UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number : 0-10995
PAINE WEBBER GROWTH PROPERTIES LP
(Exact name of registrant as specified in its charter)
Delaware 04-2772109
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and March 31, 1996 (Unaudited)
(In thousands)
ASSETS
December 31 March 31
----------- --------
Operating investment property, at cost:
Land $ 2,029 $ 2,029
Buildings, improvements and equipment 13,940 13,827
--------- ---------
15,969 15,856
Less accumulated depreciation (6,778) (6,263)
--------- ---------
9,191 9,593
Investments in unconsolidated joint
ventures, at equity 886 987
Cash and cash equivalents 1,482 1,323
Real estate tax and insurance escrow deposits 203 247
Capital improvement and replacement escrow 239 271
Accounts receivable 3 1
Deferred loan costs, net 483 496
Other assets 24 61
--------- ---------
$ 12,511 $ 12,979
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 209 $ 266
Accrued interest payable 253 211
Advances from consolidated venture - 250
Tenant security deposits 16 18
Other liabilities 25 27
Mortgage note payable 6,832 6,890
Partners' capital 5,176 5,317
--------- ---------
$ 12,511 $ 12,979
========= =========
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended December 31, 1996 and 1995 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Nine Months Ended
December 31 December 31,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rental income $ 521 $ 514 $ 1,523 $ 1,511
Reimbursements from affiliates 39 50 127 146
Interest and other income 43 79 112 195
------ ------- ------- --------
603 643 1,762 1,852
Expenses:
Property operating expenses 235 267 720 815
Depreciation 181 169 515 506
Interest expense 144 146 435 438
Real estate taxes 49 56 161 167
Management fees 8 8 24 26
General and administrative 39 73 139 271
------- ------- ------- --------
656 719 1,994 2,223
------- ------- ------- --------
Operating loss (53) (76) (232) (371)
Venture partner's share of
consolidated venture's operations - 1 2 3
Partnership's share of unconsolidated
ventures' income 162 41 327 170
------ -------- ------- --------
Net income (loss) $ 109 $ (34) $ 97 $ (198)
====== ======== ======= ========
Net income (loss) per
Limited Partnership Unit $3.69 $(0.91) $3.28 $(6.71)
===== ====== ===== ======
Cash distributions per
Limited Partnership Unit $2.69 $ 3.01 $8.07 $99.30
===== ====== ===== ======
The above net income (loss) and cash distributions per Limited Partnership Unit
are based upon the 29,194 Units of Limited Partnership Interest outstanding
during each period.
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended December 31, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at March 31, 1995 $ - $ 8,610
Cash distributions (3) (2,889)
Net loss (2) (196)
-------- --------
Balance at December 31, 1995 $ (5) $ 5,525
======== ========
Balance at March 31, 1996 $ (6) $ 5,323
Cash distributions (2) (236)
Net income 1 96
-------- --------
Balance at December 31, 1996 $ (7) $ 5,183
======== ========
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ 97 $ (198)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Reimbursements from affiliates (127) (146)
Venture partner's share of consolidated
venture's operations (2) (3)
Partnership's share of unconsolidated
ventures' income (327) (170)
Depreciation 515 506
Amortization of deferred loan costs 13 13
Changes in assets and liabilities:
Real estate tax and insurance escrow deposit 44 34
Accounts receivable (2) (5)
Other assets 37 16
Accounts payable and accrued expenses (57) (85)
Accrued interest payable 42 42
Advances from consolidated venture (250) -
Other liabilities - (4)
Tenant security deposits (2) (5)
-------- ---------
Total adjustments (116) 193
-------- ---------
Net cash used in operating activities (19) (5)
-------- ---------
Cash flows from investing activities:
Contributions to unconsolidated joint ventures (1) -
Distributions from unconsolidated joint ventures 556 580
Net withdrawals from capital
improvement and replacement escrow 32 46
Additions to operating investment property (113) (70)
-------- --------
Net cash provided by investing activities 474 556
-------- --------
Cash flows from financing activities:
Principal payments on mortgage note payable (58) (53)
Distributions to partners (238) (2,892)
--------- ---------
Net cash used in financing activities (296) (2,945)
--------- ---------
Net increase (decrease) in cash and cash equivalents 159 (2,394)
Cash and cash equivalents, beginning of period 1,323 3,493
-------- ---------
Cash and cash equivalents, end of period $ 1,482 $ 1,099
======== ========
Cash paid during the period for interest $ 380 $ 383
========= =========
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
Notes to Consolidated Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should
be read in conjunction with the financial statements and footnotes contained
in the Partnership's Annual Report for the year ended March 31, 1996. In the
opinion of management, the accompanying financial statements, which have not
been audited, reflect all adjustments necessary to present fairly the
results for the interim period. All of the accounting adjustments reflected
in the accompanying interim financial statements are of a normal recurring
nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles which requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of December 31, 1996 and March 31, 1996
and revenues and expenses for each of the three- and nine-month periods
ended December 31, 1996 and 1995. Actual results could differ from the
estimates and assumptions used.
2. Investments in Unconsolidated Joint Ventures
The Partnership has investments in four unconsolidated joint ventures at
December 31, 1996 and 1995. Three of the unconsolidated joint ventures own
and operate residential apartment complexes. As discussed further in the
Annual Report, one unconsolidated joint venture (Parkwoods) had owned and
operated a residential apartment complex until the property was completely
destroyed by a fire in October of 1991. On April 15, 1994, this venture sold
the land at the former site of the Parkwoods apartment complex to an
affiliate of the Partnership's co-venture partner for $4,750,000. Despite
the sale of the remaining real property, the Parkwoods joint venture has not
been liquidated to date due to certain outstanding legal matters related to
the aforementioned fire.
On December 23, 1994, Austin Northcastle Partners, a joint venture in
which the Partnership had an interest, sold the property known as the
Northcastle Apartments, located in Austin, Texas, to an unrelated 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 $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. On June 15, 1995,
the Partnership 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.
The unconsolidated joint ventures are accounted for on the equity method
in the Partnership's financial statements because the Partnership does not
have a voting control interest in these ventures. Under the equity method
the investments are carried at cost adjusted for the Partnership's share of
the venture's earnings, losses and distributions. The Partnership's policy
is to recognize its share of ventures' operations three months in arrears.
<PAGE>
Summarized operations of the unconsolidated joint ventures, for the
periods indicated, are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three and nine months ended September 30, 1996 and 1995
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
Rental revenues and
expense recoveries $1,199 $1,175 $ 3,544 $ 3,483
Interest and other income 33 37 83 99
------ ------ ------- -------
1,232 1,212 3,627 3,582
Property operating expenses 581 571 1,626 1,596
Interest expense 265 395 1,050 1,188
Depreciation 224 216 632 648
------- ------ ------- -------
1,070 1,182 3,308 3,432
------- ------ ------- -------
Net income $ 162 $ 30 $ 319 $ 150
======= ====== ======= =======
Net income:
Partnership's share of
combined income (losses) $ 162 $ 41 $ 327 $ 170
Co-venturers' share of
combined income (losses) - (11) (8) (20)
------- ------ ------- -------
$ 162 $ 30 $ 319 $ 150
======= ====== ======= =======
3. Operating Investment Property
The Partnership has a controlling interest in one joint venture, Nob
Hill Partners, which owns Nob Hill Apartments, a 368-unit apartment complex
located in San Antonio, Texas. As explained further in the Annual Report,
during fiscal 1993 the Partnership assumed control over the affairs of the
joint venture 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. Accordingly, the
accompanying financial statements present the financial position, results of
operations and cash flows of this joint venture on a consolidated basis. The
joint venture had a year-end of December 31 for both tax and financial
reporting purposes. Accordingly, the Partnership's policy is to report the
consolidated results of the joint venture on a three-month lag.
During the quarter ended June 30, 1996, a purchase and sale agreement
was signed with a prospective third-party buyer to sell the Nob Hill
Apartments for a price of $10 million. In October 1996, the terms of the
agreement were amended to reflect a reduction in the purchase price to $9.5
million. The transaction closed subsequent to the end of the third quarter,
on February 7, 1997. While the transaction has been executed and control of
the property has been transferred to the buyer, the sale remains contingent
upon receiving the consent of the Secretary of Housing and Urban Development
("HUD") to the sale and the assumption of the loan by the purchaser. Such
final approval has not been received to date, but management expects such
approval to be forthcoming by early April 1997. The sale generated net
proceeds of approximately $2.3 million which was distributed to the
Partnership, to be held pending receipt of the formal approval referred to
above. In addition the venture had excess working capital of approximately
$214,000 at the time of the sale. All of the net proceeds and excess working
capital are due to the Partnership under the terms of the Nob Hill joint
venture agreement. The Partnership is expected to make a special
distribution of $100 per original $1,000 investment subsequent to receiving
the final HUD approval. Of this amount, approximately $84 would represent
the net proceeds from the sale of the Nob Hill Apartments and $16 would
represent a distribution of Partnership reserves which exceed expected
future requirements.
<PAGE>
The following is a summary of property operating expenses for the
consolidated Nob Hill joint venture for the three and nine months ended
September 30, 1996 and 1995 (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
Repairs and maintenance $ 32 $ 81 $ 110 $ 228
Utilities 29 39 99 103
Management fees 21 22 63 63
Insurance 15 15 46 44
Administrative and other 138 110 402 377
----- ----- ------ ------
$ 235 $ 267 $ 720 $ 815
===== ===== ====== ======
4. Related Party Transactions
The Partnership accrues as income reimbursements due from certain of the
joint ventures for the Partnership's management fees and certain
out-of-pocket expenses, as specified in the respective joint venture
agreements. Such reimbursements totalled $127,000 and $146,000 for the nine
months ended December 31, 1996 and 1995, respectively.
The Adviser earns management fees equal to approximately 10% of the
Distributable Cash generated by the Partnership, as defined, subject to
certain limitations. Such management fees totalled $24,000 and $26,000 for
the nine months ended December 31, 1996 and 1995, respectively.
Included in general and administrative expenses for the nine months
ended December 31, 1996 and 1995 is $64,000 and $70,000, 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 $3,000 and $5,000 (included in general and administrative
expenses) for managing the Partnership's cash assets during the nine months
ended December 31, 1996 and 1995, respectively.
5. Mortgage Note Payable
Mortgage note payable at December 31, 1996 and March 31, 1996 consists
of the following debt of Nob Hill Partners, the Partnership's consolidated
joint venture (in thousands):
December 31 March 31
----------- --------
7.375% mortgage note payable
secured by the Nob Hill
operating property. The fair
value of the mortgage note
payable approximated its
carrying value as of September
30, 1996 and December 31,
1996. $6,832 $6,890
The above debt obligation represents a nonrecourse mortgage note payable
to a third party and insured by the U.S. Department of Housing and Urban
Development (HUD). The principal and interest on the note are to be paid in
monthly installments of approximately $49,000 commencing December 1, 1993,
until maturity on November 1, 2023. In addition, the property is required to
submit monthly escrow deposits of approximately $29,000 for taxes, insurance
and a replacement reserve required under the terms of the HUD regulatory
agreement. As discussed further in Note 3, subsequent to the end of the
third quarter of fiscal 1997, Nob Hill Partners sold its operating
investment property, subject to the assumption of the mortgage indebtedness,
and distributed the net proceeds to the Partnership.
6. Contingencies
As discussed in more detail in the Annual Report for the year ended
March 31, 1996, the Partnership is involved in certain legal actions. At
the present time, the Managing General Partner is unable to determine what
impact, if any, the resolution of these matters may have on the
Partnership's financial statements, taken as a whole.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
As previously reported, during the first quarter of fiscal 1997, the
Partnership signed a purchase and sale agreement with a prospective third-party
buyer to sell the Nob Hill Apartments for a price of $10 million. In October
1996, the terms of the agreement were amended to reflect a reduction in the
purchase price to $9.5 million as a result of certain required repair work at
the property. The transaction closed subsequent to the end of the third quarter,
on February 7, 1997, and the Partnership received net proceeds from the sale of
approximately $2.3 million. In addition, the venture had excess working capital
of approximately $214,000 at the time of the sale. All of the proceeds were
distributed to the Partnership in accordance with the terms of the Nob Hill
joint venture agreement, to be held pending receipt of the formal approval
referred to below. The Partnership's original investment in the Nob Hill joint
venture totalled approximately $5 million. Despite receiving less than 50% of
the Partnership's original investment, management believes that the sale price
is reflective of the market value of the property and that it was an appropriate
time to sell the investment property. While the Nob Hill property was 93%
occupied for the quarter ended December 31, 1996, development of a significant
number of new multi-family units was underway at the time of the sale. Increased
competition had begun to result in pressure to reduce rental rates or use rent
concessions as leasing incentives to maintain occupancy levels and market share.
In addition, despite the recent extensive capital improvement program at the
property, the property's age required that ongoing capital expenditures be made
to maintain the property's competitive condition. As a result of these
circumstances, management believed that the value of this 25-year-old, 368-unit,
San Antonio, Texas apartment complex was at or near its peak for the current
market cycle. While the sale has been executed and control of the property has
been transferred to the buyer, the sale remains contingent upon receiving the
consent of the Secretary of Housing and Urban Development ("HUD") to the sale of
the property and the assumption of the loan by the purchaser. Such final
approval, which should be a mere formality, has not been received to date, but
management expects such approval to be forthcoming by early April 1997. The
Partnership is expected to make a special distribution to the Limited Partners
of $2.9 million, or $100 per original $1,000 investment, subsequent to receiving
the final HUD approval. Of this amount, approximately $84 would represent the
net proceeds from the sale of the Nob Hill Apartments and $16 would represent a
distribution of Partnership reserves which exceed expected future requirements.
Distributions for the third fiscal quarter are $4.04 per Unit, which is
equivalent to a 3% annualized rate of return on the $538 remaining portion of an
original $1,000 investment. This is an increase from the 2% annual rate paid
last quarter and is the result of the improved operating performance of the
properties in the Partnership's portfolio and a reduction in debt service costs
achieved from the August 1996 refinancing of the Tantra Lake mortgage loan.
Subsequent to the expected distribution of the Nob Hill sale proceeds and excess
Partnership reserves discussed further above, the Partnership's distribution
rate is expected to increase to 4.25% per annum on the $438 remaining portion of
an original $1,000 investment.
The sale of the Nob Hill Apartments has positioned the Partnership for a
possible liquidation within the next 2-to-3 years. The Partnership has ownership
interests in three remaining apartment properties located in the markets of
Boulder, Colorado (Tantra Lake), greater Dallas, Texas (Chisholm Place) and
Stockton, California (Grouse Run). The Boulder market remains strong at the
present time due to a history of healthy population growth, a stable employment
base and an established public policy to limit new apartment construction. The
Partnership has received some unsolicited interest from prospective buyers for
the Tantra Lake Apartments. Management expects to explore the potential for a
sale of the property during calendar 1997. Despite a fairly significant amount
of new construction coming on-line in the greater Dallas market during fiscal
1997, the performance of the Chisholm Place Apartments has remained strong due
to the property's larger unit sizes, its excellent location and is
well-maintained physical appearance. Management is currently analyzing the
potential for near term appreciation in the value of the Chisholm Place property
to determine the appropriate timing for the disposition of this asset.
Management has been able to maintain high occupancy levels at Grouse Run (94%
for the quarter ended December 31, 1996) by offering various rental concessions
in recent years. As a result of the difficult local market conditions in
Stockton, which continue to affect the Grouse Run property, the disposition of
this investment will likely depend mostly on the timing of the sales of Tantra
Lake and Chisholm Place. Management's hold versus sell decisions for its
remaining investments will continue to be based upon an assessment of the best
expected overall returns to the Limited Partners. <PAGE>
The $8.5 million first mortgage loan secured by the Tantra Lake
Apartments was scheduled to mature on July 1, 1996. As discussed further in the
Annual Report, management's goal was to structure a replacement loan with the
flexibility to permit a future sale of the property in the event that a
liquidation of the Partnership is pursued over the next 2-to-3 years, as
discussed further above. On August 6, 1996, the Partnership closed on a new loan
for the Tantra Lake joint venture and the existing first mortgage loan was
repaid in full. The new mortgage loan, in the principal amount of $8,850,000,
bears interest at 7.68% per annum, requires interest-only payments throughout
its term and is scheduled to mature on September 1, 2001. The terms of the new
loan reduce Tantra Lake's required annual debt service by more than $300,000
which has significantly improved cash flow to the Partnership from this
investment. In addition, the new loan is assumable upon a sale and allows for
prepayment in full at any time. A penalty tied to a yield maintenance
calculation would be charged for any prepayment in the first two years of the
term. Thereafter, a penalty equal to 1% of the outstanding principal balance
would be due in conjunction with any prepayment transaction.
As discussed further in the Annual Report, management had filed for a
refund of approximately $450,000 in costs incurred to secure the necessary
building permits which were obtained prior to the sale of the land underlying
the former Parkwoods Apartments from a federal agency responsible for
administering federal aid in connection with the 1991 Oakland fire. An agreement
was reached during the second quarter of fiscal 1996 to a release schedule for
money previously funded by the Parkwoods joint venture to pay for building
permits. The joint venture received a partial refund of such expenses totalling
approximately $146,000 in December 1995. However, the federal agency has
subsequently denied the joint venture's claim for a refund of the remaining
$300,000 in costs incurred. Management believes that the joint venture is
entitled to a full refund of the costs incurred and continues to vigorously
pursue the refund. Presently, there are no assurances that any amounts will be
recovered.
At December 31, 1996, the Partnership and its consolidated joint venture
had available cash and cash equivalents of approximately $1,482,000. Such cash
and cash equivalents, along with future cash flow distributions from the
Partnership's operating properties, will be used for the working capital needs
of the Partnership, 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. The source of future liquidity and
distributions to the partners is expected to be through proceeds received from
the sales or refinancings of the remaining investment properties. Such sources
of liquidity are expected to be adequate to cover the Partnership's needs on
both a short-term and long-term basis.
Results of Operations
Three Months Ended December 31, 1996
- ------------------------------------
The Partnership reported net income of $109,000 for the three-month period
ended December 31, 1996 as compared to a net loss of $34,000 for the same period
in the prior year. This $143,000 favorable change in net operating results is
due to a $121,000 increase in the Partnership's share of unconsolidated
ventures' income and a $23,000 decrease in the Partnership's operating loss. The
Partnership's share of unconsolidated ventures' income increased mainly due to
increases of $84,000 and $57,000 in the net income of the Tantra Lake and
Chisholm Place joint ventures, respectively. The increase in net income at
Tantra Lake can be primarily attributed to a decrease in interest expense of
$129,000, when compared to the same period in the prior year. Interest expense
decreased as a result of the August 1996 refinancing discussed further above.
Small increases in utilities, depreciation, insurance, and maintenance expenses
partially offset the decrease in Tantra Lake's interest expense. Net income at
Chisholm Place increased mainly due to decreases in maintenance expense and real
estate taxes of $31,000 and $11,000, respectively, and an increase in rental
income of $13,000. Rental income at Chisholm Place increased due to an increase
in average rental rates.
The Partnership's operating loss decreased mainly due to declines in
general and administrative expenses of $34,000 and property operating expenses
of $32,000. General and administrative expenses decreased due to a reduction in
certain required professional services, when compared to the same period in the
prior year. Property operating expenses of the consolidated Nob Hill venture
decreased mainly due to the extensive capital maintenance program implemented at
the Nob Hill Apartments in the prior year to prepare the property for sale. The
decreases in general and administrative expenses and property operating expenses
were partially offset by a decline in interest and other income of $36,000.
Other income decreased mainly due to certain insurance proceeds received in the
prior year relating to repair costs incurred at the Northcastle Apartments
during 1993.
<PAGE>
Nine Months Ended December 31, 1996
- -----------------------------------
The Partnership reported net income of $97,000 for the nine-month period
ended December 31, 1996 as compared to a net loss of $198,000 for the same
period in the prior year. This $295,000 favorable change in net operating
results is due to a $157,000 increase in the Partnership's share of
unconsolidated ventures' income and a $139,000 decrease in the Partnership's
operating loss. The Partnership's share of unconsolidated ventures' income
increased mainly due to increases of $136,000 and $53,000 in the net income at
the Tantra Lake and Chisholm Place joint ventures, respectively. The increase in
net income at Tantra Lake can be primarily attributed to a decrease in interest
expense of $135,000, when compared to the same period in the prior year.
Interest expense decreased as a result of the August 1996 refinancing discussed
further above. Net income at Chisholm Place increased mainly as a result of
declines in real estate taxes and maintenance expense of $34,000 and $15,000,
respectively, and an increase in rental income of $32,000. Rental income at
Chisholm Place increased due to an increase in the rental rates. Small increases
in utilities and insurance expenses partially offset the favorable changes in
Chisholm Place's net income.
The Partnership's operating loss decreased mainly due to declines in
general and administrative expenses of $132,000 and property operating expenses
of $95,000. General and administrative expenses decreased largely due to a
reduction in certain required professional services when compared to the same
period in the prior year. Property operating expenses of the consolidated Nob
Hill joint venture decreased mainly due to the extensive capital maintenance
program implemented at the Nob Hill Apartments in the prior year to prepare the
property for sale. The decreases in general and administrative expenses and
property operating expenses were partially offset by a decline in interest and
other income of $83,000. Other income decreased mainly due to certain insurance
proceeds received in the prior year relating to repair costs incurred at the
Northcastle Apartments during 1993. Interest income decreased mainly due to a
significant decrease in the Partnership's average outstanding cash balance for
the current nine-month period due to the temporary investment of the proceeds
from the sale of the Northcastle property during the prior year.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As discussed in prior quarterly and annual reports, in November 1994 a
series of purported class actions (the "New York Limited Partnership Actions")
were filed in the United States District Court for the Southern District of New
York concerning PaineWebber Incorporated's sale and sponsorship of 70 limited
partnership investments, including those offered by the Partnership. The
lawsuits were brought against PaineWebber Incorporated and Paine Webber Group
Inc. (together "PaineWebber"), among others, by allegedly dissatisfied
partnership investors. In March 1995, after the actions were consolidated under
the title In re PaineWebber Limited Partnership Litigation, the plaintiffs
amended their complaint to assert claims against a variety of other defendants,
including 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.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which has been preliminarily approved by the court and provides for the complete
resolution of the class action litigation, including releases in favor of the
Partnership and the General Partners, and the allocation of the $125 million
settlement fund among investors in the various partnerships at issue in the
case. As part of the settlement, PaineWebber also agreed to provide class
members with certain financial guarantees relating to some of the partnerships.
The details of the settlement are described in a notice mailed directly to class
members at the direction of the court. A final hearing on the fairness of the
proposed settlement was held in December 1996, and a ruling by the court as a
result of this final hearing is currently pending.
With regard to the Abbate action described in the Annual Report on Form
10-K for the year ended March 31, 1996, in September 1996, the court dismissed
many of the plaintiffs' claims as barred by applicable securities arbitration
regulations. Mediation with respect to the Abbate action was held in December
1996. As a result of such mediation, a tentative settlement between PaineWebber
and the plaintiffs was reached which would provide for complete resolution of
such action. PaineWebber anticipates that releases and dismissals with regard to
this action will be received by February 1997.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
discussed above. However, PaineWebber has agreed not to seek indemnification for
any amounts it is required to pay in connection with the settlement of the New
York Limited Partnership Actions. At the present time, the General Partners
cannot estimate the impact, if any, of the potential indemnification claims on
the Partnership's financial statements, taken as a whole. Accordingly, no
provision for any liability which could result from the eventual outcome of
these matters has been made in the accompanying financial statements of the
Partnership.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K: No reports on Form 8-K have been filed by the
registrant during the quarter for which this report is filed.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES LP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAINE WEBBER GROWTH PROPERTIES LP
By: FIRST PW GROWTH PROPERTIES, INC.
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Date: February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended December
31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,482
<SECURITIES> 0
<RECEIVABLES> 3
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,927
<PP&E> 16,855
<DEPRECIATION> 6,778
<TOTAL-ASSETS> 12,511
<CURRENT-LIABILITIES> 478
<BONDS> 6,832
0
0
<COMMON> 0
<OTHER-SE> 5,176
<TOTAL-LIABILITY-AND-EQUITY> 12,511
<SALES> 0
<TOTAL-REVENUES> 2,089
<CGS> 0
<TOTAL-COSTS> 1,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435
<INCOME-PRETAX> 97
<INCOME-TAX> 0
<INCOME-CONTINUING> 97
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97
<EPS-PRIMARY> 3.28
<EPS-DILUTED> 3.28
</TABLE>
