UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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
March 31, 1997 and September 30, 1996 (Unaudited)
(In thousands)
ASSETS
March 31 September 30
-------- ------------
Cash and cash equivalents $ 1,739 $ 1,739
======== =======
LIABILITIES AND PARTNERS' DEFICIT
Equity in losses in excess of investments and
advances in joint ventures $ 2,911 $ 2,971
Accounts payable and accrued expenses 23 30
Partners' deficit (1,195) (1,262)
-------- -------
$ 1,739 $ 1,739
======== =======
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the six months ended March 31, 1997 and 1996 (Unaudited)
(In thousands)
General Limited
Partner Partners
------- --------
Balance at September 30, 1995 $ (198) $ (241)
Net loss (4) (388)
------- ---------
Balance at March 31, 1996 $ (202) $ (629)
======= =========
Balance at September 30, 1996 $ (206) $ (1,056)
Net income 1 66
------- ---------
Balance at March 31, 1997 $ (205) $ (990)
======= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1997 and 1996
(Unaudited)
(In thousands, except per Unit data)
Three Months Ended Six Months Ended
March 31, March 31,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Interest and other income $ 23 $ 22 $ 47 $ 57
Expenses:
General and administrative 49 61 91 130
----- ------- ------- -------
Operating loss (26) (39) (44) (73)
Partnership's share of ventures'
income (losses) 19 (181) 111 (319)
----- ------- ------ -------
Net income (loss) $ (7) $ (220) $ 67 $ (392)
===== ======= ====== ======
Net income (loss) per Limited
Partnership Unit $(0.19) $ (6.24) $ 1.90 $(11.11)
====== ======= ====== =======
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 six months ended March 31, 1997 and 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $ 67 $ (392)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Partnership's share of ventures' income (losses) (111) 319
Changes in assets and liabilities:
Accounts payable and accrued expenses (7) (18)
-------- --------
Total adjustments (118) 301
-------- --------
Net cash used in operating activities (51) (91)
Cash flows from investing activities:
Distributions from joint ventures 65 200
Additional investments in joint ventures (14) (518)
-------- -------
Net cash provided by (used in)
investing activities 51 (318)
-------- -------
Net decrease in cash and cash equivalents - (409)
Cash and cash equivalents, beginning of period 1,739 1,658
-------- -------
Cash and cash equivalents, end of period $ 1,739 $ 1,249
======== =======
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 March 31, 1997 and September 30, 1996
and revenues and expenses for the three- and six-month periods ended March
31, 1997 and 1996. Actual results could differ from the estimates and
assumptions used.
2. Related Party Transactions
Included in general and administrative expenses for the six-month periods
ended March 31, 1997 and 1996 is $42,000 and $43,000, respectively,
representing reimbursements to an affiliate of the Managing General Partner
for providing certain financial, accounting and investor communication
services to the Partnership.
Also included in general and administrative expenses for the six months
ended March 31, 1997 and 1996 is $2,000 and $400, respectively, representing
fees earned by an affiliate, Mitchell Hutchins Institutional Investors,
Inc., for managing the Partnership's cash assets.
3. 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.
<PAGE>
Summarized operations of the joint ventures are as follows:
CONDENSED COMBINED SUMMARY OF OPERATION
For the three and six months ended March 31, 1997 and 1996
(in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
Rental revenues and
expense recoveries $2,941 $2,795 $5,952 $5,595
Interest and other income 149 157 305 323
------ ------ ------ ------
3,090 2,952 6,257 5,918
Property operating expenses 1,352 1,448 2,601 2,749
Interest expense 1,121 1,243 2,241 2,461
Depreciation and amortization 669 631 1,339 1,296
------ ------ ------ ------
3,142 3,322 6,181 6,506
------ ------ ------ ------
Net income (loss) $ (52) $ (370) $ 76 $ (588)
====== ====== ====== ======
Net income (loss):
Partnership's share of
combined income (losses) $ 19 $ (181) $ 111 $ (319)
Co-venturers' share of
combined income (losses) (71) (189) (35) (269)
------ ------ ------ ------
$ (52) $ (370) $ 76 $ (588)
====== ====== ====== ======
<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 94% for the quarter ended March 31, 1997, compared
to 93% for the prior quarter. The St. Louis apartment market remains strong,
with no new apartment units currently being developed in the sub-market in which
Seven Trails is located. 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 completed
property improvements which included replacing balconies, roof repairs and
miscellaneous exterior repairs. In addition, carpets, vinyl, refrigerators,
stoves and dishwashers were replaced in units on an as needed basis. Property
improvements scheduled for the balance of the fiscal year will include more
balcony replacements and roof repairs, painting of building exteriors and
hallways, pool repairs and replacement of an exterior retaining wall.
Bell Plaza Shopping Center in Amarillo, Texas, was 99% leased as of March
31, 1997, unchanged from the prior quarter. Two lease extensions were
successfully negotiated with existing tenants during the quarter, one with a
discount golf retailer which occupies 4,400 square feet and the other with a
discount shoe store which occupies 3,200 square feet. There are no scheduled
lease expirations during the balance of fiscal 1997. Two tenants occupying
approximately 1,740 and 1,497 square feet vacated the shopping center in
January. Both tenants are expected to continue to pay rent until their space is
re-leased. The property's leasing team is generating a list of potential tenants
to prospect for the vacant space. Management plans to explore the potential for
a sale of the Bell Plaza property during the second half of fiscal 1997. There
are no assurances, however, that any sale transaction will be consummated in the
near term.
The occupancy level at the Carriage Hill Apartments, in Randallstown,
Maryland, averaged 93% for the quarter ended March 31, 1997, compared to 95% for
the prior quarter. 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. 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. These
updated units are priced at an average rent 10% higher than the non-updated
units.
Average occupancy at the Greenbrier Apartments, in Indianapolis, Indiana,
was 92% during the current quarter, compared to 94% last quarter. No further
rental rate increases were implemented at the property during the second quarter
due to the increase in vacancy. Property improvements during the quarter
included replacement of carpeting, countertops and appliances in units as they
turned over. Property improvements planned for next quarter include landscaping,
asphalt repairs, replacement of two exterior water heaters and replacement of
perimeter fences.
At March 31, 1997, the Partnership had cash and cash equivalents of
$1,739,000. 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 March 31, 1997
- ---------------------------------
The Partnership reported a net loss of $7,000 for the three-month period
ended March 31, 1997, as compared to a net loss of $220,000 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
$200,000 for the current three-month period. 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 $146,000 and
decreases in interest expense and property operating expenses of $122,000 and
$96,000, 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. Increases in effective rental rates at the Greenbrier and
Seven Trails properties also contributed to the increase in rental revenues for
the current three-month period. The decrease in interest expense is mainly due
to the April 1996 refinancing of the debt secured by the Seven Trails Apartments
which reduced the annual interest rate on the property's mortgage debt from 12%
to 7.87%. Property operating expenses decreased mainly due to a decrease in
utilities expense at the Carriage Hill property. Utilities expense decreased
primarily as a result of completing the conversion of the utilities at the
Carriage Hill Apartments to individual metering, as discussed further above.
A decrease in the Partnership's operating loss of $13,000 also contributed
to the favorable change in net operating results for the three months ended
March 31, 1997. The decrease in the Partnership's operating loss is mainly the
result of a decline in general and administrative expenses. General and
administrative expenses declined by $12,000 primarily due to a reduction in
certain professional fees for the current three-month period.
Six Months Ended March 31, 1997
- -------------------------------
The Partnership reported net income of $67,000 for the six-month period
ended March 31, 1997, as compared to a net loss of $392,000 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
$430,000 for the current six-month period. 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 $357,000 and
decreases in interest expense and property operating expenses of $220,000 and
$148,000, respectively. Rental revenues and expense recoveries increased mainly
due to significant increases in average occupancy levels at the Bell Plaza and
Carriage Hill properties when compared to the same period in the prior year.
Increases in effective rental rates at the Greenbrier and Seven Trails
properties also contributed to the increase in rental revenues for the current
six-month period. 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
reduction in utilities expense at the Carriage Hill property primarily as a
result of the utilities conversion discussed further above.
A decrease in the Partnership's operating loss of $29,000 also contributed
to the favorable change in net operating results for the six months ended March
31, 1997. The decrease in the Partnership's operating loss is mainly the result
of a decline in general and administrative expenses. General and administrative
expenses decreased by $39,000 primarily due to a reduction in certain
professional fees for the current six-month period.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously disclosed, the Partnership's General Partners were named as
defendants in a class action lawsuit against PaineWebber Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct investment offerings, including the offering of interests in the
various limited partnership investments and REIT stocks, including those offered
by the Partnership. In January 1996, PaineWebber signed a memorandum of
understanding with the plaintiffs in the class action outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and a plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which provides for the complete resolution of the class action litigation,
including releases in favor of the Partnership and PWPI, and the allocation of
the $125 million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement, PaineWebber also agreed
to provide class members with certain financial guarantees relating to some of
the partnerships and REITs. The details of the settlement are described in a
notice mailed directly to class members at the direction of the court. A final
hearing on the fairness of the proposed settlement was held in December 1996,
and in March 1997 the court announced its final approval of the settlement. As
part of the settlement agreement, PaineWebber has agreed not to seek
indemnification from the related partnerships and real estate investment trusts
at issue in the litigation (including the Partnership) for any amounts that it
is required to pay under the settlement. Based on the settlement agreement
discussed above covering all of the outstanding unitholder litigation,
management does not expect that the resolution of this matter will have a
material impact on the Partnership's financial statements, taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAINE WEBBER INCOME PROPERTIES FIVE
LIMITED PARTNERSHIP
By: FIFTH INCOME PROPERTIES FUND, INC.
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Date: May 13, 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 March 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,739
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,739
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,739
<CURRENT-LIABILITIES> 23
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,195)
<TOTAL-LIABILITY-AND-EQUITY> 1,739
<SALES> 0
<TOTAL-REVENUES> 158
<CGS> 0
<TOTAL-COSTS> 91
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 67
<INCOME-TAX> 0
<INCOME-CONTINUING> 67
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
