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 QUARTER ENDED March 31, 2000
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: 0-17151
PAINEWEBBER/CMJ PROPERTIES LP
--------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2780288
-------- ----------
(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>
INDEPENDENT ACCOUNTANTS' REPORT
To the Partners
Paine Webber/CMJ Properties, LP:
We have reviewed the accompanying condensed balance sheet of Paine
Webber/CMJ Properties LP as of March 31, 2000 and the related condensed
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the three-month periods ended March 31, 2000 and 1999. These
condensed financial statements are the responsibility of the Partnership's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquires of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Paine Webber/CMJ Properties LP as of December
31, 1999, and the related statements of operations, changes in partners' capital
(deficit) and cash flows for the year then ended (not presented herein); and in
our report dated March 1, 2000, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying condensed balance sheet as of December 31, 1999 is fairly stated,
in all material respects, in relation to the balance sheet from which it has
been derived.
/s/ Reznick Fedder & Silverman
------------------------------
REZNICK FEDDER & SILVERMAN
Baltimore, Maryland
April 28, 2000
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
BALANCE SHEETS
March 31, 2000 and December 31, 1999
(In thousands of dollars)
(See Independent Accountants' Report)
ASSETS
March 31 December 31
--------- -----------
(Unaudited)
Cash and cash equivalents $ 3,190 $ 449
Investments in local limited
partnerships, at equity - -
--------- --------
$ 3,190 $ 449
========= ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 33 $ -
Accrued expenses 33 27
Partners' capital 3,124 422
--------- --------
$ 3,190 $ 449
========= ========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended March 31, 2000 and 1999 (Unaudited)
(In thousands of dollars)
General Limited
Partner Partners Total
------- -------- -----
Balance at December 31, 1998 $ (74) $ 340 $ 266
Net income - 20 20
-------- --------- --------
Balance at March 31, 1999 $ (74) $ 360 $ 286
======== ========= ========
Balance at December 31, 1999 $ (72) $ 494 $ 422
Net income 72 2,630 2,702
-------- --------- --------
Balance at March 31, 2000 $ - $ 3,124 $ 3,124
======== ========= ========
See accompanying notes.
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
STATEMENTS OF OPERATIONS
For the three months ended March 31, 2000 and 1999 (Unaudited)
(In thousands of dollars, except per Unit amounts)
(See Independent Accountants' Report)
2000 1999
---- ----
Revenues:
Interest income $ 26 $ 3
Expenses:
Management fees 33 50
General and administrative 41 21
--------- --------
74 71
--------- --------
Operating loss (48) (68)
Gain on sale of local limited
partnership interests 2,711 -
Partnership's share of local limited
partnerships' income 39 88
--------- --------
Net income $ 2,702 $ 20
========= ========
Net income per Limited
Partnership Unit $300.73 $ 2.31
======= ======
The above net income per Limited Partnership Unit is based upon the 8,745
Limited Partnership Units outstanding for each period.
See accompanying notes.
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999 (Unaudited)
(In thousands of dollars)
(See Independent Accountants' Report)
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 2,702 $ 20
Adjustments to reconcile net income to net
cash used in operating activities:
Partnership's share of local limited
partnerships' income (39) (88)
Gain on sale of local limited partnership
interests (2,711) -
Changes in assets and liabilities:
Accounts payable - affiliates 33 (49)
Accrued expenses 6 10
-------- -------
Net cash used in operating activities (9) (107)
Cash flows from investing activities:
Proceeds from sale of local limited
partnership interests 2,750 -
-------- -------
Net increase (decrease) in cash and
cash equivalents 2,741 (107)
Cash and cash equivalents, beginning of period 449 341
-------- -------
Cash and cash equivalents, end of period $ 3,190 $ 234
======== =======
See accompanying notes.
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
NOTES TO 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 December 31, 1999. 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 require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of March 31, 2000 and December 31, 1999 and revenues and
expenses for the three months ended March 31, 2000 and 1999. Actual results
could differ from the estimates and assumptions used.
On February 15, 2000, the Partnership sold its interests in five of the
six real estate limited partnerships that it held: Holbrook Apartments Company,
which owns the Ramblewood Apartments in Holbrook, Massachusetts; Fawcett's Pond
Apartment Company, which owns the Village at Fawcett's Pond Apartments in
Hyannis, Massachusetts; Quaker Meadows Apartment Company, which owns the Quaker
Court Apartments and The Meadows Apartments in Lynn, Massachusetts; Marvin
Gardens Associates, which owns the Marvin Gardens Apartments in Cotati,
California; and Colonial Farms Ltd., which owns the Colonial Farms Apartments in
Modesto, California. The limited partnership interests were sold for total
consideration of $2,750,000 to affiliates of the operating general partners of
the local limited partnerships. The sales closed into escrow on February 15,
2000 pending the receipt of the required regulatory approvals from the various
lenders and state and federal housing agencies that subsidize the related
residential apartment properties. The sale proceeds were to be released to the
Partnership upon the receipt of all of the required regulatory approvals, but in
no event later than March 31, 2000. On March 1, 2000, the affiliated buyers
agreed to the release of the escrowed funds to the Partnership and indemnified
the Partnership for any approvals not yet received. As a result of these
transactions, the Partnership no longer has any interest in these five operating
investment properties. A special distribution of the net proceeds from these
sale transactions in the amount of $2,755,000, or $315.00 per original $1,000
investment, was made to the Limited Partners on April 7, 2000.
Notwithstanding the restrictions on the Partnership's ability to cause a
sale of the properties, the Partnership and the operating general partner of the
Villages at Montpelier limited partnership reached an informal agreement during
the third quarter of 1999 to initiate a joint marketing effort for the sale of
the Villages at Montpelier property, which no longer receives any government
subsidies. In July 1999, marketing proposals were requested from three real
estate brokerage firms with a strong background in selling apartment properties.
In August 1999, after a review of each company's proposals and their
capabilities to sell this property, the Partnership selected one of the firms
and negotiated an agreement with them to sell the property. Marketing materials
were prepared and comprehensive sale efforts began in early March 2000. A sale
of the Partnership's final asset, which management currently expects to complete
by the end of the second quarter of calendar year 2000, would be followed by an
orderly liquidation of the Partnership. Because a buyer of the Villages at
Montpelier property will either assume or prepay the existing HUD-insured
mortgage loan secured by the property, a sale transaction will require formal
HUD approval, which could take as long as 90-to-120 days after closing to
receive. Accordingly, the final distribution of proceeds from the sale of the
Villages at Montpelier property and the formal liquidation of the Partnership
may not be completed until the third quarter of 2000. Notwithstanding
management's expectations, there are no assurances that the disposition of the
remaining asset and a liquidation of the Partnership will be completed within
this time frame.
2. Related Party Transactions
- ------------------------------
The Adviser earned basic management fees of $33,000 and $50,000 during the
three-month periods ended March 31, 2000 and 1999, respectively. Accounts
payable - affiliates at March 31, 2000 consists of management fees of $33,000
payable to the Adviser.
Included in general and administrative expenses for the three-month
periods ended March 31, 2000 and 1999 is $10,000 and $9,000, respectively,
representing reimbursements to an affiliate of the Managing General Partner for
providing certain financial, accounting and investor communication services to
the Partnership.
Also included in general and administrative expenses for the three-month
periods ended March 31, 2000 and 1999 is $300 and $200, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
3. Local Limited Partnerships
- ------------------------------
The Partnership has an investment in one local limited partnership at
March 31, 2000 (six at December 31, 1999) which owns an operating investment
property, as discussed further in the Annual Report. As discussed in Note 1, the
Partnership sold its interests in five of the six local limited partnerships
that it had held on February 15, 2000. The Partnership recognized a gain of
$2,711,000 during the quarter ended March 31, 2000 in connection with these sale
transactions. The local limited partnerships are accounted for on the equity
method. Under the equity method of accounting for limited partnership interests,
the investments are carried at cost adjusted for the Partnership's share of the
local limited partnership's earnings, losses and distributions. Losses in excess
of the investment in individual local limited partnerships are not recognized
currently, but rather, are offset against future earnings from such entities.
Distributions received from investments in limited partnerships with carrying
values of zero are recorded as other income in the Partnership's statements of
operations.
Summarized operating results of these local limited partnerships follow:
Condensed Combined Summary of Operations
For the three months ended March 31, 2000 and 1999
(In thousands of dollars)
2000 1999
---- ----
Rental revenues, including
government subsidies $ 1,842 $ 2,471
Interest income 51 24
------- -------
1,893 2,495
Property operating expenses 1,038 1,339
Interest expense 570 680
Depreciation and amortization 223 347
------- -------
1,831 2,366
------- -------
Net income $ 62 $ 129
======= =======
Net income:
Partnership's share of
combined operations $ 56 $ 116
Local partners' share of
combined operations 6 13
------- -------
$ 62 $ 129
======= =======
Reconciliation of Partnership's Share of Operations
For the three months ended March 31, 2000 and 1999
(In thousands of dollars)
2000 1999
---- ----
Partnership's share of combined
operations, as shown above $ 56 $ 116
Losses in excess of basis not
recognized by Partnership 27 19
Income offset with prior year
unrecognized losses (44) (47)
------- -------
Partnership's share of local limited
partnerships' income $ 39 $ 88
======= =======
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information Relating to Forward-Looking Statements
- --------------------------------------------------
The following discussion of financial condition includes forward-looking
statements which reflect management's current views with respect to future
events and financial performance of the Partnership. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified in Item 7 of the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1999 under the heading "Certain Factors Affecting Future
Operating Results," which could cause actual results to differ materially from
historical results or those anticipated. The words "believe," "expect,"
"anticipate," and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which were made based on facts and conditions as they existed as of
the date of this report. The Partnership undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Liquidity and Capital Resources
- -------------------------------
On February 15, 2000, PaineWebber/CMJ Properties LP ("the Partnership")
sold its interests in five of the six real estate limited partnerships that it
held: Holbrook Apartments Company, which owns the Ramblewood Apartments in
Holbrook, Massachusetts; Fawcett's Pond Apartment Company, which owns the
Village at Fawcett's Pond Apartments in Hyannis, Massachusetts; Quaker Meadows
Apartment Company, which owns the Quaker Court Apartments and The Meadows
Apartments in Lynn, Massachusetts; Marvin Gardens Associates, which owns the
Marvin Gardens Apartments in Cotati, California; and Colonial Farms Ltd., which
owns the Colonial Farms Apartments in Modesto, California. The limited
partnership interests were sold for total consideration of $2,750,000 to
affiliates of the operating general partners of the local limited partnerships.
The sales closed into escrow on February 15, 2000 pending the receipt of the
required regulatory approvals from the various lenders and state and federal
housing agencies that subsidize the related residential apartment properties.
The sale proceeds were to be released to the Partnership upon the receipt of all
of the required regulatory approvals, but in no event later than March 31, 2000.
On March 1, 2000, the affiliated buyers agreed to the release of the escrowed
funds to the Partnership and indemnified the Partnership for any approvals not
yet received. As a result of these transactions, the Partnership no longer has
any interest in these five operating investment properties. A special
distribution of the net proceeds from these sale transactions in the amount of
$2,755,000, or $315.00 per original $1,000 investment, was made to the Limited
Partners on April 7, 2000.
As previously reported, as a limited partner of the local limited
partnerships, the Partnership does not control property disposition decisions.
The partnership agreements state that the limited partner may cause the sale of
the assets of the local limited partnerships subsequent to June 30, 1995, but
not earlier than one year after it has given written notice to the operating
general partner of its intent to cause such sale, and only if, during such
one-year period, the operating general partner does not cause the sale of such
assets. If the operating general partner has not caused the assets of the
partnership to be sold within such one-year period, the limited partner may
cause such sale, but only after it has offered to sell such assets to the
operating general partner, and either the operating general partner does not
accept such offer within 90 days of receiving it, or the operating general
partner does not complete the sale in accordance with such offer after accepting
the terms. In October 1998, the Partnership gave the written notice described
above to the operating general partner of all six local limited partnerships
after meeting with representatives of the operating general partner to discuss
the Partnership's desire to liquidate its investments in the near term. With
regard to the five properties that were still receiving government subsidies,
the associated distributable cash flow restrictions, substantial capital reserve
requirements and regulatory reporting obligations, which are characteristic of
all subsidized low-income housing properties, significantly limited the pool of
potential buyers for these real estate assets. Furthermore, the uncertainty
regarding potential future reductions in the level of federal government
assistance for these programs further restricted the properties' marketability.
Consequently, a negotiated sale of the Partnership's interests in these
properties to the operating general partners, which receive management fee
revenues from the properties through an affiliated management company, was
deemed to be in the best interests of the Limited Partners.
Notwithstanding the restrictions on the Partnership's ability to cause a
sale of the properties, the Partnership and the operating general partner of the
Villages at Montpelier limited partnership reached an informal agreement during
the third quarter of 1999 to initiate a joint marketing effort for the sale of
the Villages at Montpelier property, which no longer receives any government
subsidies. In July 1999, marketing proposals were requested from three real
estate brokerage firms with a strong background in selling apartment properties.
In August 1999, after a review of each company's proposals and their
capabilities to sell this property, the Partnership selected one of the firms
and negotiated an agreement with them to sell the property. Marketing materials
were prepared and comprehensive sale efforts began in early March 2000. A sale
of the Partnership's final asset, which management currently expects to complete
by the end of the second quarter of calendar year 2000, would be followed by an
orderly liquidation of the Partnership. Because a buyer of the Villages at
Montpelier property will either assume or prepay the existing HUD-insured
mortgage loan secured by the property, a sale transaction will require formal
HUD approval, which could take as long as 90-to-120 days after closing to
receive. Accordingly, the final distribution of proceeds from the sale of the
Villages at Montpelier property and the formal liquidation of the Partnership
may not be completed until the third quarter of 2000. Notwithstanding
management's expectations, there are no assurances that the disposition of the
remaining asset and a liquidation of the Partnership will be completed within
this time frame.
At March 31, 2000, the Partnership had available cash and cash equivalents
of approximately $3,190,000, of which $2,755,000 was distributed to the Limited
Partners on April 7, 2000. The Partnership will use the remainder of such cash
and cash equivalents for its working capital requirements and distributions to
the partners. The source of future liquidity and distributions to the partners
is expected to be from cash generated from the operations of the Partnership's
remaining real estate investment and from the proceeds received from the sale or
refinancing of the property or from the sale of the Partnership's interest in
the last local limited partnership. Such sources of liquidity are expected to be
sufficient to meet the Partnership's needs on both a short-term and long-term
basis.
Results of Operations
Three Months Ended March 31, 2000
- ---------------------------------
For the quarter ended March 31, 2000, the Partnership reported net income
of $2,702,000, as compared to net income of $20,000 for the same period in the
prior year. The $2,682,000 increase in the Partnership's net income was
primarily a result of the gain of $2,711,000 realized in the current period from
the sale of the five local limited partnership interests discussed further
above. In addition, the Partnership's operating loss decreased by $20,000 for
the three months ended March 31, 2000. The decrease in the Partnership's
operating loss was mainly due to an increase in interest income of $23,000 and a
decrease in management fees of $17,000. Interest income increased to due
interest earned on the sale proceeds of the five local limited partnerships
which were temporarily invested in money market instruments pending the special
distribution to the Limited Partners. Management fees, which are based on the
Partnership's invested assets, decreased due to the sale of the five local
limited partnership interests on February 15, 2000. The increase in interest
income and the decrease in management fee expense were partially offset by an
increase in general and administrative expenses of $20,000 for the current
three-month period. General and administrative expenses increased mainly due to
certain legal fees incurred in conjunction with the Partnership's planned
liquidation.
The gain realized on the sale of the five local limited partnership
interests and the decrease in the Partnership's operating loss were partially
offset by a $49,000 decline in the Partnership's share of local limited
partnerships' income. The decrease in the Partnership's share of local limited
partnerships' income was the result of declines in the Partnership's share of
income from the Ramblewood Apartments and Fawcett's Pond partnerships in the
current three-month period. As discussed further in the notes to the
accompanying financial statements, under the equity method of accounting for
limited partnership interests, the Partnership does not record losses from
investment properties when losses exceed the Partnership's equity method basis
in these properties, and future income is recognized only when it exceeds the
previously unrecorded losses. Net income at the Ramblewood Apartments
partnership decreased due to only one and a half months of operations being
included in the current period due to the sale of the investment in February
2000. The Fawcett's Pond income in the current period was applied against a
carried forward loss from the second half of 1999. Overall, the combined net
income of the six local limited partnerships decreased from net income of
$129,000 for the three months ended March 31, 1999 to net income of $62,000 for
the three months ended March 31, 2000. This decline in net income was primarily
due to the sale of the five limited partnership interests on February 15, 2000.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings. NONE
- --------------------------
Item 2 through 5. NONE
- -----------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
A Current Report on Form 8-K dated February 15, 2000 was filed by the
registrant to report the sale of five local limited partnership interests and is
hereby incorporated herein by reference.
<PAGE>
PAINE WEBBER/CMJ PROPERTIES, LP
SIGNATURE
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/CMJ PROPERTIES, LP
By: PW SHELTER FUND, INC.
------------------------
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Dated: May 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended March 31,
2000 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 3,190
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,190
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,190
<CURRENT-LIABILITIES> 66
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,124
<TOTAL-LIABILITY-AND-EQUITY> 3,190
<SALES> 0
<TOTAL-REVENUES> 2,776
<CGS> 0
<TOTAL-COSTS> 74
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,702
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,702
<EPS-BASIC> 300.73
<EPS-DILUTED> 300.73
</TABLE>
