UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: SEPTEMBER 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 of organization) (I.R.S.Employer
Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (617) 439-8118
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
Prospectus of registrant dated Part IV
May 26, 1983, as supplemented
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
1995 FORM 10-K
TABLE OF CONTENTS
Part I
Page
Item 1 Business I-1
Item 2 Properties I-2
Item 3 Legal Proceedings I-3
Item 4 Submission of Matters to a Vote of Security Holders I-3
Part II
Item 5 Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters II-1
Item 6 Selected Financial Data II-1
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations II-2
Item 8 Financial Statements and Supplementary Data II-6
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure II-6
Part III
Item 10 Directors and Executive Officers of the Partnership III-1
Item 11 Executive Compensation III-3
Item 12 Security Ownership of Certain Beneficial Owners
and Management III-3
Item 13 Certain Relationships and Related Transactions III-3
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K IV-1
Signatures IV-2
Index to Exhibits IV-3
Financial Statements and Supplementary Data F-1 to F-28
<PAGE>
PART I
Item 1. Business
Paine Webber Income Properties Five Limited Partnership (the
"Partnership") is a limited partnership formed in January 1983 under the Uniform
Limited Partnership Act of the State of Delaware for the purpose of investing in
a diversified portfolio of existing income-producing real properties such as
apartments, shopping centers, office buildings, and other similar
income-producing properties. The Partnership sold $34,928,000 in Limited
Partnership Units (the "Units"), representing 34,928 units at $1,000 per Unit
from May 26, 1983 to May 25, 1984 pursuant to a Registration Statement filed on
Form S-11 under the Securities Act of 1933 (Registration No. 2-81537). Limited
Partners will not be required to make any additional capital contributions.
As of September 30, 1995, the Partnership owned interests in operating
investment properties through joint venture partnerships as set forth in the
following table:
Name of Joint Venture Date of
Name and Type of Property Acquisition Type of
Location Size of Interest Ownership (1)
Randallstown Carriage Hill 806 8/30/83 Fee ownership of land and
Associates and units improvements (through
Signature Partners, L.L.C. joint venture)
Carriage Hill Village Apartments
Randallstown, Maryland
Amarillo Bell Associates 151,500 9/30/83 Fee ownership of land and
Bell Plaza Shopping Center gross improvements (though
Amarillo, Texas leasable joint venture)
sq. ft.
Greenbrier Associates 324 6/29/84 Fee ownership of land and
Greenbrier Apartments units improvements (through
Indianapolis, Indiana joint venture)
Seven Trails West Associates 532 9/13/84 Fee ownership of land and
Seven Trails West Apartments units improvements (through
Ballwin, Missouri joint venture)
(1) See Notes to the Financial Statements filed with this Annual Report for a
description of the long-term mortgage indebtedness secured by the
Partnership's operating property investments and for a description of the
agreements through which the Partnership has acquired these real estate
investments.
The Partnership originally had investments in five operating investment
properties. On June 30, 1994, Cambridge Associates, a joint venture in which the
Partnership had an investment interest, sold its operating investment property,
the Cambridge Apartments, to an affiliate of the Partnership's co-venture
partner for a gross purchase price of $9.7 million. After repayment of the
outstanding mortgage debt and payment of transaction closing costs, net proceeds
of approximately $4.7 million were available for distribution to the venture
partners. In accordance with the joint venture agreement, the Partnership was
entitled to and received approximately $3.7 million of such proceeds. A portion
of the Cambridge sales proceeds was added to the Partnership's cash reserves in
anticipation of future capital requirements at certain of the remaining joint
ventures. The remainder of the proceeds, totalling approximately $2.2 million,
was distributed to the Limited Partners in September 1994. See Note 4 to the
Financial Statements accompanying this Annual Report for a further discussion of
this transaction.
<PAGE>
The Partnership's investment objectives are to:
(i) provide the Limited Partners with cash distributions which, to some
extent, will not constitute taxable income;
(ii)preserve and protect the Limited Partners' capital;
(iii)obtain long-term appreciation in the value of its properties; and
(iv)provide a build-up of equity through the reduction of mortgage loans
on its properties.
Through September 30, 1995, the Limited Partners had received cumulative
cash distributions totalling approximately $18,047,000, or approximately $542
per original $1,000 investment for the Partnership's earliest investors, of
which approximately $7,720,000, or $284 per original $1,000 investment,
represents net proceeds from the refinancing of the Carriage Hill Apartments in
1987 and approximately $2,200,000, or $63 per original $1,000 investment,
represents the distributed portion of the net proceeds from the sale of the
Cambridge Apartments in 1994. The remaining distributions have been made from
the net operating cash flow of the Partnership. A substantial portion of such
distributions has been sheltered from current taxable income. The Partnership
suspended the payment of regular quarterly distributions of excess net cash flow
in fiscal 1988. As of September 30, 1995, the Partnership retains its ownership
interest in four of its five original investment properties. The Partnership's
success in meeting its capital appreciation objective will depend upon the
proceeds received from the final liquidation of the investments. The amount of
such proceeds will ultimately depend upon the value of the underlying investment
properties at the time of their final disposition, which cannot presently be
determined. At the present time, real estate values for retail shopping centers
in certain markets have begun to be affected by the effects of overbuilding and
consolidations among retailers which have resulted in an oversupply of space.
All of the properties securing the Partnership's investments are located
in real estate markets in which they face significant competition for the
revenues they generate. The apartment complexes compete with numerous projects
of similar type generally on the basis of price, location and amenities.
Apartment properties in all markets also compete with the local single family
home market for revenues. The continued availability of low interest rates on
home mortgage loans has increased the level of this competition over the past
few years. However, the impact of the competition from the single-family home
market has been offset by the lack of significant new construction activity in
the multi-family apartment market over this period. The shopping center competes
for long-term commercial tenants with numerous projects of similar type
generally on the basis of rental rates, location, tenant mix and tenant
improvement allowances.
The Partnership has no operating property investments located outside the
United States. The Partnership is engaged solely in the business of real estate
investment, therefore, presentation of information about industry segments is
not applicable.
The Partnership has no employees; it has, however, entered into an
Advisory Contract with PaineWebber Properties Incorporated (the "Adviser"),
which is responsible for the day-to-day operations of the Partnership. The
Adviser is a wholly-owned subsidiary of PaineWebber Incorporated ("PWI"), a
wholly owned subsidiary of PaineWebber Group Inc. ("PaineWebber").
The general partners of the Partnership (the "General Partners") are Fifth
Income Properties Fund, Inc. and Properties Associates. Fifth Income Properties
Fund, Inc., a wholly-owned subsidiary of PaineWebber, is the Managing General
Partner of the Partnership. The Associate General Partner of the Partnership is
Properties Associates, a Massachusetts general partnership, certain general
partners of which are officers of the Adviser and the Managing General Partner.
Subject to the General Partner's overall authority, the business of the
Partnership is managed by the Adviser. The terms of transactions between the
Partnership and affiliates of the Managing General Partner of the Partnership
are set forth in Items 11 and 13 below to which reference is hereby made for a
description of such terms and transactions.
Item 2. Properties
As of September 30, 1995, the Partnership owned interests in four
operating properties through joint venture partnerships. The joint venture
partnerships and the related properties are referred to under Item 1 above to
which reference is made for the name, location and description of each property.
<PAGE>
Occupancy figures for each fiscal quarter during 1995, along with an
average for the year, are presented below for each property:
Percent Occupied At Fiscal 1995
12/31/94 3/31/95 6/30/95 9/30/95 Average
Carriage Hill Village
Apartments 92% 90% 89% 89% 90%
Bell Plaza Shopping Center 76% 78% 78% 78% 78%
Greenbrier Apartments 93% 89% 90% 93% 91%
Seven Trails West Apartments 95% 94% 93% 97% 95%
Item 3. 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. 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.
The amended complaint in the New York Limited Partnership Actions alleges
that, in connection with the sale of interests in Paine Webber 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
Paine Webber 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 Partnerships 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 their
affiliates for costs and liabilities in connection with this litigation. The
General Partners intend to vigorously contest the allegations of the action, and
believe that the action will be resolved without material adverse effect on the
Partnership's financial statements, taken as a whole.
The Partnership is not subject to any other material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters
At September 30, 1995 there were 2,407 record holders of Units in the
Partnership. There is no public market for the Units, and it is not anticipated
that a public market for Units will develop. The Managing General Partner will
not redeem or repurchase Units.
No distributions were made to the Limited Partners during fiscal 1995.
Item 6. Selected Financial Data (in thousands except per Unit data)
Paine Webber Income Properties Five Limited Partnership
Selected Financial Data for the Partnership
For the years ended September 30, 1995, 1994, 1993, 1992 and 1991
Years Ended September 30,
1995 1994 1993 1992 1991
Revenues $ 106 $ 87 $ 21 $ 16 $ 18
Operating loss $ (207) $ (262) $ (183) $ (177) $ (187)
Partnership's share of
ventures' losses $(1,182) $ (995) $ (860) $(1,160) $(1,068)
Partnership's share of gain on
sale of operating investment
property - $ 3,174 - - -
Net income (loss) $(1,389) $1,917 $(1,043) $(1,337) $(1,255)
Net income (loss) per Limited
Partnership Unit $(39.37) $ 54.36 $(29.57) $(37.90) $(35.56)
Cash distributions from sale,
refinancing or other disposition
transactions per Limited
Partnership Unit - $ 63.00 - - -
Total assets $ 1,658 $ 1,836 $ 1,280 $ 2,319 $ 3,651
The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing elsewhere in this Annual
Report.
The above per Limited Partnership Unit information is based upon the
34,928 Limited Partnership Units outstanding during each year.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership offered limited partnership interests to the public from
May 1983 to May 1984 pursuant to a Registration Statement filed under the
Securities Act of 1933. Gross proceeds of $34,928,000 were received by the
Partnership and, after deducting selling expenses and offering costs,
approximately $30,920,000 was invested in joint venture interests in five
operating investment properties. The Partnership's interest in the Cambridge
Apartments property was sold in June 1994 in a transaction which yielded net
proceeds of $3.7 million to the Partnership. Of such proceeds, $2.2 million was
distributed to the Limited Partners in September 1994 and $1.5 million was
retained by the Partnership to bolster its cash reserve balances. The
Partnership does not have any commitments for additional capital expenditures or
investments but may be called upon to advance funds to its existing investments
in accordance with the respective joint venture agreements.
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 occupancy level at Seven Trails West Apartments was 97% at September
30, 1995, as compared to 96% at September 30, 1994. 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 the current year. A major capital program was
implemented during 1995 with over $400,000 budgeted to improve the exterior of
the buildings as well as the grounds. During the year, major enhancements that
were completed included replacing and/or repairing retaining walls where
necessary, replacing numerous roofs and balconies, painting the exteriors of a
number of buildings, and purchasing exercise equipment for the clubhouse.
Monthly rental rates have increased by 4% since the beginning of 1995. The
apartment complex is encumbered by a nonrecourse first mortgage loan with a
principal balance of $14,700,000 at September 30, 1995. On March 31, 1994, the
Partnership closed on a modification and extension of the wraparound mortgage
loan secured by the Seven Trails Apartments with the existing lender. As part of
the agreement, the wrap mortgage lender purchased the underlying first mortgage
loan and is now the sole mortgage lienholder. Under the terms of the
modification agreement, the loan maturity date was extended to February 1, 1996
and the accrual rate of interest was increased from 11% to 12%, with 1%
deferred, on the outstanding mortgage loan principal. In addition to the
outstanding principal balance, there is currently deferred interest totalling
approximately $1.7 million due to the Seven Trails mortgage lender. Under the
terms of the extension agreement, no interest will accrue on the current or
additional amounts of deferred interest through the scheduled maturity date. The
Partnership contributed approximately $586,000 to the Seven Trails joint venture
in the second quarter of fiscal 1994 in order to complete the modification and
extension transaction. Such advances were used to pay a refundable $147,000
extension fee, to fund a capital improvement reserve of $400,000 and to pay for
the transaction closing costs. The extension fee will be refunded to the
Partnership if the entire obligation to the mortgage lender is repaid in full
prior to the extended maturity date. Under the terms of the extension agreement,
all net cash flow of the joint venture, after payment of current debt service,
approved capital costs and approved refinancing costs, will be payable to the
lender to pay down outstanding deferred interest and then loan principal. During
fiscal 1995, the joint venture approached several potential lenders in an
attempt to secure a timely refinancing of the first mortgage loan prior to the
February 1996 maturity date. The joint venture currently has an application in
process for a new loan with a potential replacement lender. However, no
financing agreement has been finalized as of the date of this report. The loan
application is for a $17 million mortgage loan which would enable the venture to
repay, in full, the maturing obligation. The lender is currently reviewing the
loan application and completing its due diligence. The review process will
include an assessment of reserves required to be withheld from the loan amount
to be set aside for necessary repairs and improvements. Since the property is
over 20 years old, such reserve requirements could be significant and could
result in the Partnership having to contribute funds from its cash reserves to
cover transaction costs. Management is hopeful that the amounts spent on repairs
and improvements during fiscal 1995 will mitigate the prospective lender's
reserve requirements. While there are no assurances that this refinancing
transaction will be completed, management is cautiously optimistic that a
transaction will close in the second quarter of fiscal 1996. It is uncertain
whether a transaction would close in time to permit the Partnership to recover
the $147,000 extension fee referred to above.
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 annual interest rate from 9.4% 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 the Bell Plaza Shopping Center was 78% at
September 30, 1995, down from 88% at September 30, 1994. This change in
occupancy is directly attributable to the termination of the Wal-Mart lease and
the commencement of the United Supermarkets lease for approximately 77% of the
prior Wal-Mart space, which occurred in the first quarter of fiscal 1995. The
property's leasing team continues to actively market the remaining approximately
19,000 square feet of the 82,800 square foot anchor space formerly occupied by
Wal-Mart. Overall leasing activity has remained slow and very competitive. At
the present time, real estate values for retail shopping centers in certain
markets have begun to be affected by the effects of overbuilding and
consolidations among retailers which have resulted in an oversupply of space. It
remains unclear at this time what impact, if any, this general trend will have
on the operations and market value of Bell Plaza in the near term. In order to
make Bell Plaza more attractive to retail customers and potential tenants, the
exterior of the Center was repainted during fiscal 1995.
As previously reported, 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 allowed for the payment of
less than the full amount due each month through July 1994 in the event that
cash flow from the property was not sufficient to pay the required amount. 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 at that time. 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 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
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 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. Nonetheless, Carriage
Hill is now operating at a stabilized level. Management was able to increase
rental rates by 2% during fiscal year 1995. However, occupancy at Carriage Hill
decreased to 89% at September 30, 1995 from 92% at September 30, 1994.
Management expects that the average occupancy level will increase in fiscal
1996, stabilizing in the low 90% range. Management does not plan to raise
monthly rental rates in fiscal 1996 until the tenants become accustomed to
paying the individually metered utility charge.
The occupancy level at Greenbrier Apartments was 93% at September 30, 1995,
down from 96% at September 30, 1994. During fiscal 1995, the Indianapolis
apartment rental market remained very competitive, with little or no change in
the rental rates of the competition. The property management team continued to
improve the competitiveness of the Greenbrier property during the year by
completing scheduled capital improvements which included installing dishwashers
in the two-bedroom units as they turn over and replacing patio fences and roofs.
In addition, during fiscal 1995, the parking lot was sealed and re-striped and
interior hallways, exterior doors, stairs and all townhouse exteriors were
repainted. The scheduled capital improvement program also included gutter
replacement and balcony repairs, which are scheduled to be completed in the
first quarter of 1996. 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 $5,400,000, which is
secured by the property and 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 debt service payments of the joint venture.
At September 30, 1995, the Partnership had cash and cash equivalents of
$1,658,000. 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
1995 Compared to 1994
The Partnership reported a net loss of $1,389,000 for fiscal 1995 as
compared to net income of $1,917,000 for the prior year. The primary reason for
this unfavorable change in net operating results is that the Partnership
recognized a $3.2 million gain in the prior year on the sale of the Cambridge
Apartments, which occurred in June 1994. In addition, the Carriage Hill joint
venture recognized a loss on the write-off of unamortized deferred financing
costs in the current year of $1,177,000 in conjunction with the June 1995
refinancing transaction discussed further above. The Partnership's share of this
loss was $471,000, which is included in the Partnership's share of ventures'
losses for fiscal 1995. The Partnership's share of ventures' losses, prior to
the effect of the Carriage Hill refinancing loss, decreased by $284,000 in
fiscal 1995 mainly due to improved operating results at the Greenbrier, Seven
Trails and Carriage Hill joint ventures. Rental revenues were higher at all
three apartment properties in fiscal 1995, despite lower average occupancy
levels, due to increases in rental rates made possible by the generally
improving market conditions for multi-family apartment properties across the
country during fiscal 1995. At Greenbrier, rental revenues improved by $58,000,
or 4%, in fiscal 1995, when compared to the prior year, while average occupancy
declined from 94% to 91%. In addition, repairs and maintenance expenses
decreased by $96,000 at Greenbrier due to certain non-recurring repair work
performed in fiscal 1994 as a result of winter storm damage. Rental revenues
increased by $194,000, or 6%, at the Seven Trails property despite a slight drop
in average occupancy from 96% for fiscal 1994 to 95% for fiscal 1995. Such
increased revenues at Seven Trails were partially offset by the increase in the
venture's interest expense which resulted from the fiscal 1994 modification
agreement described above. At Carriage Hill, revenues were up only slightly in
what have been less favorable local market conditions. The improvement in the
Carriage Hill joint venture's net operating results were more attributable to a
decrease in expenses, primarily depreciation and utilities expenses, which
declined by $61,000 and $63,000, respectively. The improved operating results at
the three apartment properties were partially offset by a decline in revenues at
the Bell Plaza Shopping Center which resulted from the anchor tenant re-leasing
situation described further above. The resulting drop in average occupancy at
Bell Plaza, from 87% for fiscal 1994 to 78% for fiscal 1995, contributed to the
decrease of $64,000 in the venture's rental revenues.
The unfavorable changes in net operating results were also partially offset
by a decrease in the Partnership's operating loss of approximately $55,000 for
the current year due to an increase in interest income and a decrease in general
and administrative expenses. Interest income increased by $19,000 due to an
increase in the interest rates earned on the Partnership's cash reserves, as
well as the significant increase in the average outstanding balance of such
reserves which resulted from the retention of $1.5 million of the Cambridge sale
proceeds from the June 1994 sale transaction. General and administrative
expenses decreased by $36,000 mainly due to higher professional fees incurred in
the prior year.
1994 Compared to 1993
The Partnership reported net income of $1,917,000 for fiscal 1994 as
compared to a net loss of $1,043,000 in the prior year. The Partnership's net
income for fiscal 1994 was a result of the Partnership's share of the gain
realized from the sale of the Cambridge Apartments, as discussed above. The
total gain recognized by the Cambridge joint venture totalled $3,336,000, and
the Partnership's share of such gain amounted to $3,174,000 per the terms of the
joint venture agreement. The Partnership's share of ventures' losses, prior to
the gain on the Cambridge sale, increased by $135,000 when compared to the prior
year. This unfavorable change in the Partnership's share of ventures' losses
from operations was mainly a result of an increase in the operating loss at the
Cambridge Apartments, primarily due to the payment, in accordance with the
agreement, of previously unaccrued subordinated management fees in the amount of
$100,000 upon the sale of the operating investment property. An increase in
interest expense at the Seven Trails joint venture during fiscal 1994, as a
result of the modification and extension agreement described above, also
contributed to the increase in the combined joint ventures' operating loss. The
Partnership's operating loss increased by $79,000 during fiscal 1994 due to an
increase in Partnership general and administrative expenses. These expenses
increased mainly as a result of additional expenditures incurred related to an
independent valuation of the Partnership's operating properties which was
commissioned during fiscal 1994 in conjunction with management's ongoing
refinancing efforts and portfolio management responsibilities.
1993 Compared to 1992
For the year ended September 30, 1993, the Partnership reported a net loss
of $1,043,000, as compared to a net loss of $1,337,000 for the year ended
September 30, 1992. This favorable change in net operating results was primarily
due to a decrease in the Partnership's share of ventures' losses. The largest
factor in the decline in ventures' losses was an increase in rental revenue at
all five of the joint ventures. Occupancy and rental rates increased at the
properties during fiscal 1993, reflecting the gradual improvement of the
multi-family apartment market in most areas of the country, as well as strong
leasing activity at the Bell Plaza Shopping Center. This improvement in
operating results was partially offset by an increase in property operating
expenses. Property operating expenses increased mainly due to an increase in
utilities expense at the majority of the joint ventures as a result of the
severe 1993 winter season and an increase in repairs and maintenance costs at
Carriage Hill, Cambridge and Seven Trails.
Inflation
The Partnership completed its twelfth full year of operations in fiscal
1995 and the effects of inflation and changes in prices on revenues and expenses
to date have not been significant.
Inflation in future periods may increase revenues, as well as operating
expenses, at the Partnership's operating investment properties. Some of the
existing leases with tenants at the Partnership's retail shopping center contain
rental escalation and/or expense reimbursement clauses based on increases in
tenant sales or property operating expenses which would tend to rise with
inflation. Tenants at the Partnership's apartment projects have short-term
leases, generally of six - to - twelve months in duration. Rental rates at these
properties can be adjusted to keep pace with inflation, as market conditions
allow, as the leases are renewed or turned over. Such increases in rental income
would be expected to at least partially offset the corresponding increases in
Partnership and property operating expenses.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included under Item 14
of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
III -4
PART III
Item 10. Directors and Executive Officers of the Partnership
The Managing General Partner of the Partnership is Fifth Income Properties
Fund, Inc. a Delaware corporation, which is a wholly-owned subsidiary of
PaineWebber. The Associate General Partner of the Partnership is Properties
Associates, a Massachusetts general partnership, certain general partners of
which are also officers of the Adviser and the Managing General Partner. The
Managing General Partner has overall authority and responsibility for the
Partnership's operation, however, the day-to-day business of the Partnership is
managed by the Adviser pursuant to an advisory contract.
(a) and (b) The names and ages of the directors and principal executive
officers of the Managing General Partner of the Partnership are as follows:
Date elected
Name Office Age to Office
Lawrence A. Cohen President and Chief Executive Officer 42 8/30/88
Albert Pratt Director 84 11/19/82*
J. Richard Sipes Director 48 6/9/94
Walter V. Arnold Senior Vice President and Chief
Financial Officer 48 10/29/85
James A. Snyder Senior Vice President 50 7/6/92
John B. Watts III Senior Vice President 42 6/6/88
David F. Brooks First Vice President and
Assistant Treasurer 53 11/19/82 *
Timothy J. Medlock Vice President and Treasurer 34 6/1/88
Thomas W. Boland Vice President 33 12/1/91
* The date of incorporation of the Managing General Partner.
(c) There are no other significant employees in addition to the directors
and principal executive officers mentioned above.
(d) There is no family relationship among any of the foregoing directors
and executive officers of the Managing General Partner of the Partnership. All
of the foregoing directors and executive officers have been elected to serve
until the annual meeting of the Managing General Partner.
(e) All of the directors and officers of the Managing General Partner hold
similar positions in affiliates of the Managing General Partner, which are the
corporate general partners of other real estate limited partnerships sponsored
by PWI, and for which PaineWebber Properties Incorporated serves as the Adviser.
The business experience of each of the directors and principal executive
officers of the Managing General Partner is as follows:
Lawrence A. Cohen is President and Chief Executive Officer of the Managing
General Partner and President and Chief Executive Officer of the Adviser which
he joined in January 1989. He is also a member of the Board of Directors and the
Investment Committee of the Adviser. From 1984 to 1988, Mr. Cohen was First Vice
President of VMS Realty Partners where he was responsible for origination and
structuring of real estate investment programs and for managing national
broker-dealer relationships. He is a member of the New York Bar and is a
Certified Public Accountant.
J. Richard Sipes is a Director of the Managing General Partner and a
Director of the Adviser. Mr. Sipes is an Executive Vice President at
PaineWebber. He joined the firm in 1978 and has served in various capacities
within the Retail Sales and Marketing Division. Before assuming his current
position as Director of Retail Underwriting and Trading in 1990, he was a
Branch Manager, Regional Manager, Branch System and Marketing Manager for a
PaineWebber subsidiary, Manager of Branch Administration and Director of
Retail Products and Trading. Mr. Sipes holds a B.S. in Psychology from
Memphis State University.
Albert Pratt is Director of the Managing General Partner, a Consultant of
PWI and a general partner of the Associate General Partner. Mr. Pratt joined PWI
as Counsel in 1946 and since that time has held a number of positions including
Director of both the Investment Banking Division and the International Division,
Senior Vice President and Vice Chairman of PWI and Chairman of PaineWebber
International, Inc.
Walter V. Arnold is a Senior Vice President and Chief Financial Officer of
the Managing General Partner and a Senior Vice President and Chief Financial
Officer of the Adviser which he joined in October 1985. Mr. Arnold joined PWI in
1983 with the acquisition of Rotan Mosle, Inc. where he had been First Vice
President and Controller since 1978, and where he continued until joining the
Adviser. Mr. Arnold is a Certified Public Accountant licensed in the state of
Texas.
James A. Snyder is a Senior Vice President of the Managing General Partner
and a Senior Vice President and Member of the Investment Committee of the
Adviser. Mr. Snyder re-joined the Adviser in July 1992 having served previously
as an officer of PWPI from July 1980 to August 1987. From January 1991 to July
1992, Mr. Snyder was with the Resolution Trust Corporation where he served as
the Vice President of Asset Sales prior to re-joining PWPI. From February 1989
to October 1990, he was President of Kan Am Investors, Inc., a real estate
investment company. During the period August 1987 to February 1989, Mr. Snyder
was Executive Vice President and Chief Financial Officer of Southeast Regional
Management Inc., a real estate development company.
John B. Watts III is a Senior Vice President of the Managing General
Partner and a Senior Vice President of the Adviser which he joined in June 1988.
Mr. Watts has had over 16 years of experience in acquisitions, dispositions and
finance of real estate. He received degrees of Bachelor of Architecture,
Bachelor of Arts and Master of Business Administration from the University of
Arkansas.
David F. Brooks is a First Vice President and Assistant Treasurer of the
Managing General Partner and a First Vice President and an Assistant Treasurer
of the Adviser. Mr. Brooks joined the Adviser in March 1980. From 1972 to 1980,
Mr. Brooks was an Assistant Treasurer of Property Capital Advisors, Inc. and
also, from March 1974 to February 1980, the Assistant Treasurer of Capital for
Real Estate, which provided real estate investment, asset management and
consulting services.
Timothy J. Medlock is a Vice President and Treasurer of the Managing
General Partner and Vice President and Treasurer of the Adviser which he joined
in 1986. From June 1988 to August 1989, Mr. Medlock served as the Controller of
the Managing General Partner and the Adviser. From 1983 to 1986, Mr. Medlock was
associated with Deloitte Haskins & Sells. Mr. Medlock graduated from Colgate
University in 1983 and received his Masters in Accounting from New York
University in 1985.
Thomas W. Boland is a Vice President of the Managing General Partner
and a Vice President and Manager of Financial Reporting of the Adviser which
he joined in 1988. From 1984 to 1987, Mr. Boland was associated with Arthur
Young & Company. Mr. Boland is a Certified Public Accountant licensed in the
state of Massachusetts. He holds a B.S. in Accounting from Merrimack College
and an M.B.A. from Boston University.
(f) None of the directors and officers were involved in legal proceedings
which are material to an evaluation of his or her ability or integrity as a
director or officer.
(g) Compliance With Exchange Act Filing Requirements: The Securities
Exchange Act of 1934 requires the officers and directors of the Managing General
Partner, and persons who own more than ten percent of the Partnership's limited
partnership units, to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
beneficial holders are required by SEC regulations to furnish the Partnership
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Partnership believes that, during the year ended September 30, 1995, all filing
requirements applicable to the officers and directors of the Managing General
Partner and ten-percent beneficial holders were complied with.
<PAGE>
Item 11. Executive Compensation
The directors and officers of the Partnership's Managing General Partner
receive no current or proposed remuneration from the Partnership.
The Partnership is required to pay certain fees to the Adviser, and the
General Partners are entitled to receive a share of Partnership cash
distributions and a share of profits and losses. These items are described under
Item 13.
The Partnership has not paid regular cash distributions to the Unitholders
over the past five years. Regular quarterly distributions of excess cash flow
were suspended in 1988. Furthermore, the Partnership's Units of Limited
Partnership Interest are not actively traded on any organized exchange, and no
efficient secondary market exists. Accordingly no accurate price information is
available for these Units. Therefore, a presentation of historical Unitholder
total returns would not be meaningful.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership issuing Units of limited
partnership interest, not voting securities. All the outstanding stock of the
Managing General Partner, Fifth Income Properties Fund, Inc., is owned by
PaineWebber. Properties Associates, the Associate General Partner, is a
Massachusetts general partnership, the general partners of which are also
officers of the Adviser and the Managing General Partner. No limited partner is
known by the Partnership to own beneficially more than 5% of the outstanding
interests of the Partnership.
(b) The directors and officers of the Managing General Partner do not
directly own any Units of limited partnership interest of the Partnership. No
director or officer of the Managing General Partner, nor any general partner of
the Associate General Partner, possesses a right to acquire beneficial ownership
of Units of limited partnership interest of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation
of which may, at a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partners of the Partnership are Fifth Income Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of PaineWebber
Group Inc. ("PaineWebber") and Properties Associates (the "Associate General
Partner"), a Massachusetts general partnership, certain general partners of
which are also officers of the Managing General Partner and PaineWebber
Properties Incorporated. Subject to the Managing General Partner's overall
authority, the business of the Partnership is managed by PaineWebber Properties
Incorporated (the "Adviser") pursuant to an advisory contract. The Adviser is a
wholly-owned subsidiary of PaineWebber Incorporated ("PWI"). The General
Partners, the Adviser and PWI receive fees and compensation, determined on an
agreed-upon basis, in consideration of various services performed in connection
with the sale of the Units, the management of the Partnership and the
acquisition, management, financing and disposition of Partnership investments.
All distributable cash, as defined, for each fiscal year shall be
distributed quarterly in the ratio of 99% to the Limited Partners and 1% to the
General Partners. All sale or refinancing proceeds shall be distributed
generally 85% to the Limited Partners and 15% to the General Partners, after the
prior receipt by the Limited Partners of their adjusted capital contributions
and a cumulative, noncompounded return on their average adjusted capital
contributions ranging from 10% to 6% depending on when a Limited Partner was
admitted to the Partnership. All sale and refinancing proceeds received by the
Partnership to date have been distributed to the Limited Partners in accordance
with the Partnership Agreement.
Pursuant to the terms of the Partnership Agreement, taxable income and tax
loss of the Partnership will be allocated 99% to the Limited Partners and 1% to
the General Partners. Taxable income or tax loss arising from a sale or
refinancing of investment properties will be allocated to the Limited Partners
and to the General Partners in proportion to the amounts of sale or refinancing
proceeds to which they are entitled; provided that the General Partners shall be
allocated at least 1% of taxable income arising from a sale or refinancing. If
there are no sale or refinancing proceeds, taxable income and tax losses from a
sale or refinancing will be allocated 99% to the Limited Partners and 1% to the
General Partners. Notwithstanding this, the Partnership Agreement provides that
the allocation of taxable income and tax losses arising from the sale of a
property which leads to the dissolution of the Partnership shall be adjusted to
the extent feasible so that neither the General or Limited Partners recognize
any gain or loss as a result of having either a positive or negative balance
remaining in their capital accounts upon the dissolution of the Partnership. If
the General Partner has a negative capital account balance subsequent to the
sale of a property which leads to the dissolution of the Partnership, the
General Partner may be obligated to restore a portion of such negative capital
account balance as determined in accordance with the provisions of the
Partnership Agreement. Allocations of the Partnership's operations between the
General Partners and the Limited Partners for financial accounting purposes have
been made in conformity with the allocations of taxable income or tax loss.
Under the advisory contract, the Adviser has specific management
responsibilities; to administer day-to-day operations of the Partnership, and to
report periodically the performance of the Partnership to the Managing General
Partner. The Adviser is paid a basic management fee (4% of adjusted cash flow)
and an incentive management fee (5% of adjusted cash flow subordinated to a
noncumulative annual return to the Limited Partners equal to 6% based upon their
adjusted capital contribution) for services rendered. No management fees were
earned during the three-year period ended September 30, 1995.
The Managing General Partner and its affiliates are reimbursed for their
direct expenses relating to the offering of Units, the administration of the
Partnership and the acquisition and operations of the Partnership's real
property investments.
An affiliate of the Managing General Partner performs certain accounting,
tax preparation, securities law compliance and investor communications and
relations services for the Partnership. The total costs incurred by this
affiliate in providing such services are allocated among several entities,
including the Partnership. Included in general and administrative expenses for
the years ended September 30, 1995 is $87,000, representing reimbursements to
this affiliate for providing such services to the Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins"), an affiliate of the Managing General
Partner, 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 $5,000 for managing the Partnership's
cash assets in fiscal 1995, which amount is included in general and
administrative expenses on the accompanying statement of operations. Fees
charged by Mitchell Hutchins are based on a percentage of invested cash reserves
which varies based on the total amount of invested cash which Mitchell Hutchins
manages on behalf of PWPI.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) and (2) Financial Statements and Schedule:
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements and Financial Statement Schedule at
page F-1.
(3) Exhibits:
The exhibits listed on the accompanying index to exhibits at
page IV-3 are filed as part of this Report.
(b) No Current Reports on Form 8-K were filed during the last quarter of
fiscal 1995.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this report. See Index to Financial
Statements and Financial Statement Schedule at page F-1.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership 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/ Lawrence A. Cohen
Lawrence A. Cohen
President and Chief Executive Officer
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
By: /s/ Thomas W. Boland
Thomas W. Boland
Vice President
Dated: January 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Partnership in
the capacity and on the dates indicated.
By:/s/ Albert Pratt Date:January 11, 1996
Albert Pratt
Director
By: /s/ J. Richard Sipes DateJanuary 11, 1996
J. Richard Sipes
Director
IV-2
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a)(3)
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
INDEX TO EXHIBITS
Page Number in the
Exhibit No. Description of Document Report or Other
Reference
- -------------- ----------------------------------- -----------------------
(3) and Prospectus of the Registrant dated Filed with the
(4) May 26, 1983, as supplemented, Commission pursuant
with particular reference to to Rule 424(c) and
the Restated Certificate incorporated herein
and Agreement of Limited by reference.
Partnership.
(10) Material contracts previously filed Filed with the
as exhibits to registration Commission pursuant
statements and amendments thereto to Section 13 or
of the registrant together with 15(d) of the
all such contracts filed as exhibits Securities Exchange
of previously filed Forms 8-K and Act of 1934 and
Forms 10-K are hereby incorporated incorporated herein
herein by refererence. by reference.
(13) Annual Report to Limited Partners No Annual Report for
the year ended
September 30, 1995
has been sent to the
Limited Partners. An
Annual Report will be
sent to the Limited
Partners subsequent
to this filing.
(22) List of subsidiaries Included in Item 1 of
Part I of this Report
Page I-1, to which
reference is hereby
made.
(27) Financial data schedule Filed as the last
page of EDGAR
submission following
the Financial
Statements and
Financial Statement
Schedule required by
Item 14.
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a) (1) and (2) and 14(d)
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reference
Paine Webber Income Properties Five Limited Partnership:
Report of independent auditors F-2
Balance sheets as of September 30, 1995 and 1994 F-3
Statements of operations for the years ended
September 30, 1995, 1994 and 1993 F-4
Statements of changes in partners' capital (deficit)
for the years ended September 30, 1995, 1994 and 1993 F-5
Statements of cash flows for the years ended September
30, 1995, 1994 and 1993 F-6
Notes to financial statements F-7
Combined Joint Ventures of Paine Webber Income Properties Five Limited
Partnership:
Report of independent auditors F-17
Combined balance sheets as of September 30, 1995 and 1994 F-18
Combined statements of operations and changes in
venturers' capital (deficit) for the
years ended September 30, 1995, 1994 and 1993 F-19
Combined statements of cash flows for the years ended
September 30, 1995, 1994 and 1993 F-20
Notes to combined financial statements F-21
Schedule III - Real estate and accumulated depreciation F-28
Other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements, including the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
Paine Webber Income Properties Five Limited Partnership:
We have audited the accompanying balance sheets of Paine Webber Income
Properties Five Limited Partnership as of September 30, 1995 and 1994, and the
related statements of operations, changes in partners' capital (deficit) and
cash flows for each of the three years in the period ended September 30, 1995.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paine Webber Income
Properties Five Limited Partnership at September 30, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 28, 1995
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
BALANCE SHEETS
September 30, 1995 and 1994
(In thousands, except per Unit data)
ASSETS
1995 1994
Cash and cash equivalents $ 1,658 $ 1,836
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Equity in losses in excess of investments and
advances in joint ventures $ 2,059 $ 861
Accounts payable and accrued expenses 38 25
Total liabilities 2,097 886
Partners' capital (deficit):
General Partners:
Capital contributions 1 1
Cumulative net loss (139) (125)
Cumulative cash distributions (60) (60)
Limited Partners ($1,000 per unit; 34,928 units issued):
Capital contributions, net of offering costs 31,554 31,554
Cumulative net loss (13,748) (12,373)
Cumulative cash distributions (18,047) (18,047)
Total partners' capital (deficit) (439) 950
$ 1,658 $ 1,836
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the years ended September 30, 1995, 1994 and 1993
(In thousands, except per Unit data)
1995 1994 1993
Revenues:
Interest income $ 106 $ 87 $ 21
Expenses:
General and administrative 313 349 204
Operating loss (207) (262) (183)
Partnership's share of ventures' losses (1,182) (995) (860)
Partnership's share of gain on sale of
operating investment property - 3,174 -
Net income (loss) $(1,389) $1,917 $(1,043)
Net income (loss) per Limited
Partnership Unit $(39.37) $ 54.36 $(29.57)
Cash distributions per Limited
Partnership Unit $ - $ 63.00 $ -
The above net income (loss) and cash distributions per Limited Partnership
Unit are based upon the 34,928 Limited Partnership Units outstanding during each
year.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended September 30, 1995, 1994 and 1993
(In thousands)
General Limited
Partners Partners Total
Balance at September 30, 1992 $(193) $2,469 $2,276
Net loss (10) (1,033) (1,043)
Balance at September 30, 1993 (203) 1,436 1,233
Net income 19 1,898 1,917
Cash distributions - (2,200) (2,200)
Balance at September 30, 1994 (184) 1,134 950
Net loss (14) (1,375) (1,389)
Balance at September 30, 1995 $(198) $ (241) $ (439)
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the years ended September 30, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1995 1994 1993
Cash flows from operating activities:
Net income (loss) $ (1,389) $ 1,917 $(1,043)
Adjustments to reconcile net income (loss)
to net cash used for operating activities:
Partnership's share of ventures' losses 1,182 995 860
Partnership's share of gain on sale of
operating investment property - (3,174) -
Changes in assets and liabilities:
Accounts payable - affiliates - (24) 6
Accounts payable and accrued expenses 13 - (1)
Total adjustments 1,195 (2,203) 865
Net cash used for operating
activities (194) (286) (178)
Cash flows from investing activities:
Distributions from joint ventures 275 4,191 390
Additional investments in joint ventures (259) (586) -
Net cash provided by
investing activities 16 3,605 390
Cash flows from financing activities:
Distributions to partners - (2,200) -
Net cash used for
financing activities - (2,200) -
Net increase (decrease) in cash and
cash equivalents (178) 1,119 212
Cash and cash equivalents, beginning of year 1,836 717 505
Cash and cash equivalents, end of year $ 1,658 $ 1,836 $ 717
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
Notes to Financial Statements
1. Organization
Paine Webber Income Properties Five Limited Partnership (the
"Partnership") is a limited partnership organized pursuant to the laws of
the State of Delaware in January 1983 for the purpose of investing in a
diversified portfolio of income-producing properties. The Partnership
authorized the issuance of units (the "Units") of limited partnership
interest (at $1,000 per Unit) of which 34,928 were subscribed and issued
between May 26, 1983 and May 25, 1984.
2. Summary of Significant Accounting Policies
The accompanying financial statements as of September 30, 1995 and 1994
include the Partnership's investment in four joint venture partnerships
which own operating properties. The Partnership accounts for its investments
in joint venture partnerships using the equity method because the
Partnership does not have a voting control interest in the ventures. Under
the equity method the ventures are carried at cost adjusted for the
Partnership's share of the ventures' earnings and losses and distributions.
The Partnership's policy is to identify any permanent impairment to the
carrying value of its joint venture investments on a specific identification
basis. At September 30, 1995 and 1994, the carrying value of one of the
Partnership's joint ventures is adjusted for an allowance for possible
investment loss. See Note 4 for a discussion of this allowance account and a
description of the joint venture partnerships.
The Partnership has reviewed FAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of," which is
effective for financial statements for years beginning after December 15,
1995, and believes this new pronouncement will not have a material effect on
the Partnership's financial statements.
For purposes of reporting cash flows, cash and cash equivalents include
all highly liquid investments which have original maturities of 90 days or
less.
No provision for income taxes has been made as the liability for such
taxes is that of the partners rather than the Partnership.
3. The Partnership Agreement and Related Party Transactions
The General Partners of the Partnership are Fifth Income Properties Fund,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber Group Inc. ("PaineWebber") and Properties Associates (the
"Associate General Partner"), a Massachusetts general partnership, certain
general partners of which are also officers of the Managing General Partner
and PaineWebber Properties Incorporated. Subject to the Managing General
Partner's overall authority, the business of the Partnership is managed by
PaineWebber Properties Incorporated (the "Adviser") pursuant to an advisory
contract. The Adviser is a wholly-owned subsidiary of PaineWebber
Incorporated ("PWI"). The General Partners, the Adviser and PWI receive fees
and compensation, determined on an agreed-upon basis, in consideration of
various services performed in connection with the sale of the Units, the
management of the Partnership and the acquisition, management, financing and
disposition of Partnership investments.
All distributable cash, as defined, for each fiscal year shall be
distributed quarterly in the ratio of 99% to the Limited Partners and 1% to
the General Partners. All sale or refinancing proceeds shall be distributed
generally 85% to the Limited Partners and 15% to the General Partners, after
the prior receipt by the Limited Partners of their adjusted capital
contributions and a cumulative, noncompounded return on their average
adjusted capital contributions ranging from 10% to 6% depending on when a
Limited Partner was admitted to the Partnership. All sale and refinancing
proceeds received by the Partnership to date have been distributed to the
Limited Partners in accordance with the Partnership Agreement.
Pursuant to the terms of the Partnership Agreement, taxable income and tax
loss of the Partnership will be allocated 99% to the Limited Partners and 1%
to the General Partners. Taxable income or tax loss arising from a sale or
refinancing of investment properties will be allocated to the Limited
Partners and to the General Partners in proportion to the amounts of sale or
refinancing proceeds to which they are entitled; provided that the General
Partners shall be allocated at least 1% of taxable income arising from a
sale or refinancing. If there are no sale or refinancing proceeds, taxable
income and tax losses from a sale or refinancing will be allocated 99% to
the Limited Partners and 1% to the General Partners. Notwithstanding this,
the Partnership Agreement provides that the allocation of taxable income and
tax losses arising from the sale of a property which leads to the
dissolution of the Partnership shall be adjusted to the extent feasible so
that neither the General or Limited Partners recognize any gain or loss as a
result of having either a positive or negative balance remaining in their
capital accounts upon the dissolution of the Partnership. If the General
Partner has a negative capital account balance subsequent to the sale of a
property which leads to the dissolution of the Partnership, the General
Partner may be obligated to restore a portion of such negative capital
account balance as determined in accordance with the provisions of the
Partnership Agreement. Allocations of the Partnership's operations between
the General Partners and the Limited Partners for financial accounting
purposes have been made in conformity with the allocations of taxable income
or tax loss.
Under the advisory contract, the Adviser has specific management
responsibilities; to administer day-to-day operations of the Partnership,
and to report periodically the performance of the Partnership to the
Managing General Partner. The Adviser is paid a basic management fee (4% of
adjusted cash flow) and an incentive management fee (5% of adjusted cash
flow subordinated to a noncumulative annual return to the Limited Partners
equal to 6% based upon their adjusted capital contribution) for services
rendered. No management fees were earned during the three-year period ended
September 30, 1995.
The Managing General Partner and its affiliates are reimbursed for their
direct expenses relating to the offering of Units, the administration of the
Partnership and the acquisition and operations of the Partnership's real
property investments.
Included in general and administrative expenses for the years ended
September 30, 1995, 1994 and 1993 is $87,000, $96,000 and $107,000,
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"), an affiliate of the Managing General
Partner, 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 $5,000, $2,000 and
$1,000 for managing the Partnership's cash assets in fiscal 1995, 1994 and
1993, respectively, which amounts are included in general and administrative
expenses on the accompanying statements of operations.
<PAGE>
4. Investments in Joint Venture Partnerships
As of September 30, 1995, the Partnership has investments in five joint
ventures (four at September 30, 1994). On June 30, 1994, Cambridge Associates
sold its operating investment property, the Cambridge Apartments, a 378-unit
apartment complex located in Omaha, Nebraska, to an affiliate of the
Partnership's co-venture partner. The property was sold for $9,700,000. After
repayment of the outstanding $5 million first mortgage loan and closing costs,
the sale generated approximately $4.7 million to be split between the
Partnership and the co-venturer in accordance with the venture agreement. The
Partnership's share of such proceeds amounted to approximately $3.7 million in
cash. The sale resulted in a gain of $3,336,000 which was recognized by the
venture in fiscal 1994. The Partnership's share of such gain totalled
$3,174,000.
The joint ventures are accounted for on the equity method in the
Partnership's financial statements. Condensed combined financial statements
of these joint ventures (including Cambridge Associates through the date of
the sale transaction described above) are as follows:
Condensed Combined Balance Sheet
September 30, 1995 and 1994
(in thousands)
Assets
1995 1994
Current assets $ 2,369 $ 2,284
Operating investment properties, net 45,566 46,744
Other assets, net 1,982 1,987
$ 49,917 $51,015
Liabilities and Venturers' Deficit
Current liabilities $ 18,333 $ 7,297
Other liabilities 980 860
Long-term mortgage debt,
less current portion 36,325 46,530
Partnership's share of combined deficit (2,607) (1,470)
Co-venturers' share of combined deficit (3,114) (2,202)
$ 49,917 $51,015
Reconciliation of Partnership's Investments
(in thousands)
1995 1994
Partnership's share of deficit, as shown above $ (2,607) $ (1,470)
Partnership's share of current liabilities
and long-term debt 848 909
Less: Allowance for possible investment loss (1) (300) (300)
Investments in joint ventures, at equity, net $ (2,059) $ (861)
(1) The carrying value of the Partnership's investments in joint
ventures at September 30, 1995 and 1994 is net of an allowance for
possible investment loss of $300,000, which relates to the
Amarillo Bell Associates joint venture. See discussion below for
further details.
<PAGE>
Condensed Combined Summary of Operations
For the years ended September 30, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
Revenues:
Rental income and expense recoveries $11,173 $12,458 $12,782
Interest and other income 443 386 343
11,616 12,844 13,125
Expenses:
Property operating expenses 4,968 6,199 6,135
Depreciation and amortization 2,525 2,688 2,983
Interest expense 5,216 5,421 5,435
Loss on write-off of deferred
financing costs 1,177 - -
13,886 14,308 14,553
Operating loss (2,270) (1,464) (1,428)
Gain on sale of operating
investment property - 3,336 -
Net income (loss) $ (2,270) $ 1,872 $ (1,428)
Net income (loss):
Partnership's share of
combined income (loss) $ (1,182) $ 2,179 $ (860)
Co-venturers' share of combined loss (1,088) (307) (568)
$ (2,270) $ 1,872 $ (1,428)
The Partnership's share of the combined income (loss) of the joint ventures
is presented as follows on the accompanying statements of operations (in
thousands):
1995 1994 1993
Partnership's share of ventures' losses $ (1,182) $ (995) $ (860)
Partnership's share of gain on sale of
operating investment property - 3,174 -
$ (1,182) $ 2,179 $ (860)
Investments in joint ventures, at equity is the Partnership's net investment
in the joint venture partnerships. These joint ventures are subject to
partnership agreements which determine the distribution of available funds,
the disposition of the venture's assets and the rights of the partners,
regardless of the Partnership's percentage ownership interest in the
venture. Substantially all of the Partnership's investments in these joint
ventures are restricted as to distributions.
<PAGE>
Investments in joint ventures, at equity on the balance sheet at September
30, 1995 and 1994 is comprised of the following (in thousands):
1995 1994
Randallstown Carriage Hill Associates $ (5,796) $ (4,970)
Signature Partners, L.L.C. 238 -
Amarillo Bell Associates 1,556 1,506
Greenbrier Associates 855 915
Seven Trails West Associates 1,088 1,688
$ (2,059) $ (861)
The Partnership received cash distributions from the ventures as set forth
below (in thousands):
1995 1994 1993
Amarillo Bell Associates $ 50 $ 59 $ 78
Greenbrier Associates 132 111 4
Carriage Hill 93 - -
Cambridge Associates - 4,021 308
$ 275 $ 4,191 $ 390
A description of the ventures' properties and the terms of the joint venture
agreements are summarized as follows:
a) Randallstown Carriage Hill Associates
On August 30, 1983, the Partnership acquired an interest in Randallstown
Carriage Hill Associates, a Maryland general partnership organized to
purchase and operate Carriage Hill Village Apartments, an 806-unit apartment
complex in Randallstown, Maryland. The Partnership ("PWIP5") is a general
partner in the joint venture. JBG Associates ("JBG") was the original
co-venturer of the joint venture.
The aggregate cash investment made by the Partnership for its interest was
approximately $11,524,000 (including an acquisition fee of $1,150,000 paid
to the Adviser). The apartment complex was acquired subject to four
mortgages; two institutional nonrecourse first mortgages with balances
totalling approximately $6,136,000 at the time of closing, and two second
mortgage notes from the seller of the property with balances totalling
$6,000,000 at the time of closing. On December 30, 1986, the Partnership
refinanced the aforementioned debt by obtaining a $28,000,000 non-recourse
mortgage loan. The Partnership received a distribution of approximately
$9,926,000 in fiscal 1987, reflecting its share of the excess refinancing
proceeds.
The joint venture obtained necessary new capital by admitting Signature
Development Corporation ("Signature") as a new partner in fiscal 1988. The
amended partnership agreement provided for the admission of Signature as a
50% partner in the joint venture with JBG and PWIP5 (collectively "JBG/PW").
JBG and PWIP5's ownership percentages were adjusted, pro rata, to 10% and
40%, respectively. In return for its 50% interest, Signature committed to
contribute up to $3,000,000 to the joint venture over the first three years,
primarily to fund capital improvements, working capital needs and meet debt
payments.
The Carriage Hill joint venture did not generate sufficient cash flow to
fully cover its debt service payments to the lender during the second
quarter of fiscal 1994. 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 at that time. 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 initial principal amount of
approximately $27.9 million, has a fixed interest rate of 7.65% and a term
of 35 years. The venture recognized a loss of $1,177,000 in fiscal 1995 in
connection with the refinancing transaction to write off the unamortized
balance of the deferred financing costs related to the prior mortgage loan.
The new loan also releases from the collateral a 23-acre parcel of excess
land. The venture distributed this land parcel, which had a carrying value
of $563,000, to a new entity, Signature Partners, L.L.C., in conjunction
with the refinancing transaction. Signature Partners, L.L.C. is owned by
Signature, JBG and the Partnership with the same ownership interest
percentages as in the Carriage Hill joint venture agreement. The land owned
by Signature Partners, L.L.C. could eventually be marketed to local
developers once market conditions improve. Proceeds of any such sale, if
completed, would be distributed to the owners in accordance with the same
priorities called for under the terms of the Carriage Hill joint venture
agreement described below.
The amended joint venture agreement provides that available net cash flow,
as defined, is to be distributed in the following order of priority: 1) To
the partners for any deficiency loans, as defined, simple but cumulative
interest at 15% per annum; 2) To Signature and JBG/PW, until both have
received an amount of $151,324 plus simple but cumulative interest at 10%
thereon from January 15, 1995 through the date of distribution; 3) To
Signature, simple but cumulative interest at 10% per annum on the aggregate
unreturned balance of the Initial Capital Commitment of $2,549,120 and any
Additional Capital, as defined; 4) To JBG/PW, simple but cumulative interest
at 10% per annum on the unreturned balance of JBG/PW's deemed capital
contribution of $1,500,000; and (5) any net cash flow remaining, to the
partners pro rata in proportion to their respective partnership interests.
Any cash flow distributed by the joint venture to JBG/PW is to be
distributed between them in the following order of priority: 1) To the
holders of operating notes, interest on all operating notes other than the
Initial Operating Loan, as defined; 2) To PWIP5 and JBG, $300,000
distributed 90% to PWIP5 and 10% to JBG; and 3) any remainder, 80% to PWIP5
and 20% to JBG.
Per the terms of the amended joint venture agreement, any net proceeds
arising from the refinancing, sale, exchange or other disposition of the
Property or any part thereof, will be distributed in the following order of
priority: 1) To the lenders of deficiency loans, simple but cumulative
interest at 15% per annum on, and then to the payment of the principal of,
any deficiency loans; 2) To Signature and JBG/PW, until both have received
an amount of $151,324 plus simple but cumulative interest at 10% thereon
from January 15, 1995 through the date of distribution; 3) to Signature and
JBG/PW, an amount equal to their respective Closing Adjustment Accounts, as
defined, plus the Deferred Distribution of $137,500 owed to JBG/PW, together
with simple but cumulative interest at 10% per annum thereon; 4) to
Signature, simple but cumulative interest at 10% per annum on, and then to
the payment of principal of, the aggregate unreturned balance of the Initial
Capital Commitment of $2,549,120 and any Additional Capital, as defined; 5)
to JBG/PW, simple but cumulative interest at 10% per annum on, and then to
the payment of principal of, the unreturned aggregate balance of JBG/PW's
deemed capital contribution of $1,500,000, plus $351,000; and 5) the balance
pro rata to the partners in proportion to their respective percentages of
partnership interests. Any capital proceeds distributed by the joint venture
to JBG/PW are to be distributed between them in the following order of
priority: 1) To the holders of operating notes, all unpaid accrued interest
on, and then to the payment of principal of, all outstanding operating notes
other than the Initial Operating Loan; 2) To JBG, any subordinated
management fees and management fees then unpaid and accrued from prior
fiscal years, 3) To PWIP5, payment of the Initial Operating Note together
with accrued interest thereon; 4) To JBG, $200,000 for services rendered in
connection with the refinancing of the original mortgage; 5) To PWIP5 and
JBG, the next $5,000,000 distributed 90% to PWIP5 and 10% to JBG; and 6) To
PWIP5 and JBG, any remaining balance distributed 80% to PWIP5 and 20% to
JBG.
All tax losses shall be allocated to the partners in proportion to their
percentages of partnership interest; provided, however, that no partner
shall be allocated any loss which would reduce its capital account below
zero unless all Partners have negative capital accounts. Taxable income
shall be allocated in accordance with the cash flow distributions set forth
above. Any income allocated by the joint venture to JBG/PW is to be
allocated between them to the extent of cash flow distributed to them for
such taxable year, with the remainder allocated 80% to PWIP5 and 20% to JBG.
Tax losses allocated by the joint venture to JBG/PW shall be allocated
between them in the ratio of their positive capital account balances,
subsequent to any distributions, with any remaining losses allocated 80% to
PWIP5 and 20% to JBG. Allocations of the joint venture's net losses for
financial accounting purposes have been made in accordance with the
allocations of tax losses.
A management agreement ("Management Agreement"), dated as of July 8, 1988,
between the joint venture and Signature Management Services, Inc., an
affiliate of Signature, sets forth conditions of the property management for
the Carriage Hill Apartments. The Management Agreement provides for a
monthly management fee of 5% of the prior month's gross revenues, as
defined.
b) Amarillo Bell Associates
On September 30, 1983, the Partnership acquired a 50% interest in Amarillo
Bell Associates, an existing Texas general partnership which owns a 151,500
square foot shopping center in Amarillo, Texas. The Partnership is a general
partner in the joint venture. The Partnership's co-venturer is an affiliate
of The Boyer Company. The aggregate investment by the Partnership for its
interest was approximately $2,222,000 (including an acquisition fee of
$230,000 paid to the Adviser).
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 9.4% 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. At September 30,
1995, the balance of the mortgage loan, which matures on July 1, 2002, was
approximately $3,293,000.
Subsequent to the end of fiscal 1990, the Partnership had entered into
negotiations with its co-venture partner to execute a purchase and sale
agreement for the sale of the Partnership's interest in the joint venture.
The proposed agreement would have given the co-venturer an option to
purchase the Partnership's interest for $1,500,000. Because the option price
was below the equity method carrying value of the Partnership's investment
in Amarillo Bell Associates at September 30, 1990, the Partnership
recognized a provision for possible investment loss of $300,000 in fiscal
1990 which reflected an estimate of the loss that would have been incurred
if the option had been executed and exercised. The co-venturer was unable to
obtain financing to complete this transaction and the option was never
executed. The $300,000 allowance for possible investment loss remains on the
Partnership's balance sheet at September 30, 1995 due to management's belief
that it represents a permanent impairment to the carrying value of the
investment in the Bell Plaza joint venture.
The joint venture agreement provides that the Partnership will receive from
cash flow an annual non-cumulative preferred return, payable monthly, of 50%
of the distributable cash flow with a minimum of $164,000 from October 1,
1988 annually through September 30, 1990. For the period after September 30,
1990, the Partnership will receive an annual distribution paid on a monthly
basis equal to 50% of distributable cash flow. The co-venturer will receive
an annual non-cumulative base return payable quarterly equal to the
available cash flow after the Partnership's return as set forth above.
Taxable income before depreciation will be allocated to the Partnership and
the co-venturer first in the same amount as cash is distributed, and any
balance will be allocated 50% to the Partnership and 50% to the co-venturer.
If no cash flow is available, then 100% is to be allocated to the
Partnership. Depreciation will be allocated to the partners as it is
attributable to their respective basis in the depreciable assets.
Allocations of income and loss for financial accounting purposes have been
made in accordance with the allocations of taxable income or tax loss.
If additional cash is required for any reason in connection with the joint
venture, it is to be provided in equal proportions by the Partnership and
the co-venturer.
Per the terms of the joint venture agreement, distributions from a sale of
the operating investment property and/or refinancing proceeds will be as
follows, after the payment of mortgage debts and to the extent not
previously returned to each partner: 1) to the Partnership in an amount
equal to the Partnership's gross investment, 2) to the co-venturer
$2,140,000, 3) payment of all unpaid accrued interest on all outstanding
operating notes and then to the repayment of the principal of all
outstanding operating notes, 4) payment of any accrued subordinated
management fees, 5) any remaining balance thereof shall be distributed 50%
to the Partnership and 50% to the co-venturer.
The joint venture has entered into a property management contract with an
affiliate of the co-venturer cancellable at the option of the Partnership
upon the occurrence of certain events. The management fee is equal to 4% of
gross rents.
c) Greenbrier Associates
On June 29, 1984, the Partnership acquired an interest in Greenbrier
Associates, an Indiana general partnership that owns and operates Greenbrier
Apartments, a 324-unit apartment complex located in Indianapolis, Indiana.
The Partnership is a general partner in the joint venture. The Partnership's
co-venturer is an affiliate of the Paragon Group.
The aggregate cash investment made by the Partnership for its interest was
approximately $4,109,000 (including an acquisition fee of $432,000 paid to
the Adviser). The apartment complex is encumbered by a first mortgage loan
with a balance of $5,400,000 at September 30, 1995.
The joint venture agreement provides that the Partnership will receive from
available cash flow an annual cumulative preferred base return, payable
monthly, of $378,000. The Partnership's preference return is noncumulative
on a year-to-year basis beginning July 1, 1987. The cumulative preference
return of the Partnership in arrears at September 30, 1995 and 1994 for
unpaid preference returns through June 30, 1987 is approximately $312,000.
After the Partnership has received its preferred return, the co-venturer is
then entitled to receive an annual noncumulative, subordinated base return,
payable quarterly, of $21,000. Any remaining cash flow not previously
distributed at the end of each year will be used to pay any accrued interest
on all outstanding operating notes. The next $100,000 of cash flow in any
year will be distributed 90% to the Partnership and 10% to the co-venturer.
Thereafter, any excess cash flow will be distributed 80% to the Partnership
and 20% to the co-venturer.
Taxable income or tax loss from operations will be allocated in the same
proportions as cash distributions, but in no event less than 5% to the
co-venturer. Additionally, the co-venturer shall not be allocated net
profits in excess of net cash flow distributed to it during the fiscal year.
Allocations of the venture's operations between the Partnership and the
co-venturer for financial accounting purposes have been made in conformity
with the actual allocations of taxable income or tax loss.
If additional cash is required for any reason in connection with the joint
venture, it will be provided by the Partnership and the co-venturer as loans
to the joint venture. Such loans would be provided 85% by the Partnership
and 15% by the co-venturer.
Any proceeds arising from a refinancing, sale, exchange or other
distribution of property will be distributed in the following order of
priority: (1) to the payment of unpaid principal and accrued interest on all
outstanding operating notes, then to the repayment of unpaid operating loans
and accrued interest to the Partnership and the co-venturer, (2) to the
Partnership for the aggregate amount of the Partnership's cumulative
preference return not previously distributed, (3) the next $4,044,000 to the
Partnership, (4) the next $200,000 to the co-venturer, (5) to the property
manager, an amount equal to the sum of any unpaid subordinated management
fees, (6) the next $3,500,000 to the Partnership and the co-venturer
allocated 90% and 10%, respectively, (7) the next $3,000,000 to the
Partnership and the co-venturer allocated 80% and 20%, respectively, and (8)
any remaining balance to the Partnership and the co-venturer in the
proportions of 70% and 30%, respectively.
The joint venture entered into a property management contract with an
affiliate of the co-venturer, cancellable at the option of the Partnership
upon the occurrence of certain events. The management fee is 5% of the gross
receipts collected from the property.
d) Seven Trails West Associates
On September 13, 1984 the Partnership acquired an interest in Seven Trails
West Associates, a Missouri general partnership that owns and operates Seven
Trails West Apartments, a 532-unit apartment complex in Ballwin, Missouri.
The Partnership is a general partner in the joint venture.
The aggregate cash investment by the Partnership for its interest was
approximately $10,011,000 (including an acquisition fee of $1,050,000 paid
to the Adviser). The apartment complex is encumbered by a nonrecourse first
mortgage loan with a principal balance of $14,700,000 at September 30,
1995. On March 31, 1994, the Partnership closed on a modification and
extension of the wraparound mortgage loan secured by the Seven Trails
Apartments with the existing lender. As part of the agreement, the wrap
mortgage lender purchased the underlying first mortgage loan and is now the
sole mortgage lienholder. Under the terms of the modification agreement,
the loan maturity date was extended to February 1, 1996 and the accrual
rate of interest was increased from 11% to 12%, with 1% deferred, on the
outstanding mortgage loan principal of $14,700,000. In addition to the
outstanding principal balance, there is currently deferred interest
totalling approximately $1.7 million due to the Seven Trails mortgage
lender. Under the terms of the extension agreement, no interest will accrue
on the current or additional amounts of deferred interest through the
scheduled maturity date. The Partnership contributed approximately $586,000
to the Seven Trails joint venture in the second quarter of fiscal 1994 in
order to complete the modification and extension transaction. Such advances
were used to pay a refundable $147,000 extension fee, to fund a capital
improvement reserve of $400,000 and to pay for the transaction closing
costs. The extension fee will be refunded to the Partnership if the entire
obligation to the mortgage lender is repaid in full prior to the extended
maturity date. Under the terms of the extension agreement, all net cash
flow of the joint venture, after payment of current debt service, approved
capital costs and approved refinancing costs, will be payable to the lender
to pay down outstanding deferred interest and then loan principal. During
fiscal 1995, the joint venture approached several potential lenders in an
attempt to secure a timely refinancing of the first mortgage loan prior to
the February 1996 maturity date. The joint venture currently has an
application in process for a new loan with a potential replacement lender.
However, no financing agreement has been finalized as of the date of this
report.
The joint venture agreement provides that the Partnership will receive from
available cash flow an annual cumulative preferred base return, payable
monthly, of $875,000. The Partnership's preference return was cumulative on
a year to year basis through September 30, 1987 and is cumulative monthly
but not annually thereafter. The cumulative preference return of the
Partnership in arrears at September 30, 1995 for unpaid preference returns
through September 30, 1987 is approximately $1,691,000.
After the Partnership has received its preferred return, the co-venturer is
then entitled to receive an annual noncumulative, subordinated base return,
payable quarterly, of $50,000. Any cash flow not previously distributed at
the end of each fiscal year will be applied as follows: $250,000 of cash
flow in any year will be distributed 90% to the Partnership and 10% to the
co-venturer; the next $300,000 of annual cash flow will be distributed 80%
to the Partnership and 20% to the co-venturer; thereafter, any excess cash
flow will be distributed 70% to the Partnership and 30% to the co-venturer.
Taxable income or tax loss from operations will be allocated in the same
proportions as cash distributions, but in no event less than 10% to the
co-venturer. Additionally, the co-venturer shall not be allocated net
profits in excess of net cash flow distributed to it during the fiscal year.
Allocations of the venture's operations between the Partnership and the
co-venturer for financial accounting purposes have been made in conformity
with the allocations of taxable income or tax loss.
If additional cash is required for any reason in connection with the joint
venture, the joint venture agreement calls for such funds to be provided by
the Partnership and the co-venturer as loans to the joint venture. Such
loans would be provided 90% by the Partnership and 10% by the co-venturer.
Operating notes have been provided by the Partnership and co-venturer in the
amounts of $836,000 and $11,000, respectively. The notes bear interest at
the prime interest rate of a local bank. As stated above, the Partnership
advanced 100% of the funds required to close the loan modification and
extension agreement in fiscal 1994. The portion of such operating notes
representing the co-venture partner's 10% share of the required funds bears
interest at twice the rate of the regular operating notes.
Subject to the first loan modification agreement reached in 1991, as
referred to above, any proceeds arising from a refinancing, sale or exchange
or other disposition of property will be distributed first to the payment of
unpaid principal and accrued interest on any outstanding notes. Any
remaining proceeds will be distributed in the following order: 20% of the
proceeds in excess of $25,000,000 would be distributed to the holder of the
mortgage note (except in a refinancing); repayment of unpaid principal and
accrued interest on all outstanding operating notes to the Partnership and
the co-venturer; and any remaining balance distributed 90% to the
Partnership and 10% to the co-venturer.
The joint venture has entered into a property management contract with an
affiliate of the co-venturer, cancellable at the option of the Partnership
upon the occurrence of certain events. The management fee is equal to 4% of
the gross receipts collected from the property.
5. Contingencies
The Partnership is involved in certain legal actions. The Managing General
Partner believes these actions will be resolved without material adverse
effect on the Partnership's financial statements, taken as a whole.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of
Paine Webber Income Properties Five Limited Partnership:
We have audited the combined balance sheets of the Combined Joint Ventures of
Paine Webber Income Properties Five Limited Partnership as of September 30, 1995
and 1994, and the related combined statements of operations and changes in
ventures' capital (deficit) and cash flows for each of the three years in the
period ended September 30, 1995. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Combined Joint
Ventures of Paine Webber Income Properties Five Limited Partnership at September
30, 1995 and 1994 and the results of their operations and their cash flows for
each of the three years in the period ended September 30, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
November 17, 1995
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
September 30, 1995 and 1994
(In thousands)
Assets
1995 1994
Current assets:
Cash and cash equivalents $ 545 $ 666
Escrow deposits 1,030 1,213
Accounts receivable 130 67
Prepaid expenses 664 581
Total current assets 2,369 2,527
Operating investment properties:
Land 5,250 5,212
Buildings, improvements and equipment 68,244 66,959
73,494 72,171
Less accumulated depreciation (27,928) (25,427)
Net operating investment properties 45,566 46,744
Reserve for capital expenditures 689 222
Deferred expenses, net of accumulated amortization
of $212 ($465 in 1994) 1,138 1,361
Other assets 155 161
$49,917 $51,015
Liabilities and Venturers' Deficit
Current liabilities:
Current portion of long-term debt $14,911 $ 3,524
Current portion of deferred interest 1,657 1,646
Accounts payable 117 251
Accounts payable - affiliates 30 44
Accrued real estate taxes 548 549
Accrued interest 585 525
Tenant security deposits 364 398
Distributions payable to venturers - 235
Other current liabilities 121 125
Total current liabilities 18,333 7,297
Notes payable to venturers 966 847
Other liabilities 14 13
Long-term debt 36,325 46,530
Venturers' deficit (5,721) (3,672)
$49,917 $51,015
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL (DEFICIT)
For the years ended September 30, 1995, 1994 and 1993
(In thousands)
1995 1994 1993
Revenues:
Rental income and expense recoveries $11,173 $12,458 $12,782
Interest and other income 443 386 343
11,616 12,844 13,125
Expenses:
Interest expense 5,216 5,421 5,435
Depreciation and amortization 2,525 2,688 2,983
Real estate taxes 994 1,136 1,187
Repairs and maintenance 839 1,288 1,269
Salaries and related expenses 1,376 1,505 1,491
Utilities 725 874 883
General and administrative 320 384 382
Management fees 532 670 578
Insurance 155 324 333
Bad debt expense 27 18 12
Loss on write-off of deferred
financing costs 1,177 - -
13,886 14,308 14,553
Operating loss (2,270) (1,464) (1,428)
Gain on sale of operating
investment property - 3,336 -
Net income (loss) (2,270) 1,872 (1,428)
Contributions from venturers 916 50 38
Distributions to venturers (695) (4,950) (524)
Venturers' capital (deficit),
beginning of year (3,672) (644) 1,270
Venturers' deficit, end of year $ (5,721) $ (3,672) $ (644)
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES OF
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
For the years ended September 30, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1995 1994 1993
Cash flows from operating activities:
Net income (loss) $ (2,270) $ 1,872 $(1,428)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,525 2,688 2,983
Amortization of deferred financing costs 99 70 -
Loss on write-off of deferred
financing costs 1,177 - -
Gain on sale of operating
investment property - (3,336) -
Changes in assets and liabilities:
Escrow deposits 183 (368) 98
Accounts receivable (63) 21 (4)
Accounts receivable - affiliates - - 38
Prepaid expenses (83) (48) 8
Other current assets - - (86)
Deferred expenses (126) (144) (36)
Accounts payable (134) (80) 59
Accounts payable - affiliates (14) (45) 72
Accrued real estate taxes (1) 27 3
Accrued interest 60 7 20
Tenant security deposits (34) (97) (58)
Other current liabilities (4) (37) (15)
Deferred interest 11 (88) 79
Other liabilities 1 2 -
Total adjustments 3,597 (1,428) 3,161
Net cash provided by
operating activities 1,327 444 1,733
Cash flows from investment activities:
Additions to operating investment
properties (1,323) (776) (800)
Increase in reserve for capital
expenditures (467) 243 2
Proceeds from sale of assets - 9,686 -
Net cash provided by
(used for)
investing activities (1,790) 9,153 (798)
Cash flows from financing activities:
Proceeds from long-term debt 31,184 - -
Payment of deferred financing costs (945) - -
Contributions by venturers 916 50 -
Distributions to venturers (930) (5,115) (469)
Repayment of long-term debt (30,002) (5,277) (255)
Proceeds from loans from venturers 119 586 -
Repayment of notes to partners - (85) -
Net cash provided by (used for)
financing activities 342 (9,841) (724)
Net increase (decrease) in cash and
cash equivalents (121) (244) 211
Cash and cash equivalents,
beginning of year 666 910 699
Cash and cash equivalents, end of year $ 545 $ 666 $ 910
Cash paid during the year for interest $ 4,909 $ 5,432 $ 5,336
See accompanying notes.
<PAGE>
COMBINED JOINT VENTURES of
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
Notes to Combined Financial Statements
1. Summary of significant accounting policies
Organization
The accompanying financial statements of the Combined Joint Ventures of
Paine Webber Income Properties Five Limited Partnership (Combined Joint
Ventures) include the accounts of Randallstown Carriage Hill Associates, a
Maryland general partnership; Signature Partners, L.L.C., a Maryland limited
liability company; Amarillo Bell Associates, a Texas general partnership;
Greenbrier Associates, an Indiana general partnership; Cambridge Associates,
a Nebraska general partnership and Seven Trails West Associates a Missouri
general partnership. As further described in Note 2, Cambridge Associates
sold its operating investment property and commenced a liquidation of its
operations during fiscal 1994. The financial statements of the Combined
Joint Ventures are presented in combined form due to the nature of the
relationship between each of the co-venturers and Paine Webber Income
Properties Five Limited Partnership (PWIP5).
The dates of PWIP5's acquisition of interests in the joint ventures are as
follows:
Date of Acquisition
Joint Venture of Interest
Randallstown Carriage Hill Associates 8/30/83
Signature Partners L.L.C. 6/1/95
Amarillo Bell Associates 9/30/83
Greenbrier Associates 6/29/84
Cambridge Associates 7/31/84
Seven Trails West Associates 9/13/84
Basis of presentation
Generally, the records of the combined joint ventures are maintained on
the income tax basis of accounting and adjusted to generally accepted
accounting principles for financial reporting purposes, principally for
depreciation.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Operating investment properties
The operating investment properties are carried at the lower of cost,
reduced by accumulated depreciation, or net realizable value. The net
realizable value of a property held for long-term investment purposes is
measured by the recoverability of the venture's investment through expected
future cash flows on an undiscounted basis, which may exceed the property's
market value. The net realizable value of a property held for sale
approximates its current market value. All of the operating properties owned
by the Combined Joint Ventures were held for long-term investment purposes
as of September 30, 1995 and 1994. Depreciation expense is computed on a
straight-line basis over the estimated useful lives of the buildings,
improvements and equipment, generally, five to forty years. Professional fees
and other costs incurred in connection with the acquisition of the properties
have been capitalized and are included in the cost of the land and buildings.
The Combined Joint Ventures have reviewed FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of,"
which is effective for financial statements for years beginning after December
15, 1995, and believe this new pronouncement will not have a material effect on
the financial statements of the Combined Joint Ventures.
<PAGE>
Deferred expenses
Deferred expenses consist of organization costs, leasing commissions and
loan fees which are being amortized, using the straight-line method, over
five years and the terms of the related leases and loans, respectively.
Amortization of deferred loan fees is included in interest expense on the
accompanying statements of operations.
Revenue Recognition
The Combined Joint Ventures lease space at the operating investment
properties under short-term and long-term operating leases. Rental revenues
are recognized on an accrual basis as earned pursuant to the terms of the
leases.
Income tax matters
The Combined Joint Ventures are comprised of entities which are not
taxable and accordingly, the results of their operations are included on the
tax returns of the various partners. Accordingly no income tax provision is
reflected in the accompanying combined financial statements.
Cash and cash equivalents
For purposes of the statement of cash flows, the Partnerships consider all
short-term investments with original maturity dates of 90 days or less to be
cash equivalents.
Escrow deposits
Escrow deposits at September 30, 1995 and 1994 consist of tenant security
deposits, amounts escrowed for the payment of insurance premiums, real
estate taxes and repair and replacement funds.
Reserve for Capital Expenditures
In connection with the mortgage loan of the Carriage Hill joint venture,
an escrow account was established as a reserve for replacements stipulating
that a portion of each month's mortgage payment is to be deposited in the
reserve for replacement account. When repairs are made, the joint venture
pays the vendor and then the lender reimburses the joint venture and reduces
the escrow account by the amount of the expenditure. These funds can only be
used for making necessary repairs as stipulated in the mortgage agreement.
2. Joint Ventures
See Note 4 to the financial statements of PWIP5 in this Annual Report for a
more detailed description of the joint venture partnerships. Descriptions of
the ventures' properties are summarized below:
a. Randallstown Carriage Hill Associates
The joint venture owns and operates Carriage Hill Village
Apartments, an 806-unit apartment complex located in Randallstown,
Maryland.
<PAGE>
b. Signature Partners, L.L.C.
This limited liability company owns a 23-acre parcel of land
located in Randallstown, Maryland. See Note 4.
c. Amarillo Bell Associates
The joint venture owns and operates Bell Plaza Shopping Center, a
151,500 gross leasable square foot shopping center located in Amarillo,
Texas.
d. Greenbrier Associates
The joint venture owns and operates Greenbrier Apartments, a
324-unit apartment complex located in Indianapolis, Indiana.
e. Seven Trails West Associates
The joint venture owns and operates Seven Trails West Apartments, a
532-unit apartment complex located in Ballwin, Missouri.
As further described in Note 4, the mortgage loan secured by the
Seven Trails West Apartments is scheduled to mature on February 1,
1996. Management is currently pursuing new financing sources which
would allow the venture to repay the outstanding debt obligation.
However, no financing agreement has been finalized as of the date of
this report.
f. Cambridge Associates
The joint venture owned and operated Cambridge Apartments, a
378-unit apartment complex located in Omaha, Nebraska. On June 30, 1994,
Cambridge Associates sold its operating investment property, the
Cambridge Apartments, to an affiliate of PWIP5's co-venture partner. The
property was sold for $9,700,000. After repayment of the outstanding $5
million first mortgage loan and closing costs, the sale generated
approximately $4.7 million to be split between PWIP5 and the co-venturer
in accordance with the venture agreement. PWIP5's share of such proceeds
amounted to approximately $3.7 million in cash. The venture recognized a
gain of $3,336,000 in fiscal 1994 in connection with the sale
transaction.
The following description of the joint venture agreements provides certain
general information.
Allocations of net income and loss
The agreements generally provide that taxable income and losses (other
than those resulting from sales or other dispositions of the projects) will
be allocated between PWIP5 and the co-venturers in the same proportions as
cash flow distributed from operations, except for certain items which are
specifically allocated to the partners, as set forth in the joint venture
agreements. Gains or losses resulting from sales or other dispositions of
the projects shall be allocated as specified in the joint venture
agreements. Allocations of income and loss for financial accounting purposes
have been made in accordance with the actual joint venture agreement.
<PAGE>
Distributions
The joint venture agreements generally provide that distributions will be
paid on an annual basis first to PWIP5, in specified amounts ranging from
$283,500 to $875,000 as a preferred return. After payment of PWIP5's
preference return, the agreements generally provide for certain preferred
payments, up to specified amounts, to be paid to the co-venturers. Any
remaining distributable cash will be paid in proportions ranging from 90% to
50% to PWIP5 and 10% to 50% to the co-venturers, as set forth in the joint
venture agreements. Allocations of the distributable cash of the Carriage
Hill joint venture differ significantly from these general terms. See Note 4
to the financial statements of PWIP5 included in this Annual Report for a
further discussion.
Distributions of net proceeds upon the sale or refinancing of the projects
shall be made in accordance with formulas provided in the joint venture
agreements.
3. Related party transactions
The Combined Joint Ventures entered into property management agreements
with affiliates of the co-venturers, cancelable at the joint ventures'
option upon the occurrence of certain events. The management fees are equal
to 4% to 5% of gross receipts, as defined in the agreements. Management fees
totalling $532,000, $670,000 and $578,000 were paid to affiliates of the
co-venturers for fiscal 1995, 1994 and 1993, respectively.
Accounts payable - affiliates at September 30, 1995 and 1994 are
principally management fees and reimbursements payable to property managers.
Notes payable to venturers at September 30, 1995 represents operating notes
provided by PWIP5 and its co-venturer to Seven Trails West Associates and
Randallstown Carriage Hill Associates in the amounts of $848,000 and
$118,000, respectively. Notes payable to venturers at September 30, 1994
represent operating notes provided by PWIP 5 and its co-venturer to Seven
Trails West Associates in the amounts of $836,000 and $11,000, respectively.
Such loans generally bear interest at the prime rate and are payable only
out of the respective venture's available net cash flow or sale or
refinancing proceeds.
4. Long-term debt
Long-term debt at September 30, 1995 and 1994 consists of the following
(in thousands):
1995 1994
7.65% mortgage note to a financial
institution, due in 2030. Payments are
made in monthly installments of $191,
including principal and interest.
The mortgage note is secured by
the property owned by Randallstown
Carriage Hill Associates and is
subject to certain escrow deposit
requirements. The mortgage note is
co-insured by the Secretary of Housing
and Urban Development (HUD) in
accordance with the provisions of the
National Housing Act and the laws
of the State of Maryland. $ 27,843 $ -
<PAGE>
1995 1994
8.75% mortgage note to a financial
institution, due January 1, 2022.
Payments were made in monthly
installments of $214, including principal
and interest. The mortgage note
was secured by the property owned by
Randallstown Carriage Hill Associates
and was subject to certain deposit
requirements of real estate tax and
insurance premiums. The mortgage note
was co-insured by the Secretary of
Housing and Urban Development (HUD) in
accordance with the provisions of
the National Housing Act and the laws of
the State of Maryland.
See discussion below. - 26,677
8.125% nonrecourse mortgage note
secured by land and building owned by
Amarillo Bell Associates, guaranteed
by the co-venturer. Payable in
monthly installments of $26, including
interest, with a final payment of
approximately
$2,943 due July 1, 2002. 3,293 -
9.4% nonrecourse mortgage note,
secured by land and building owned by
Amarillo Bell Associates, guaranteed
by the co-venturer. Payable in
monthly installments of $30, including
interest, with a final payment of
approximately
$3,250 due June 1, 1995. - 3,277
Wrap-around mortgage of $5,400
secured by the Greenbrier
Associates property, bears interest
at 10% payable monthly thereafter.
The entire principal of $5,400,000
and any unpaid accrued interest is
due June 29, 1998. See discussion
below regarding extension. 5,400 5,400
Wrap-around deed of trust of $14,700,000
secured by the Seven Trails West
Associates operating investment property,
bearing interest of 12% (11%
payable monthly, 1% accrued and deferred).
The entire principal balance
and deferred interest is due
February 1, 1996. See discussion below
regarding 1994 modification
agreement. 14,700 14,700
51,236 50,054
Less current portion (14,911) (3,524)
$36,325 $46,530
<PAGE>
Maturities of long-term debt, which is all non-recourse to the joint
ventures and PWIP5, for each of the next five years and thereafter are as
follows:
1996 $ 14,911
1997 228
1998 5,645
1999 266
2000 287
Thereafter 29,899
$51,236
The Carriage Hill joint venture did not generate sufficient cash flow to
fully cover its debt service payments to the lender during the second quarter of
fiscal 1994. Consequently, the Carriage Hill joint venture entered into a
forbearance agreement with its 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 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 at such time.
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 initial principal amount of approximately $27.9 million, has a
fixed interest rate of 7.65% and a term of 35 years. The venture recognized a
loss of $1,177,000 in fiscal 1995 in connection with the refinancing transaction
to write off the unamortized balance of the deferred financing costs related to
the prior mortgage loan.
As part of the refinancing transaction described above, the Carriage Hill
joint venture was able to secure the release from collateral of a 23-acre parcel
of excess land. Title to this land, which had a carrying value of $563,000, was
transferred from the joint venture to a newly formed limited liability company,
Signature Partners, L.L.C. ("Signature Partners"). Signature Partners is owned
by the venture partners with the same ownership interest percentages as in the
Carriage Hill joint venture agreement. This land could eventually be marketed to
local developers once market conditions improve. Proceeds of any such sale, if
completed, would be distributed to the owners in accordance with the same
priorities called for under the terms of the Carriage Hill joint venture
agreement.
In fiscal 1993, Greenbrier Associates exercised an option to extend the
maturity date of its mortgage loan to June 29, 1998, at which time the entire
principal and any unpaid accrued interest is due. In connection with the
extension of the maturity date, deferred interest expense of $263,000 was to be
paid partially with the extension, with two remaining installments of $88,000 to
be paid on June 30, 1994 and 1995. As of September 30, 1995, all deferred
interest has been paid.
On March 31, 1994, the Seven Trails joint venture closed on a modification
and extension of the wraparound mortgage loan secured by the Seven Trails
Apartments with the existing lender. As part of the agreement, the wrap mortgage
lender purchased the underlying first mortgage loan and is now the sole mortgage
lienholder. Under the terms of the modification agreement, the loan maturity
date was extended to February 1, 1996 and the accrual rate of interest was
increased from 11% to 12%, with 1% deferred, on the outstanding mortgage loan
principal of $14,700,000. In addition to the outstanding principal balance,
there is currently deferred interest totalling approximately $1.7 million due to
the Seven Trails mortgage lender. Under the terms on the extension agreement, no
interest will accrue on the current or additional amount of deferred interest
through the scheduled maturity date. PWIP5 contributed approximately $586,000 to
the Seven Trails joint venture in the second quarter of fiscal 1994 in order to
complete this transaction. Such advances were used to pay a refundable $147,000
extension fee, to fund a capital improvement reserve of $400,000 and to pay for
transaction closing costs. The extension fee will be refunded to PWIP 5 if the
entire obligation to the mortgage lender is repaid in full prior to the extended
maturity date. Under the terms of the extension agreement, all net cash flow of
the joint venture, after payment of current debt service, approved capital costs
and approved refinancing costs, will be payable to the lender to pay down
outstanding deferred interest and then loan principal.
The mortgage loan secured by the Seven Trails West Apartments is scheduled
to mature on February 1, 1996. Management has preliminarily identified a
financing source which would enable the venture to repay the outstanding debt
obligation. 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 a result, there are no assurances that a
refinancing will be successfully completed (see Note 2). Accordingly, the entire
mortgage loan balance secured by the operating investment property owned by
Seven Trails West Associates has been classified as current on the accompanying
combined balance sheet as of September 30, 1995.
5. Leases
Minimum annual future lease revenues under noncancellable operating leases
at the Bell Plaza Shopping Center as of September 30, 1995 are as follows (in
thousands):
1996 $ 574
1997 544
1998 533
1999 435
2000 352
Thereafter 3,715
$ 6,153
Revenues from a major tenant of the Bell Plaza Shopping Center comprised
approximately 34% of the total rental revenues of Amarillo Bell Associates for
the year ended September 30, 1995. This major tenant replaced another
significant tenant which accounted for approximately 50% of the venture's rental
revenues for the year ended September 30, 1994.
<PAGE>
- ------------------------------------------------------------
- -------------------------------------------------------
<TABLE>
Schedule III - Real Estate and Accumulated Depreciation
COMBINED JOINT VENTURES OF PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
September 30, 1995
(In thousands)
<CAPTION>
Initial Cost to Gross Amount at Which Carried at Life on Which
Partnership Costs Close of period Depreciation
Buildings Capitalized Buildings, in Latest
Improvements (Removed) Improvements Income
& Personal Subsequent to & Personal Accumulated Date of Date Statement
Description Encumbrances Land Property Acquisition Land Property Total Depreciation Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED JOINT VENTURES:
Apartment
Complex $27,843 $1,000 $23,633 $3,932 $1,000 $27,565 $28,565 $ 12,836 1970-73 8/30/83 5-30 yrs.
Randallstown, MD
Land - 563 - 38 601 - 601 - - 6/1/95 -
Randallstown, MD
Shopping
Center 3,293 1,519 6,310 889 1,519 7,199 8,718 2,542 1979-82 9/30/83 5-40 yrs.
Amarillo, TX
Apartment
Complex 5,400 420 8,990 418 420 9,408 9,828 3,543 1964-68 6/29/84 5-30 yrs.
Indianapolis,
IN
Apartment
Complex
Ballwin,
MO 14,700 1,710 22,131 1,941 1,710 24,072 25,782 9,007 1968-74 9/13/84 5-30 yrs.
Total $51,236 $5,212 $61,064 $ 7,218 $5,250 $68,244 $73,494 $27,928
Notes
(A) The aggregate cost of real estate owned at September 30, 1995 for Federal
income tax purposes is approximately $71,278,000. (B) See Note 4 to Combined
Financial Statements for a description of the terms of the debt encumbering the
properties.
(C) Reconciliation of real estate owned:
1995 1994 1993
Balance at beginning of period $ 72,171 $80,879 $80,079
Acquisitions and improvements 1,323 776 800
Dispositions - (9,484) -
Balance at end of period $73,494 $ 72,171 $80,879
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 25,427 $ 25,891 $23,115
Depreciation expense 2,501 2,669 2,776
Dispositions - (3,133) -
Balance at end of period $ 27,928 $25,427 $25,891
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Partnership's audited financial
statements for the year ended September 30, 1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,658
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,658
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,658
<CURRENT-LIABILITIES> 38
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (439)
<TOTAL-LIABILITY-AND-EQUITY> 1,658
<SALES> 0
<TOTAL-REVENUES> 106
<CGS> 0
<TOTAL-COSTS> 313
<OTHER-EXPENSES> 1,182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,389)
<EPS-PRIMARY> (39.37)
<EPS-DILUTED> (39.37)
</TABLE>
