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 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: 0-12087
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2780287
(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 .
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 1995 and September 30, 1994
(Unaudited)
ASSETS
March 31 September 30
Cash and cash equivalents $ 1,689,720 $ 1,836,093
LIABILITIES AND PARTNERS' CAPITAL
Equity in losses in excess of
investments and advances in joint ventures $ 1,205,030 $ 861,816
Accounts payable and accrued expenses 19,506 23,726
Partners' capital 465,184 950,551
$ 1,689,720 $ 1,836,093
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1995 1994 1995 1994
REVENUES:
Interest income $25,517 $ 6,903 $50,195 $13,293
EXPENSES:
General and administrative 46,165 116,051 104,585 178,362
Operating loss (20,648) (109,148) (54,390) (165,069)
Partnership's share of
ventures' losses (220,712) (239,559) (430,977) (487,047)
NET LOSS $(241,360) $(348,707) $(485,367) $ (652,116)
Net loss per Limited
Partnership Unit $(6.84) $(9.88) $(13.76) $(18.48)
The above net loss per Limited Partnership Unit is based upon the 34,928 Units
of Limited Partnership Interest outstanding for each period.
See accompanying notes.
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the six months ended March 31, 1995 and 1994
(Unaudited)
General Limited
Partners Partners
Balance at September 30, 1993 $(203,020) $1,436,199
Net loss (6,521) (645,595)
BALANCE AT MARCH 31, 1994 $(209,541) $ 790,604
Balance at September 30, 1994 $(183,842) $ 1,134,393
Net loss (4,854) (480,513)
BALANCE AT MARCH 31, 1995 $ (188,696) $ 653,880
STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
1995 1994
Cash flows from operating activities:
Net loss $(485,367) $(652,116)
Adjustments to reconcile net loss to
net cash used for operating activities:
Partnership's share of ventures' losses 430,977 487,047
Changes in assets and liabilities:
Accounts payable - affiliates - (23,694)
Accounts payable and accrued expenses (4,220) (2,502)
Total adjustments 426,757 460,851
Net cash used for operating activities (58,610) (191,265)
Cash flows from investing activities:
Distributions from joint ventures 65,570 307,817
Additional investments in joint ventures (153,333) (586,132)
Net cash used for investing activities (87,763) (278,315)
Net decrease in cash and cash equivalents (146,373) (469,580)
Cash and cash equivalents, beginning of period 1,836,093 716,351
Cash and cash equivalents, end of period $1,689,720 $ 246,771
See accompanying notes.
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 September 30, 1994.
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.
2. Investments in Joint Ventures
As of March 31, 1995, the Partnership has investments in four joint
ventures which own operating properties as more fully described in the
Partnership's Annual Report (five at March 31, 1994). As discussed further
in the Annual Report, the Partnership's interest in the joint venture which
owned the Cambridge Apartments was liquidated subsequent to the venture's
sale of the operating investment property to an affiliate of the
Partnership's co-venture partner on June 30, 1994. The four remaining joint
venture investments are accounted for using the equity method because the
Partnership does not have a voting control interest in the ventures. Under
the equity method the assets, liabilities, revenues and expenses of the
joint ventures do not appear in the Partnership's financial statements.
Instead, the investments are carried at cost adjusted for the Partnership's
share of the ventures' earnings and losses and distributions.
Summarized operations of the joint ventures are as follows. Results for
the three and six months ended March 31, 1994 include the operations of the
Cambridge Apartments joint venture.
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three and six months ended March 31, 1995 and 1994
Three Months Ended Six Months Ended
March 31, March 31,
1995 1994 1995 1994
Rental revenues and
expense recoveries $2,865,000 $3,312,000 $5,664,000 $6,413,000
Interest and other income 21,000 112,000 175,000 258,000
2,886,000 3,424,000 5,839,000 6,671,000
Property operating expenses 1,366,000 1,778,000 2,706,000 3,327,000
Interest expense 1,236,000 1,305,000 2,472,000 2,649,000
Depreciation and
amortization 652,000 767,000 1,305,000 1,512,000
3,254,000 3,850,000 6,483,000 7,488,000
NET LOSS $(368,000) $(426,000) $(644,000) $(817,000)
Net loss:
Partnership's share of
combined loss $(221,000) $(240,000) $(431,000) $ (487,000)
Co-venturers' share of
combined loss (147,000) (186,000) (213,000) (330,000)
$(368,000) $(426,000) $(644,000) $(817,000)
3. Related Party Transactions
Included in general and administrative expenses for six months ended March
31, 1995 and 1994 is $43,030 and $49,854, 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 six months
ended March 31, 1995 and 1994 is $1,938 and $1,163, respectively,
representing fees earned by Mitchell Hutchins Institutional Investors, Inc.
for managing the Partnership's cash assets.
The General Partners and their affiliates are reimbursed for any direct
expenses of the Partnership incurred by the General Partners and their
affiliates on behalf of the Partnership.
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Occupancy at Bell Plaza Shopping Center increased to 78% at March 31, 1995
from 76% last quarter as one new shop space was leased and several critical
lease extensions were negotiated with existing tenants. Management continues to
actively pursue the re-leasing of the remaining 20,000 square feet of the former
Wal-Mart space as well as the other presently vacant space at the center.
During the quarter ended December 31, 1994, the Bell Plaza joint venture
obtained a six-month extension of the maturity date of its mortgage loan to June
1, 1995, in return for an extension fee of approximately $27,000. During the
current quarter, management obtained a commitment from a new lender which would
enable the venture to repay the outstanding debt obligation. This new non-
recourse first mortgage loan would be in the amount of $3,300,000. The loan
would bear interest equal to the rate on a seven-year U.S. Treasury Note at the
time of the closing plus 2.1% per annum. The loan would mature in seven years
and would require monthly principal and interest payments based upon a twenty-
five-year amortization schedule. The terms of the loan would allow a prepayment
of the principal balance after the end of one year. The joint venture paid
$33,000 to obtain this commitment, with an additional $33,000 due at closing.
Management is confident that this refinancing will be successfully consummated
during the third quarter of fiscal 1995. However, completion of any refinancing
transaction remains subject to, among other things, final negotiation, lender
due diligence and the execution of final loan documents.
As discussed further in the Annual Report, local market conditions in the
Randallstown, Maryland area where the Carriage Hill Apartments property is
located, were sluggish throughout fiscal 1994. In addition, the venture
incurred higher than normal operating expenses due to the harsh winter of 1994.
During the second quarter of fiscal 1994, the property did not generate
sufficient cash flow to fully cover its debt service payments to the lender.
Consequently, the Carriage Hill joint venture entered into a forbearance
agreement with the lender which allowed the joint venture to pay less than the
full amount due each month through July 1994 in the event that cash flow was not
sufficient. In return, the joint venture agreed to, among other things, apply
for refinancing at a lower interest rate through a HUD-insured loan program. An
application for such financing was submitted in fiscal 1994. However, the
dramatic increase in market interest rate levels during calendar 1994 made this
refinancing plan economically unfeasible. Accordingly, management of the
venture went back to the existing lender to attempt to reach an agreement which
would allow the venture to bring the loan, which has a scheduled maturity date
of January 2022, current over a period of time. The lender agreed to an
additional forbearance period beginning in August 1994, whereby the venture was
required to make the full monthly payments due under the original mortgage loan
from August 1, 1994 forward and to repay the prior deferred payments and restore
certain required escrow deposits by October 31, 1994. Through December 31,1994,
the venture had made the full payments due under the mortgage loan since August,
but had requested additional time from the lender to make up the deferred
payments and restore the escrow deposits, an obligation which totalled
approximately $300,000. During the first quarter of fiscal 1995, the lender
agreed to give the venture until January 15, 1995 to bring the loan current.
During the second quarter, the Partnership and its co-venture partner each
contributed $150,000 to the venture, the proceeds of which were used to bring
the loan current under the terms of the forbearance agreement. Operations of
the property at the present time are sufficient to cover the amount of the
current payments required under the loan agreement. Net operating income
increased significantly during the second quarter of fiscal 1995 due to higher
rental rates and lower utility costs that resulted from the mild winter
experienced this year. Furthermore, as a result of the property's improved cash
flow and a slight decrease in long-term interest rates, a refinancing of the
property may now be achievable. Subsequent to the end of the quarter, the joint
venture obtained a commitment from HUD to refinance the existing first mortgage
loan secured by Carriage Hill. The new loan would reduce monthly debt service
requirements and would provide additional capital that could be used to convert
the gas utilities to individual metering for each apartment unit. This
conversion would transfer the utility payments to the tenants; thereby reducing
the property's future operating expenses. The new loan would also release from
the collateral a 17-acre parcel of excess land. This land could then be sold to
residential builders. Proceeds of any such sale, if completed, would be payable
primarily to the Partnership's co-venture partner in accordance with the terms
of the joint venture agreement. Completion of this refinancing transaction,
however, remains subject to, among other things, lender due diligence and the
execution of the final loan documents. Management hopes to complete this
refinancing by the end of fiscal 1995.
The average occupancy level at Seven Trails West Apartments was 94% for the
quarter, compared to 95% last quarter. Average rental rates increased 3.5% on
an annualized basis over the first quarter. In order to maintain the property
in competitive condition, the property's excess cash flow is being reinvested in
property improvements. As part of this program, more than $400,000 will be
reinvested in 1995 to complete repairs to balconies, sidewalks and retaining
walls, as well as to update unit interiors with new appliances and carpeting as
needed. It is expected that these improvements will facilitate a refinancing of
the first mortgage loan, which matures on February 1, 1996. Management is
working with several financial institutions to obtain proposals to refinance
this loan.
At March 31, 1995, the Partnership had cash and cash equivalents of
approximately $1,690,000. Such cash and cash equivalents will be utilized for
the working capital requirements of the Partnership and for future refinancing
expenses and capital contributions related to the Partnership's joint ventures.
The source of future liquidity and distributions to the partners is expected to
be from cash generated by the Partnership's income-producing properties and from
the proceeds received from the sale or refinancing of such properties or from
the sale of the Partnership's interests in the joint ventures. These 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, 1995
The Partnership's net loss for the second quarter of fiscal 1995 decreased
by approximately $107,000 when compared to the same period in the prior year.
The decrease in net loss was the result of an increase in interest income, a
decline in general and administrative expenses and a decrease in the
Partnership's share of ventures' losses. Interest income increased by
approximately $19,000 due to an increase in average cash reserve balances and an
increase in market interest rates. The Partnership added approximately $1.5
million to its cash reserves from the sale of the Cambridge Apartments in June
1994. General and administrative expenses declined by approximately $70,000
compared to the second quarter of fiscal 1994 due to certain expenditures
incurred in the prior year related to an independent valuation of the
Partnership's investment properties. The Partnership's share of ventures'
losses decreased by approximately $19,000 mainly due to increased revenues and
decreased operating expenses at Carriage Hill, which was offset by lower
revenues at Bell Plaza, as discussed further below.
Six Months Ended March 31, 1995
The Partnership's net loss decreased by approximately $167,000 for the six
months ended March 31, 1995, when compared to the same period in the prior year.
The decrease in net loss resulted from a decrease in the Partnership's share of
ventures' losses, an increase in interest income and a decrease in general and
administrative expenses. The decrease in the Partnership's share of ventures'
losses of approximately $56,000 resulted largely from a decrease in expenses and
an increase in rental revenues at Carriage Hill. Rental revenue increased
despite a slight decrease in occupancy as a result of higher rental rates.
Expenses decreased primarily due to lower utility costs that resulted from the
mild winter experienced this year. The decrease in expenses and increase in
rental revenues at Carriage Hill were partially offset by a decrease in rental
revenues at Bell Plaza. Rental revenues decreased due to a decline in occupancy
to 78% from 86% in the same period in the prior year. The increase in interest
income on Partnership cash reserves in the current period was due to a
significant increase in the balance of such reserves as a result of the
retention of approximately $1.5 million of the Cambridge sales proceeds and an
increase in interest rates earned. The decrease in general and administrative
expenses was due primarily to expenditures incurred during the prior year
related to an independent valuation of the Partnership's investment properties
in conjunction with refinancing and portfolio management efforts.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
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 Fifth Income Properties Fund, Inc., a wholly-owned
subsidiary of PaineWebber Group Inc. and Properties Associates, which are the
General Partners in the Partnership.
The amended complaint in the New York Limited Partnership Actions alleges
that, in connection with the sale of interests in PaineWebber Income Properties
Five Limited Partnership, PaineWebber, Fifth Income Properties Fund, 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
PaineWebber Income Properties Five Limited Partnership, also allege that
following the sale of the partnership interests, PaineWebber, Fifth Income
Properties Fund, Inc. and Properties Associates misrepresented financial
information about the Partnership's value and performance. The amended
complaint alleges that PaineWebber, Fifth Income Properties Fund, 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 Fifth Income Properties Fund, Inc., Properties Associates and its
affiliates for costs and liabilities in connection with this litigation. The
Managing General Partner intends to vigorously contest the allegations of the
action, and believes that the action will be resolved without material adverse
effect on the Partnership's financial statements, taken as a whole.
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.
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
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 INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
By: FIFTH INCOME PROPERTIES FUND, INC.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Date: May 12, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's interim financial statements for the six months ended March 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,689,720
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> (1,205,030)
<DEPRECIATION> 0
<TOTAL-ASSETS> 484,690
<CURRENT-LIABILITIES> 19,506
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 465,184
<TOTAL-LIABILITY-AND-EQUITY> 484,690
<SALES> 0
<TOTAL-REVENUES> 50,195
<CGS> 0
<TOTAL-COSTS> 104,585
<OTHER-EXPENSES> (430,977)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (485,367)
<INCOME-TAX> 0
<INCOME-CONTINUING> (485,367)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (485,367)
<EPS-PRIMARY> (13.76)
<EPS-DILUTED> (13.76)
</TABLE>
