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 JUNE 30, 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
June 30, 1995 and September 30, 1994
(Unaudited)
ASSETS
June 30 September 30
Cash and cash equivalents $ 1,548,749 $ 1,836,093
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Equity in losses in excess of investments and
advances in joint ventures $ 1,806,689 $ 861,816
Accounts payable and accrued expenses 18,349 23,726
Partners' capital (deficit) (276,289) 950,551
$ 1,548,749 $ 1,836,093
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended June 30, 1995 and 1994
(Unaudited)
General Limited
Partner Partners
Balance at September 30, 1993 $(203,020) $1,436,199
Net income 21,158 2,094,685
BALANCE AT JUNE 30, 1994 $(181,862) $3,530,884
Balance at September 30, 1994 $(183,842) $1,134,393
Net loss (12,268) (1,214,572)
BALANCE AT JUNE 30, 1995 $(196,110) $ (80,179)
See accompanying notes.
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three and nine months ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
REVENUES:
Interest income $ 24,094 $ 32,702 $ 74,289 $ 45,995
EXPENSES:
General and administrative 142,974 89,249 247,559 267,611
Operating loss (118,880) (56,547) (173,270) (221,616)
Partnership's share of
ventures'
income (losses) (156,345) 2,824,506 (587,322) 2,337,459
Income (loss) before
extraordinary item (275,225) 2,767,959 (760,592) 2,115,843
Partnership's share of
extraordinary
loss on early
extinguishment
of debt (466,248) - (466,248) -
NET INCOME (LOSS) $(741,473) $2,767,959 $(1,226,840) $2,115,843
Per Limited Partnership Unit:
Income (loss) before
extraordinary item $ (7.79) $78.46 $(21.55) $ 59.97
Partnership's share of
extraordinary loss
on early extinguishment
of debt (13.22) - (13.22) -
Net income (loss) $(21.01) $78.46 $(34.77) $59.97
The above per Limited Partnership Unit information 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 CASH FLOWS
For the nine months ended June 30, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
1995 1994
Cash flows from operating activities:
Net income (loss) $ (1,226,840)$ 2,115,843
Adjustments to reconcile net income (loss) to
net cash used for operating activities:
Partnership's share of ventures' income (losses) 587,322 (2,337,459)
Partnership's share of extraordinary loss
on early extinguishment of debt 466,248 -
Changes in assets and liabilities:
Accounts payable - affiliates - (23,694)
Accounts payable and
accrued expenses (5,377) (3,754)
Total adjustments 1,048,193 (2,364,907)
Net cash used for operating activities (178,647) (249,064)
Cash flows from investing activities:
Distributions from joint ventures 115,569 4,165,229
Additional investments in joint ventures (224,266) (586,132)
Net cash provided by
(used for) investing activities (108,697) 3,579,097
Net increase (decrease) in
cash and cash equivalents (287,344) 3,330,033
Cash and cash equivalents, beginning of period 1,836,093 716,351
Cash and cash equivalents, end of period $ 1,548,749 $4,046,384
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 June 30, 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 June 30, 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 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 nine months ended June 30, 1994 include the operations of the
Cambridge Apartments joint venture):
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three and nine months ended June 30, 1995 and 1994
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
Rental revenues and
expense recoveries $2,642,000 $3,248,000 $8,306,000 $9,661,000
Interest and other income 260,000 123,000 435,000 381,000
2,902,000 3,371,000 8,741,000 10,042,000
Property operating expenses 1,211,000 1,732,000 3,917,000 5,059,000
Interest expense 1,230,000 1,423,000 3,702,000 4,072,000
Depreciation and
amortization 708,000 751,000 2,013,000 2,263,000
3,149,000 3,906,000 9,632,000 11,394,000
Operating loss (247,000) (535,000) (891,000) (1,352,000)
Gain on sale of operating
investment property - 3,418,000 - 3,418,000
Net income (loss) before
extraordinary loss $ (247,000) $2,883,000 $ (891,000) $2,066,000
Extraordinary loss from
early extinguishment
of debt (1,166,000) - (1,166,000) -
NET INCOME (LOSS) $(1,413,000) $2,883,000 $(2,057,000) $2,066,000
Net income (loss):
Partnership's share of
combined income (loss) $(623,000) $2,824,000 $(1,054,000)$ 2,337,000
Co-venturers' share of
combined income (loss) (790,000) 59,000 (1,003,000) (271,000)
$(1,413,000) $2,883,000 $(2,057,000) $2,066,000
The Partnership's share of the combined income (loss) of the joint ventures
is presented as follows on the accompanying statements of operations:
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
Partnership's share
of ventures' income
(losses) $ (157,000) $2,824,000 $ (588,000)$ 2,337,000
Partnership's share of
extraordinary loss on
early extinguishment
of debt (466,000) - (466,000) -
$ (623,000)$ 2,824,000 $(1,054,000)$ 2,337,000
3. Related Party Transactions
Included in general and administrative expenses for nine months ended June
30, 1995 and 1994 is $66,685 and $75,816, 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 nine months
ended June 30, 1995 and 1994 is $2,121 and $2,337, respectively, representing
fees earned by Mitchell Hutchins Institutional Investors, Inc. for managing
the Partnership's cash assets.
4. Contingencies
The Partnership is involved in certain legal actions. The Managing General
Partner believes that these actions will be resolved without material adverse
effect on the Partnership's financial statements, taken as a whole.
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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. On June 19,
1995, the Partnership completed the refinancing of the existing first mortgage
loan secured by Bell Plaza, reducing the interest rate from 10% to 8.125%. The
loan, in the initial principal amount of $3,300,000, matures in seven years and
requires monthly principal and interest payments based upon a twenty-five-year
amortization schedule. The terms of the loan allow for a prepayment of the
principal balance after the end of one year. The joint venture paid a fee of
$33,000 to obtain the loan commitment, with an additional $33,000 paid at
closing. Occupancy at Bell Plaza Shopping Center was 78% at June 30, 1995,
unchanged from last quarter. 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.
As discussed further in the Annual Report, during the second quarter of
fiscal 1994 the Carriage Hill joint venture did not generate sufficient cash
flow to fully cover its debt service payments to the lender. Consequently, the
joint venture entered into a forbearance agreement with the lender which
provided for the payment of 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 had 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 October 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. Subsequently, market interest rates declined sufficiently to allow
the existing first mortgage loan secured by Carriage Hill, with an outstanding
principal balance of approximately $26.5 million, to be refinanced. The new
loan, in the amount of approximately $27.9 million, has a fixed interest rate of
7.65% and a term of 35 years. The new loan, which closed on June 1, 1995,
significantly reduces monthly debt service requirements and provides additional
capital that will 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 also releases from the collateral a 17-acre parcel of excess land.
This land can now be marketed for sale to residential builders. Proceeds of
any such sale, if completed, would be payable primarily to the Partnership's
co-venture partner to reduce its cumulative preference return in accordance
with the terms of the joint venture agreement.
The average occupancy level at Seven Trails West Apartments was 93% for the
quarter, compared to 94% last quarter. Average rental rates increased 3% on an
annualized basis over the second 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 through the end of 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 June 30, 1995, the Partnership had cash and cash equivalents of
approximately $1,549,000. 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 June 30, 1995
The Partnership reported a net loss of approximately $741,000 for the three
months ended June 30, 1995 as compared to net income of approximately $2,768,000
for the same period in the prior year. The primary reason for this unfavorable
change in net operating results is that the Partnership's share of ventures'
operations in the prior period include the Partnership's share of a $3.4 million
gain on the sale of the Cambridge Apartments in June 1994. In addition, the
Carriage Hill joint venture realized an extraordinary loss on the early
extinguishment of debt in the current year of approximately $1,166,000 as a
result of the write-off of unamortized deferred financing costs related to the
venture's prior debt in conjunction with the June 1995 refinancing transaction
discussed further above. The Partnership's share of this loss was approximately
$466,000. In addition, the Partnership's operating loss increased by
approximately $62,000 for the current three-month period mainly due to an
increase in general and administrative expenses. General and administrative
expenses increased by approximately $54,000 as a result of additional
expenditures incurred related to an independent valuation of the Partnership's
operating properties which was commissioned in conjunction with management's
ongoing refinancing efforts and portfolio management responsibilities.
Nine Months Ended June 30, 1995
The Partnership reported a net loss of approximately $1,227,000 for the
nine months ended June 30, 1995 as compared to net income of approximately
$2,116,000 for the same period in the prior year. The primary reason for this
unfavorable change in net operating results is that the Partnership's share of
ventures' operations in the prior period include the Partnership's share of a
$3.4 million gain on the sale of the Cambridge Apartments in June 1994. In
addition, the Carriage Hill joint venture realized an extraordinary loss on the
early extinguishment of debt in the current year of approximately $1,166,000 as
a result of the write-off of unamortized deferred financing costs related to the
venture's prior debt in conjunction with the June 1995 refinancing transaction
discussed further above. The Partnership's share of this loss was approximately
$466,000. These items were partially offset by a decrease in the Partnership's
operating loss of approximately $48,000 for the current nine-month period due to
an increase in interest income and a decrease in general and administrative
expenses. Interest income increased by approximately $28,000 due to an increase
in the interest rates earned on the Partnership's cash reserves and as a result
of 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. General
and administrative expenses decreased by approximately $20,000 mainly due to the
timing of certain professional services provided to the Partnership.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As discussed in the Partnership's quarterly report on Form 10-Q for the
period ended March 31, 1995, 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. On May 30, 1995, the
court certified class action treatment of the claims asserted in the litigation.
Refer to the description of the claims in the prior quarterly report for further
information. The General Partners continue to believe 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: August 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's interim financial statements for the nine months ended June 30,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,548,749
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,548,749
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,548,749
<CURRENT-LIABILITIES> 18,349
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (276,289)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 74,289
<CGS> 0
<TOTAL-COSTS> 247,559
<OTHER-EXPENSES> 587,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (760,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (760,592)
<DISCONTINUED> 0
<EXTRAORDINARY> (466,248)
<CHANGES> 0
<NET-INCOME> (1,226,840)
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<EPS-DILUTED> (34.77)
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