205 - 65
Parkwood Montclair Partners 4,139 - 6,216
Austin Northcastle Partners 1,937 70 -
Plano Chisholm Place Associates 105 123 61
$ 6,699 $ 292 $ 6,713
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 $2,275,000 from the refinancing proceeds in 1986. The outstanding
first mortgage loan is nonrecourse to the venture, had a balance of
$8,594,000 as of December 31, 1994 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 $887,000 and $8,000, respectively, from inception through
December 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 was to be provided by the Partnership. Thereafter, funds are to 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 December 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 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 $38,000 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 $3,203,000 as of December 31, 1994 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
$698,000 from inception through December 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 was to be provided by the Partnership. Thereafter, funds are to 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 December
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 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 $6,993,000. In return for a payment of $4,200,000, the lender forgave
the resulting principal balance of $2,793,000 and accrued interest of
$975,000. An extraordinary gain of $3,616,000 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
$23,000 and a deferred interest asset of $130,000, which related to the
accrual of imputed interest under a prior debt modification agreement. The
Partnership's share of the extraordinary gain amounted to $3,540,000. 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
$211,000 from the Partnership and its co-venture partner made in the ratios
of 80% and 20%, respectively. The outstanding 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.
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, to the payment
of any reimbursements of management fees and expenses owed to the
Partnership; fourth, 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; 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 is to 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
December 31, 1994 total approximately $254,000.
(d)Austin Northcastle Partners
On September 15, 1983 the Partnership acquired an interest in Austin
Northcastle Partners, a 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. On December 23, 1994, Austin
Northcastle Partners sold the Northcastle Apartments to an unaffiliated
third party for $6,100,000. Final approval of the sale, which involved the
assumption of the outstanding first mortgage loan secured by the property,
was received from the Department of Housing and Urban Development on April
26, 1995. After transaction costs and the assumption of the outstanding
first mortgage loan, the joint venture received net proceeds of
approximately $1,620,000 from the sale. The Partnership's share of such
proceeds was $1,581,000, in accordance with the terms of the joint venture
agreement. The venture recognized a gain on the sale of approximately
$1,204,000 to the extent that the sales price exceeded the net book value of
the operating investment property at the time of the sale. The
Partnership's share of such gain is included in Partnership's share of
unconsolidated ventures' income on the accompanying statement of operations
for fiscal 1995. Subsequent to year-end, the Partnership distributed the
proceeds from the sale of the Northcastle Apartments to the Limited Partners
(see Note 7).
The joint venture agreement provided that the net cash flow, as defined,
was to be allocated first to the payment of interest and principal on
certain interim borrowings, if such borrowings had been made, and then any
remaining amounts were to be distributed 99% to the Partnership and 1% to
the co-venturer.
Taxable income and tax loss from operations was allocated 99% to the
Partnership and 1% to the co-venturer. Allocations of the joint venture
operations between the partners for financial accounting purposes were made
in conformity with the allocations of taxable income or tax loss.
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 was 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 $308,000 paid to an affiliate of the co-
venturer). In addition, acquisition fees aggregating $135,000 and $53,000
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 devastated a large section of 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 $14,108,000. 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
$11,802,000 in calendar 1992. The Partnership's share of such gains
amounted to $225,000 for fiscal 1994 and $11,545,000 for fiscal 1993.
Certain costs incurred directly related to the fire, including site clean
up, property management and legal fees aggregating $1,444,000, 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.
During fiscal 1994, the joint venture was successful in obtaining
approval for the construction of a condominium complex on the land. The
reconstruction plans were 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. During calendar 1994, 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 agreed to pay the former tenants
approximately $250,000 and to offer certain discounts to former tenants who
wish to purchase a condominium unit in the redeveloped project. Subsequent
to year-end, the majority of the $250,000 settlement amount was paid out to
the former tenants.
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, was less than
the carrying value of the investment property at the date of the sale by
approximately $163,000. An additional loss equal to this amount was
recognized by the venture in calendar 1994. A portion of the proceeds was
retained by the joint venture to pay for the ongoing costs associated with
the claims described below. The remaining portion of the proceeds was
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, the joint venture was
not liquidated at the time of the sale of the land.
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. Preliminary court proceedings
during fiscal 1995 with respect to this litigation included certain court-
supervised mediation hearings. Based on such preliminary proceedings,
management now believes that the amount of any legal defense costs, award
judgements and negotiated settlements will be covered under the venture's
liability insurance policies. However, there can be no assurances regarding
the ultimate outcome of these matters. 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, 1995 and 1994 consists of the
following debt of Nob Hill Partners, the Partnership's consolidated joint
venture (in thousands):
1995 1994
Mortgage note payable secured by the Nob
Hill operating property. The loan bears
interest at 7.375% with monthly principal
and interest payments of $49,000 through
November 1, 2023. $ 6,962 $ 7,029
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 $5,311,000.
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 excess proceeds from the refinancing were used to
pay financing costs, which totalled $547,000, and to fund certain required
escrow reserves. In addition to the required monthly principal and interest
payments, the property submits monthly escrow deposits of $29,000 for taxes,
insurance and a replacement reserve required under the terms of the HUD
regulatory agreement.
Scheduled maturities of the mortgage note payable for each of the next
five years and thereafter are as follows (in thousands):
1995 $ 72
1996 77
1997 83
1998 90
1999 97
Thereafter 6,543
$6,962
7. Subsequent Event
On May 15, 1995, the Partnership distributed $92,000 to the Limited
Partners and $1,000 to the General Partners for the quarter ended March 31,
1995.
On June 15, 1995, the Partnership made a special distribution of
$2,627,000 to the Limited Partners. This distribution, of $90 per Unit,
represented the Partnership's portion of the proceeds received from the sale
of the Northcastle Apartments on December 23, 1994 (see Note 5) plus certain
excess Partnership reserves.
8. Contingencies
The Partnership is involved in certain legal actions. The Managing
General Partner believes these actions will be resolved without material
adverse effect on the Partnership's financial statements, taken as a whole.
.
Schedule III- Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
PAINE WEBBER GROWTH PROPERTIES LP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 1995
(In Thousands)
Cost
Capitalized Life on Which
Initial Cost to (Removed) Depreciation
Partnership Subsequent to Gross Amount at Which Carried at in Latest
Venture Acquisition End of Year Income
Buildings & Buildings & Buildings & Accumulated Date of Date Statement
Description Encumbrances Land Improvements ImprovementsLand Improvements Total DepreciationConstruction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Apartment
Complex
San Antonio,
TX $ 6,962 $ 2,029 $11,518 $2,160 $ 2,029 $13,678 $15,707 $ 5,577 1972-1974 3/31/83 5-30 yrs
Notes:
(A) The aggregate cost of real estate owned at December 31, 1994 for Federal income tax purposes is approximately $14,455,000.
(B) See Note 6 of Notes to Financial Statements for a description of the mortgage debt encumbering the operating investment
property.
(C) Reconciliation of real estate owned:
1995 1994 1993
Balance at beginning of year $14,729 $14,555 $14,446
Acquisitions and improvements 978 174 109
Balance at end of year $15,707 $14,729 $14,555
(D) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 4,984 $ 4,488 $ 4,002
Depreciation expense 593 496 486
Balance at end of year $ 5,577 $ 4,984 $ 4,488
</TABLE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Paine Webber Growth Properties LP:
We have audited the accompanying combined balance sheets of the Combined
Joint Ventures of PaineWebber Growth Properties LP as of December 31, 1994 and
1993, and the related combined statements of operations, changes in partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 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 combined financial position of the Combined Joint
Ventures of PaineWebber Growth Properties LP at December 31, 1994 and 1993, and
the combined results of their operations and their cash flows for each of the
three years in the period ended December 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 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 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 LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1995
COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED BALANCE SHEETS
December 31, 1994 and 1993
(In Thousands)
Assets
1994 1993
Current assets:
Cash and cash equivalents $ 1,108 $ 1,920
Accounts receivable 1,594 -
Prepaid expenses 76 126
Total current assets 2,778 2,046
Operating investment properties:
Land 4,325 9,547
Buildings, improvements and equipment 22,465 27,343
Construction in progress - 1,691
26,790 38,581
Less: Accumulated depreciation (9,949) (11,066)
Allowance to reduce operating property to
net realizable value - (1,593)
16,841 25,922
Reserves for repairs and capital improvements 49 536
Deferred expenses, net of accumulated amortization
of $166 in 1994 ($225 in 1993) 135 466
$ 19,803 $28,970
Liabilities and Venturers' Capital
Current liabilities:
Accounts payable and other liabilities $ 386 $ 571
Accrued real estate taxes 241 239
Accrued interest - 272
Accrued management fee 15 18
Tenant security deposits 191 200
Current portion of long-term debt 159 216
Notes payable to venturers - 460
Due to venturers 1,619 -
Total current liabilities 2,611 1,976
Reimbursements payable to venturer 1,629 2,456
Deferred fees payable to affiliates - 20
Long-term debt 15,798 20,266
Venturers' capital (deficit) (235) 4,252
$19,803 $28,970
See accompanying notes.
COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL (DEFICIT)
For the years ended December 31, 1994, 1993 and 1992
(In Thousands)
1994 1993 1992
REVENUES:
Rental income $ 5,726 $ 5,509 $ 5,154
Rental interruption insurance proceeds - - 1,110
Interest and other income 205 306 481
Gains on settlement of insurance claims - 250 11,802
5,931 6,065 18,547
EXPENSES:
Interest expense 2,010 2,022 2,987
Write down of investment property to
net realizable value - 1,593 -
Depreciation expense 1,110 1,068 1,050
Salaries 562 599 587
Repairs and maintenance 671 751 701
Property operating expenses 586 544 504
Real estate taxes 454 409 379
General and administrative 231 211 209
Management fees 339 289 340
Reimbursements to partner 209 454 414
Professional fees 204 400 119
Tenant compensation expense - 250 -
6,376 8,590 7,290
Operating income (loss) (445) (2,525) 11,257
Net gain on sales of investment
properties 1,041 - -
Net income (loss) 596 (2,525) 11,257
Recharacterization of prior year
capital contribution
to operating loan payable to venturer - - (175)
Contributions from venturers 154 - -
Distributions to venturers (5,237) (201) (5,186)
Venturers' capital, beginning of year 4,252 6,978 1,082
Venturers' capital (deficit),
end of year $ (235) $ 4,252 $ 6,978
See accompanying notes.
COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
Increase (Decrease) in Cash and Cash Equivalents
(In Thousands)
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ 596 $ (2,525) $11,257
Adjustments to reconcile net
income (loss) to net cash provided
by (used for) operating activities:
Net gain on sales of investment
properties (1,041) - -
Gains on settlement of insurance claims - (250) (11,802)
Depreciation and amortization 1,110 1,068 1,050
Amortization of loan acquisition costs 30 31 55
Write down of investment property
to net realizable value - 1,593 -
Changes in assets and liabilities:
Accounts receivable (2) 2 96
Prepaid expenses 50 6 22
Other assets 166 - 10
Accounts payable and other liabilities (169) 220 (125)
Accrued interest (111) 118 29
Accrued real estate taxes 2 (71) (91)
Accrued management fees (3) (3) 6
Tenant security deposits (8) 18 22
Reimbursements payable to partner (693) 384 242
Total adjustments (669) 3,116 (10,486)
Net cash provided by (used for)
operating activities (73) 591 771
Cash flows from investment activities:
Net proceeds from sales of investment
properties 9,110 - -
Additions to operating investment
properties (1,136) (992) (825)
Decrease (increase) in reserve for
capital expenditures (14) (14) 19
Expenditures related to fire - - (1,444)
Net cash provided by (used for)
investing activities 7,960 (1,006) (2,250)
Cash flows from financing activities:
Repayment of long-term debt (4,525) (3,830) (19,221)
Distributions to venturers (4,151) (201) (5,186)
Repayments of operating loans
payable to venturers (106) - (1,354)
Refund of debt issuance costs 83 - -
Proceeds from issuance of long-term
debt net of $301
debt issuance costs and $501
capital improvement escrow - 3,571 -
Proceeds from insurance settlements - 250 27,578
Proceeds from operating loans payable
to venturers - 238 1,089
Net cash provided by (used for)
financing activities (8,699) 28 2,906
Net increase (decrease) in
cash and cash equivalents (812) (387) 1,427
Cash and cash equivalents,
beginning of year 1,920 2,307 880
Cash and cash equivalents, end of year $ 1,108 $ 1,920 $ 2,307
Cash paid during the year for interest $ 2,023 $ 1,872 $ 2,903
See accompanying notes.
1. Summary of significant accounting policies
Organization
The accompanying financial statements of the Combined Joint Ventures of
PaineWebber Growth Properties, LP 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 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. As
further described in Note 2, Austin Northcastle Partners sold its operating
investment property on December 23, 1994 and liquidated its operations
subsequent to year-end. Also, as further described in Note 2, Parkwood
Montclair Partners sold the land at the former site of the Parkwood
Apartments on April 15, 1994 to an affiliate of the co-venture partner. Due
to certain outstanding legal claims involving the Parkwoods joint venture,
the venture was not liquidated subsequent to the sale of the land (see Note
2).
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 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 consisted of land and
construction in process which included 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
estimate of the sales price to be realized 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, 1994 and 1993.
Subsequent to year-end, management decided to actively market the Nob Hill
Apartments for sale. However, since the current market value of the
property is estimated to be equal to or greater than its net carrying value,
no adjustments to the financial statement presentation of the Combined Joint
Ventures will be required. 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 Combined Joint Ventures have reviewed FAS No. 121 ``Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of'' which is effective for financial statements for years beginning after
December 15, 1995, and believes this new pronouncement will not have a
material effect on the Combined Joint Ventures' financial statements.
Deferred expenses
Deferred expenses consist primarily of loan fees which are being
amortized over the terms of the related loans. Such amortization expense is
included in interest expense on the accompanying statements of operations.
Income tax matters
The 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 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
1994 1993
Reserve for tenant security deposits $ 191 $ 200
Reserve for insurance and tax deposits 276 274
$ 467 $ 474
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, 1994 and 1993 and
are included in the balance of cash and cash equivalents on the accompanying
balance sheet.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year 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 owned and operated Northcastle Apartments, a 170-unit
apartment complex located in Austin, Texas. On December 23, 1994, Austin
Northcastle Partners sold the Northcastle Apartments to an unaffiliated
third party for $6,100,000. Final approval of the sale, which involved
the assumption of the outstanding first mortgage loan secured by the
property, was received from the Department of Housing and Urban
Development on April 26, 1995. After transaction costs and the
assumption of the outstanding first mortgage loan, the joint venture
received net proceeds of approximately $1,620,000 from the sale. PWGP's
share of such proceeds was $1,581,000, in accordance with the terms of
the joint venture agreement. The venture recognized a gain on the sale
of approximately $1,204,000 to the extent that the sales price exceeded
the net book value of the operating investment property at the time of
the sale.
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 $14,108,000. 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
$29,361,000. In September 1993, the joint venture and another insurance
carrier entered into a cash settlement of $250,000 related to
supplemental hazard insurance. Management estimated for financial
statement purposes that the amount of the settlement related to rental
interruption insurance was $1,783,000, of which $673,000 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)
$1,418,000 ($65,000 of accrued interest) in full payment of operating
loans payable to PWGP, (iii) $171,000 in payment of reimbursements
payable to PWGP, (iv) $4,691,000 distributed to PWGP, and (v) $2,547,000
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 $11,802,000 in 1992.
Certain costs incurred directly related to the fire including site
cleanup, property management and legal fees aggregating $1,444,000 were
offset in deriving the gain in 1992.
During 1993, the joint venture was successful in obtaining approval for
the construction of a condominium complex on the land. The
reconstruction plans were 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. During calendar 1994, 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 agreed to pay
the former tenants approximately $250,000 and to offer certain discounts
to former tenants who wish to purchase a condominium unit in the
redeveloped project.
On April 15, 1994, Parkwood Montclair Partners sold the land on the
former site of the Parkwoods Apartments to an affiliate of PWGP's co-
venture partner. The property was sold for $4,750,000. After paying all
closing costs, the net sales proceeds amounted to approximately
$4,699,000. Parkwood Montclair Partners retained a portion of the
proceeds, which will be used to pay the $250,000 settlement amount
pursuant to the agreement with the former tenants of the Parkwoods
Apartments and to fund ongoing costs associated with the claims described
below. The remaining portion of the proceeds was 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. The net sales price of the
land was less than its net carrying value at the date of the sale by
approximately $163,000. An additional loss equal to such amount was
recognized in 1994. Due to the outstanding legal claims involving the
venture, as discussed further below, Parkwood Montclair Partners was not
liquidated at the time of the sale of the land.
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 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.
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 $209,000, $454,000 and $414,000 for the years ended December 31,
1994, 1993 and 1992, respectively. Cumulative unpaid reimbursements
aggregated $1,662,000 and $2,456,000 at December 31, 1994 and 1993,
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. As of December 31, 1994, all deferred
consulting fees had been paid in full.
Included in accounts payable at December 31, 1993 is $21,000, payable to
the partners of Parkwood Montclair Partners for the reimbursement of
disbursements made on behalf of the joint venture.
Notes payable to partners at December 31, 1993 consists of $437,000 owed
to PWGP and $23,000 owed to the co-venturer in the Northcastle joint venture
for advances made to the venture. The loans bore interest at 12% per annum.
The loans and accrued interest were paid off in connection with the sale of
the Northcastle Apartments during 1994.
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. At December 31,
1994, the balance of reserves for repairs and capital improvements consists
of an escrow account maintained by Grouse Run Associates I and II. The
balance of reserves for repairs and capital improvements at December 31,
1993 consisted 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).
5. Long-term debt
Long-term debt at December 31, 1994 and 1993 consists of the following (in
thousands):
1994 1993
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 $84,000 will be
made through June 1, 1996 when the
remaining unpaid balance is due. $ 8,594 $8,703
Nonrecourse mortgage note secured by an all
inclusive trust deed on the Northcastle
operating property. The loan bore interest
at a rate of 7.375% per annum and was
payable in monthly principal and interest
installments of $32,000 through 2018. - 4,373
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 $11,000. The remaining
unpaid balance is due February 1, 2019. 1,420 1,441
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 $13,000 with the remaining
unpaid balance due February 1, 2020. 1,783 1,805
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 4,160
Total long-term debt 15,957 20,482
Less: current portion (159) (216)
$15,798 $20,266
.
Maturities of long-term debt for each of the next five years and
thereafter are as follows:
1995 $ 159
1996 8,533
1997 54
1998 59
1999 63
Thereafter 7,089
$ 15,957
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
COMBINED JOINT VENTURES OF
PAINE WEBBER GROWTH PROPERTIES LP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(In Thousands)
Costs
(Removed) Life on Which
Capitalized Depreciation
Initial Cost to Subsequent to Gross Amount at Which Carried at in Latest
Partnership Acquisition End of Year Income
Buildings & Buildings & Buildings & Accumulated Date of Date Statement
Description Encumbrances (B) Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED JOINT VENTURES:
Apartment Complex
Plano, TX $ 4,160 $ 1,744 $ 6,250 $ 154$ 1,744 $ 6,404 $ 8,148 $ 2,588 1982 5/31/83 5-30 yrs
Apartment Complex
Stockton, CA 3,203 545 4,914 479 545 5,393 5,938 2,413 1980 3/31/83 5-30 yrs
Apartment Complex
Boulder, CO 8,594 2,036 8,747 1,921 2,036 10,668 12,704 4,948 1974 2/17/83 5-30 yrs
$15,957 $ 4,325 $19,911 $2,554 $4,325 $22,465 $26,790 $ 9,949
Notes:
(A) The aggregate cost of real estate owned at December 31, 1994 for Federal income tax purposes is approximately $26,436,000.
(B) See Note 5 of Notes to Financial Statements for a description of the debt encumbering the operating investment properties.
(C) Reconciliation of real estate owned:
December 31 December 31, December 31,
1994 1993 1992
Balance at beginning of year $ 38,581 $37,589 $36,764
Acquisitions and improvements 1,136 992 825
Dispositions (12,927) - -
Balance at end of year $ 26,790 $ 38,581 $37,589
(C) Reconciliation of accumulated depreciation:
Balance at beginning of year $ 11,066 $ 9,998 $ 8,948
Depreciation expense 1,110 1,068 1,050
Dispositions (2,227) - -
Balance at end of year $ 9,949 $ 11,066 $ 9,998
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the year ended March 31, 1995 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,493
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,074
<PP&E> 17,036
<DEPRECIATION> (5,577)
<TOTAL-ASSETS> 16,086
<CURRENT-LIABILITIES> 514
<BONDS> 6,962
<COMMON> 0
0
0
<OTHER-SE> 8,610
<TOTAL-LIABILITY-AND-EQUITY> 16,086
<SALES> 0
<TOTAL-REVENUES> 3,115
<CGS> 0
<TOTAL-COSTS> 2,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 718
<INCOME-PRETAX> 325
<INCOME-TAX> 0
<INCOME-CONTINUING> 325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325
<EPS-PRIMARY> 8.7
<EPS-DILUTED> 8.7
</TABLE>
