UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number: 0-12087
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2780287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and September 30, 1996 (Unaudited)
(In thousands)
ASSETS
December 31 September 30
----------- ------------
Cash and cash equivalents $ 1,723 $ 1,739
======== =======
LIABILITIES AND PARTNERS' DEFICIT
Equity in losses in excess of investments and
advances in joint ventures $ 2,879 $ 2,971
Accounts payable and accrued expenses 32 30
Partners' deficit (1,188) (1,262)
-------- -------
$ 1,723 $ 1,739
======== =======
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the three months ended December 31, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partner Partners
------- --------
Balance at September 30, 1995 $ (198) $ (241)
Net loss (2) (170)
------- ---------
Balance at December 31, 1995 $ (200) $ (411)
======= =========
Balance at September 30, 1996 $ (206) $ (1,056)
Net income 1 73
------- ---------
Balance at December 31, 1996 $ (205) $ (983)
======= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three months ended December 31, 1996 and 1995 (Unaudited)
(In thousands, except per Unit data)
1996 1995
---- ----
Revenues:
Interest and other income $ 24 $ 35
Expenses:
General and administrative 42 69
------- ---------
Operating loss (18) (34)
Partnership's share of ventures'
income (losses) 92 (138)
------- ---------
Net income (loss) $ 74 $ (172)
======= =========
Net income (loss) per Limited
Partnership Unit $ 2.09 $ (4.87)
======= =========
The above net income (loss) per Limited Partnership Unit is based upon the
34,928 Units of Limited Partnership Interest outstanding for each period.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ 74 $ (172)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Partnership's share of ventures' (income) losses (92) 138
Changes in assets and liabilities:
Accounts payable and accrued expenses 2 (22)
-------- --------
Total adjustments (90) 116
-------- --------
Net cash used in operating activities (16) (56)
Cash flows from investing activities:
Distributions from joint ventures - 97
Additional investments in joint ventures - (28)
-------- --------
Net cash provided by investing activities - 69
-------- --------
Net (decrease) increase in cash and cash equivalents (16) 13
Cash and cash equivalents, beginning of period 1,739 1,658
-------- --------
Cash and cash equivalents, end of period $ 1,723 $ 1,671
======== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in
the Partnership's Annual Report for the year ended September 30, 1996. In the
opinion of management, the accompanying financial statements, which have not
been audited, reflect all adjustments necessary to present fairly the results
for the interim period. All of the accounting adjustments reflected in the
accompanying interim financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles which requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of December 31, 1996 and September 30,
1996 and revenues and expenses for the three-month periods ended December 31,
1996 and 1995. Actual results could differ from the estimates and assumptions
used.
2. Investments in Joint Ventures
The Partnership has investments in four joint ventures which own operating
properties as more fully described in the Partnership's Annual Report. The
joint venture investments are accounted for using the equity method because
the Partnership does not have a voting control interest in the ventures.
Under the equity method the assets, liabilities, revenues and expenses of the
joint ventures do not appear in the Partnership's financial statements.
Instead, the investments are carried at cost adjusted for the Partnership's
share of the ventures' earnings and losses and distributions.
Summarized operations of the joint ventures are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three months ended December 31, 1996 and 1995
(in thousands)
1996 1995
---- ----
Rental revenues and
expense recoveries $2,962 $2,755
Interest and other income 205 211
------ ------
3,167 2,966
Property operating expenses 1,249 1,295
Interest expense 1,120 1,213
Depreciation and amortization 670 676
------ ------
3,039 3,184
------ ------
Net income (loss) $ 128 $ (218)
====== ======
Net income (loss):
Partnership's share of
combined income (losses) $ 92 $ (138)
Co-venturers' share of
combined income (losses) 36 (80)
------ ------
$ 128 $ (218)
====== ======
<PAGE>
3. Related Party Transactions
Included in general and administrative expenses for both of the
three-month periods ended December 31, 1996 and 1995 is $21,000,
representing reimbursements to an affiliate of the Managing General Partner
for providing certain financial, accounting and investor communication
services to the Partnership.
Also included in general and administrative expenses for the three months
ended December 31, 1996 and 1995 is $2,000 and $200, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
4. Contingencies
As discussed in more detail in the Annual Report for the year ended
September 30, 1996, the Partnership is involved in certain legal actions. At
the present time, the Managing General Partner is unable to determine what
impact, if any, the resolution of these matters may have on the
Partnership's financial statements, taken as a whole.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
The Partnership's four remaining investment properties consist of three
multi-family apartment complexes and one retail shopping center. While the
current estimated market values of certain of the remaining properties are below
the amounts paid for the properties at the time of the Partnership's original
investments in 1983 and 1984, all of the properties currently have estimated
values above their respective outstanding mortgage debt obligations.
Management's strategy over the past several 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
until favorable opportunities for the sale of the properties can be achieved.
With the last of the required financing transactions completed during fiscal
1996, the Partnership's management will focus on potential disposition
strategies for the remaining investment properties. As a result, the Partnership
could be positioned for a possible liquidation within the next 2-to-3 years.
There are no assurances, however, that the Partnership will be able to achieve
the sale of its remaining assets within this time frame.
The average occupancy level for the Seven Trails West Apartments, located
in St. Louis, Missouri, was 93% for the quarter ended December 31, 1996,
compared to 95% last quarter. The slight decline in occupancy is attributable to
a decline in the number of potential tenants looking to rent apartment units
during the holiday season. The St. Louis apartment market remains strong, with
no new apartment units being developed in the area or in the planning stages.
The Partnership's management expects Seven Trails to benefit from the
combination of a stable multi-family market and the property's strong position
in the marketplace. In order to maintain the property's competitive condition,
excess cash flow is being reinvested in property improvements. During the
quarter, the property's management team replaced carpeting, vinyl and appliances
in units on an as-needed basis and performed exterior enhancements including
balcony and roof repairs and front entrance door replacements.
On April 17, 1996, the Partnership successfully completed the refinancing
of the existing first mortgage loan secured by the Seven Trails West Apartments,
reducing the annual interest rate from 12% to 7.87%. The new loan, in the
initial principal amount of $17,000,000, is for a term of ten years with monthly
payments of principal and interest totalling $130,000. The proceeds of the new
loan, together with a contribution of $159,000 from the joint venture, were used
to pay off all obligations of the prior first mortgage loan as well as to fund
all reserves and escrows required by the new lender. Because the prior mortgage
loan was not repaid by February 1, 1996, the joint venture forfeited a $147,000
fee which had been paid to the prior lender in connection with a fiscal 1994
extension agreement and was to be refundable under certain conditions.
Bell Plaza Shopping Center in Amarillo, Texas, was 99% leased as of
December 31, 1996, compared to 98% at the end of the last quarter. During the
first quarter, the property's leasing team signed a new three-year lease for
1,720 square feet with a cellular phone retailer. Two existing leases,
comprising 7,600 square feet, are scheduled to expire during the balance of
fiscal 1997. The property's leasing team expects to be able to renew these
leases. Currently, the Amarillo retail market remains strong, with no new retail
construction taking place. However, as previously reported, the Amarillo market
may be negatively affected in the near term as Pantex, one of the area's major
employers, anticipates reducing its workforce by up to 1,600 people over the
next few years.
As discussed further in the Annual Report, the fiscal 1995 refinancing of
the first mortgage loan secured by the Carriage Hill Apartments reduced the
venture's monthly debt service requirements and provided additional funds which
have been used to make improvements to the property. These improvements included
the conversion of the gas utilities to individual metering for each apartment
unit. In the past, operating results have been negatively impacted by high
utility costs incurred during the winter season. By transferring the utility
payments to the tenants, the property management company sought to reduce and
stabilize property operating expenses. This conversion has now been completed,
and currently over 65% of residents already pay for their own gas. The occupancy
level at the Carriage Hill Apartments, in Randallstown, Maryland, averaged 95%
for the quarter ended December 31, 1996, compared to 94% for the prior quarter.
With the average occupancy level stabilized and the gas conversion completed,
the property's management company anticipates increasing average rental rates
gradually during fiscal 1997. As part of an ongoing capital improvement program,
Carriage Hill continues to offer prospective residents the option of an updated
apartment unit. The updated package includes new appliances, new kitchen sinks,
countertops and cabinetry hardware, as well as new bathroom vanities. So far
sixteen units have been updated. These updated units are priced at an average
rent 10% higher than the non-updated units. Other property improvements
completed during the quarter included carpet and appliance replacement on an
as-needed basis.
Average occupancy at the Greenbrier Apartments, in Indianapolis, Indiana,
was 94% during the current quarter, compared to 93% last quarter. The property's
management team decreased concessions to new residents during the quarter as a
result of the strong occupancy level and the gradually improving local market
conditions. Property improvements completed during the quarter included the
typical carpet and appliance replacements on an as-needed basis, exterior carpet
replacement at the clubhouse and laundry room area, some roof repairs and
landscaping. During the next quarter, the property's management team expects to
update clubhouse interior finishes. Greenbrier continues to produce excess cash
flow after the payment of operating expenses, debt service payments to the
lender and capital costs. The current mortgage debt of $5.4 million bears
interest at 10% per annum and is not scheduled to mature until June 1998.
Because of the potential for a sale of the property prior to the June 1998
maturity date, as well as increases in mortgage interest rate levels which
occurred during fiscal 1996, management has decided to defer any immediate
refinancing plans.
At December 31, 1996, the Partnership had cash and cash equivalents of
$1,723,000. Such cash and cash equivalents will be utilized for the working
capital requirements of the Partnership and for future capital contributions, as
necessary, related to the Partnership's joint ventures. The source of future
liquidity and distributions to the partners is expected to be from cash
generated by the Partnership's income-producing properties and from the proceeds
received from the sale or refinancing of such properties or from the sale of the
Partnership's interests in the joint ventures. These sources of liquidity are
expected to be sufficient to meet the Partnership's needs on both a short-term
and long-term basis.
Results of Operations
Three Months Ended December 31, 1996
- ------------------------------------
The Partnership reported net income of $74,000 for the three-month period
ended December 31, 1996, as compared to a net loss of $172,000 for the same
period in the prior year. The primary reason for this favorable change in net
operating results is that the Partnership's share of ventures' operations
improved by $230,000. The favorable change in the Partnership's share of
ventures' operations is mainly attributable to an increase in combined rental
revenues and expense recoveries of $207,000 and decreases in interest expense
and property operating expenses of $93,000 and $46,000, respectively. Rental
revenues and expense recoveries increased mainly due to significant increases in
average occupancy levels for the current quarter at the Bell Plaza and Carriage
Hill properties when compared to the same period in the prior year. The decrease
in interest expense is mainly due to the April 1996 refinancing of the debt
secured by the Seven Trails Apartments, as discussed further above. Property
operating expenses decreased mainly due to a decrease in repairs and maintenance
expenses at the Seven Trails Apartments. The decline in repairs and maintenance
expenses is mainly due the completion of a major capital improvement program in
the prior year.
A decrease in the Partnership's operating loss of $16,000 also contributed
to the favorable change in net operating results for the three months ended
December 31, 1996. The decrease in the Partnership's operating loss is the
result of a decline in general and administrative expenses. General and
administrative expenses declined by $27,000 due to a reduction in certain
required professional services during the current three-month period.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
The status of the litigation involving the Partnership's General
Partners and their affiliates remains unchanged from what was reported in
the Annual Report on Form 10-K for the year ended September 30, 1996.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the
quarter for which this report is filed.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
By: FIFTH INCOME PROPERTIES FUND, INC.
Managing General Partner
By:/s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Date: February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended December 31,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,723
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,723
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,723
<CURRENT-LIABILITIES> 32
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,188)
<TOTAL-LIABILITY-AND-EQUITY> 1,723
<SALES> 0
<TOTAL-REVENUES> 116
<CGS> 0
<TOTAL-COSTS> 42
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 74
<INCOME-TAX> 0
<INCOME-CONTINUING> 74
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
</TABLE>
