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, 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: 0-12087
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 .
Page 1 of 10
<PAGE>
-9-
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 1996 and September 30, 1995 (Unaudited)
(In thousands)
ASSETS
March 31 September 30
Cash and cash equivalents $ 1,249 $ 1,658
======= =======
LIABILITIES AND PARTNERS' DEFICIT
Equity in losses in excess of investments and
advances in joint ventures $ 2,060 $ 2,059
Accounts payable and accrued expenses 20 38
Partners' deficit (831) (439)
------- --------
$ 1,249 $ 1,658
======= ========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) For the six
months ended March 31, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
Balance at September 30, 1994 $ (184) $ 1,134
Net loss (5) (480)
----------- ------------
Balance at March 31, 1995 $ (189) $ 654
======= ==========
Balance at September 30, 1995 $ (198) $ (241)
Net loss (4) (388)
---------- ----------
Balance at March 31, 1996 $ (202) $ (629)
======= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1996 and 1995
(Unaudited) (In thousands, except per Unit data)
Three Months Ended Six Months Ended
March 31, March 31,
-----------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Interest and other income $ 22 $ 26 $ 57 $ 50
Expenses:
General and administrative 61 46 130 104
--------- ---------- --------- ---------
Operating loss (39) (20) (73) (54)
Partnership's share of ventures'
losses
(181) (221) (319) (431)
-------- -------- ------- --------
Net loss $ (220) $ (241) $ (392) $ (485)
======== ======== ======= ========
Net loss per Limited
Partnership Unit $ (6.24) $ (6.84) $(11.11) $(13.76)
======== ======== ======= =======
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.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS For the six months ended
March 31, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
Cash flows from operating activities:
Net loss $ (392) $ (485)
Adjustments to reconcile net loss to
net cash used for operating activities:
Partnership's share of ventures' losses 319 431
Changes in assets and liabilities:
Accounts payable and accrued expenses (18) (5)
------------ -----------
Total adjustments 301 426
------------ ---------
Net cash used for operating activities (91) (59)
------------- ----------
Cash flows from investing activities:
Distributions from joint ventures 200 66
Additional investments in joint ventures (518) (153)
----------- ---------
Net cash used for investing activities (318) (87)
----------- ----------
Net decrease in cash and cash equivalents (409) (146)
Cash and cash equivalents, beginning of period 1,658 1,836
---------- ----------
Cash and cash equivalents, end of period $ 1,249 $1,690
======= ======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
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 September 30, 1995.
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
The Partnership has investments in four joint ventures which own operating
properties as more fully described in the Partnership's Annual Report. 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:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three and six months ended March 31, 1996 and 1995
(in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
-----------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Rental revenues and
expense recoveries $ 2,840 $ 2,756 $ 5,595 $5,555
Interest and other income 112 130 323 284
----------- ---------- ----------- --------
2,952 2,886 5,918 5,839
Property operating expenses 1,492 1,366 2,824 2,706
Interest expense 1,171 1,236 2,310 2,472
Depreciation and amortization 659 652 1,372 1,305
----------- ---------- ---------- -------
3,322 3,254 6,506 6,483
---------- --------- ---------- -------
Net loss $ (370) $ (368) $ (588) $ (644)
========== ========= ========== =======
Net loss:
Partnership's share of
combined net loss $ (181) $ (221) $ (319) $ (431)
Co-venturers' share of
combined net loss (189) (147) (269) (213)
------------ ----------- ----------- --------
$ (370) $ (368) $ (588) $ (644)
=========== ========== ========== =======
<PAGE>
3. Related Party Transactions
Included in general and administrative expenses for the six months ended
March 31, 1996 and 1995 is $43,000 for each period, 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, 1996 and 1995 is $400 and $1,900, 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. At the present time,
the Managing General Partner is unable to estimate the impact, if any, of
these matters on the Partnership's financial statements, taken as a whole.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's four remaining investment properties consist of three
multi-family apartment complexes and one retail shopping center. While the
current estimated market values of certain of the remaining properties are below
the amounts paid for the properties at the time of the Partnership's inception
in 1983 and 1984, all of the properties have estimated values above their
respective outstanding mortgage debt obligations. Management's strategy over the
past two years has been to capitalize on the favorable market interest rate
environment by refinancing the mortgage loans secured by the operating
investment properties to improve cash flow and permit the reinvestment of funds
for capital improvement work. Such capital improvements are aimed at preserving
and enhancing the properties' market values while the respective local economies
and market conditions improve until favorable opportunities for the sale of the
properties can be achieved. The status of such refinancing efforts and capital
improvement work is discussed in more detail below.
The average occupancy level at Seven Trails West Apartments was 96% for the
quarter ended March 31, 1996, compared to 98% for the prior quarter. Despite the
small decrease in occupancy, the property continued to benefit from a
combination of a stable multi-family rental market and the improvements in
physical appearance resulting from the capital improvement program implemented
during fiscal 1995 and the first half of fiscal 1996. During fiscal 1995, major
enhancements that were completed included replacing numerous roofs and
balconies, painting the exteriors of a number of buildings, and replacing
carpeting and appliances for various units. Roof repairs and appliance
replacements have continued as needed in fiscal 1996. Such improvements have
contributed to management's ability to implement monthly rental rate increases
at Seven Trails.
On April 17, 1996, the Partnership successfully completed the refinancing
of the existing first mortgage loan secured by Seven Trails West Apartments,
reducing the annual interest rate from 12% to 7.87%. The new loan, in the
initial principal amount of $17,000,000, is for a term of ten years with monthly
debt service payments including the amortization of loan principal on a
thirty-year schedule. The proceeds of the new loan, together with a contribution
of $159,000 from the joint venture, were used to pay off all obligations of the
prior first mortgage loan as well as fund all reserves and escrows required by
the new lender. As part of the new loan agreement, reserves for agreed upon
repairs and future replacements aggregating approximately $209,000 were
established in escrow accounts with the mortgage lender. As of March 31, 1996,
the Partnership had temporarily advanced $490,000 to the Seven Trails joint
venture to be used for a good faith deposit with the new lender and for the
prepayment of certain loan closing costs. Such amounts will be returned to the
Partnership in the third quarter of fiscal 1996.
Occupancy at the Bell Plaza Shopping Center was 95% at March 31, 1996, down
from 96% as of December 31, 1995. During the month of February, a 1,720 square
foot tenant vacated its premises. The property's leasing team is concluding
negotiations on two new leases, one with a hair salon for 1,445 square feet and
another with a spa/boutique for 3,160 square feet. If leases are signed with
these prospective tenants, the Center will be 98% leased. During the first
quarter of the current fiscal year, the property's leasing team was able to
complete negotiations with a tenant, World Gym, to take the remaining 17,600
square feet of the former Wal-Mart space. The new lease for the remainder of the
Wal-Mart space should improve the overall financial performance of the center
due to the fact that, on a combined basis, the new tenant and United
Supermarkets, which has occupied 62,800 square feet of the former Wal-Mart space
since the first quarter of fiscal 1995, will be paying a higher per square foot
rent than Wal-Mart was originally paying for its space.
As discussed further in the Partnership's Annual Report, market interest
rates declined sufficiently during fiscal 1995 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 initial
principal 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 will transfer the utility payments to
the tenants, thereby reducing the property's future operating expenses. The new
loan also releases from the collateral a 23-acre parcel of excess land. This
land may eventually be marketed for sale to local developers once market
conditions improve sufficiently. The suburban Baltimore market remains
competitive with competing properties continuing to offer concessions to attract
new tenants. Carriage Hill's occupancy averaged 85% for the second fiscal
quarter, a decline of 1% from the prior quarter. This decrease in occupancy is
primarily attributable to a seasonal decline in leasing activity. The conversion
to individual gas metering commenced during the first quarter of fiscal 1996
with a targeted completion date of June 1, 1996. After the conversion is fully
implemented, occupancy is expected to stabilize again in the low 90% range.
The average occupancy level at Greenbrier Apartments was 91% for the
quarter ended March 31, 1996, compared to 93% for the prior quarter. Capital
expenditures during the current quarter included carpet and appliance
replacements on an as-needed basis. Capital improvements planned for the
remainder of fiscal 1996 include replacing perimeter fences, selected landscape
replacements, roof repairs and balcony and gutter replacements on an as-needed
basis. Greenbrier continues to produce excess cash flow after the payment of
operating expenses, debt service payments to the lender and capital costs.
Although the current mortgage debt of $5.4 million, which bears interest at 10%
per annum, does not mature until June 1998, the joint venture has applied for a
new mortgage loan with another lender. Given the current favorable interest rate
environment, a new loan could reduce the monthly interest expense to the joint
venture.
At March 31, 1996, the Partnership had cash and cash equivalents of
$1,249,000. 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, 1996
The Partnership reported a net loss of $220,000 for the three months ended
March 31, 1996 as compared to a net loss of $241,000 for the same period in the
prior year. The primary reason for this favorable change in net operating
results was a decrease in the Partnership's share of ventures' losses of
$40,000. This decrease is due largely to improved rental revenues at Seven
Trails West Apartments and Greenbrier Apartments for the comparative periods
mainly due to improved rental rates at both properties. In addition, combined
interest expense decreased by $65,000 mainly as a result of the lower interest
rate on the debt secured by the Carriage Hill Apartments which was refinanced in
June 1995. The improved rental revenues at Seven Trails and Greenbrier and lower
interest expense for the Carriage Hill Apartments mortgage loan were partially
offset by decreases in revenue at Carriage Hill and Bell Plaza and an increase
in property operating expenses at the Carriage Hill joint venture. Revenues
decreased at Carriage Hill for the current three-month period due to a decline
in the property's average occupancy level. Revenues at Bell Plaza in the prior
period reflect the lease termination fee received from Wal-Mart prior to the
commencement of the United Supermarkets lease. Property operating expenses
increased at Carriage Hill due largely to an increase in utility costs resulting
from more severe winter conditions during the current year. As noted above, the
venture is in the process of converting the utilities at the Carriage Hill
Apartments to individual metering. Once completed, this will significantly
reduce the venture's exposure to fluctuations in utility charges caused by
extreme weather conditions.
Six Months Ended March 31, 1996
The Partnership reported a net loss of $392,000 for the six months ended
March 31, 1996 as compared to a net loss of $485,000 for the same period in the
prior year. The primary reason for this favorable change in net operating
results was a decrease in the Partnership's share of ventures' losses of
$112,000. This decrease is due largely to improved rental revenues at Seven
Trails West Apartments and Greenbrier Apartments for the comparative periods
mainly due to improved rental rates at both properties. In addition, combined
interest expense decreased by $162,000 mainly as a result of the lower interest
rate on the debt secured by the Carriage Hill Apartments which was refinanced in
June 1995. The improved rental revenues at Seven Trails and Greenbrier and lower
interest expense for the Carriage Hill Apartments mortgage loan were partially
offset by decreases in revenue at Carriage Hill and Bell Plaza, an increase in
property operating expenses at the Carriage Hill joint venture and increases in
depreciation and amortization expense at all four joint ventures. Revenues
decreased at Carriage Hill due largely to a decline in the property's average
occupancy level. Revenues at Bell Plaza in the prior period reflect the lease
termination fee received from Wal-Mart prior to the commencement of the United
Supermarkets lease. Property operating expenses increased at Carriage Hill due
largely to an increase in utility costs resulting from more severe winter
conditions during the current year. As noted above, the venture is in the
process of converting the utilities at the Carriage Hill Apartments to
individual metering. Once completed, this will significantly reduce the
venture's exposure to fluctuation in utility charges caused by extreme weather
conditions. Depreciation and amortization expense increased at all of the joint
ventures for the six months ended March 31, 1996 due to capital improvements,
tenant improvements, leasing commissions and deferred financing costs which have
been incurred over the past year.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously disclosed, Fifth Income Properties Fund, Inc. and Properties
Associates, the General Partners of the Partnership, were named as defendants in
a class action lawsuit against PaineWebber Incorporated ("PaineWebber") and a
number of its affiliates relating to PaineWebber's sale of 70 direct investment
offerings, including the offering of interests in the Partnership. In January
1996, PaineWebber signed a memorandum of understanding with the plaintiffs in
the class action 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 a plan of allocation which the parties expect to submit to the
court for its consideration and approval within the next several months. Until a
definitive settlement and plan of allocation is approved by the court, there can
be no assurance what, if any, payment or non-monetary benefits will be made
available to unitholders in PaineWebber Income Properties Five Limited
Partnership. 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 this
litigation. At the present time, the General Partners cannot estimate the
impact, if any, of this matter 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.
<PAGE>
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, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended March 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 1249
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1249
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1249
<CURRENT-LIABILITIES> 20
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (831)
<TOTAL-LIABILITY-AND-EQUITY> 1249
<SALES> 0
<TOTAL-REVENUES> 57
<CGS> 0
<TOTAL-COSTS> 130
<OTHER-EXPENSES> 319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (392)
<INCOME-TAX> 0
<INCOME-CONTINUING> (392)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (392)
<EPS-PRIMARY> (11.11)
<EPS-DILUTED> (11.11)
</TABLE>
