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, 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
December 31, 1997 and September 30, 1997 (Unaudited)
(In thousands)
ASSETS
December 31 September 30
----------- ------------
Cash and cash equivalents $ 2,447 $ 2,165
======== ========
LIABILITIES AND PARTNERS' DEFICIT
Losses in excess of investments and
advances in joint ventures $ 3,562 $ 3,305
Accounts payable and accrued expenses 50 47
Partners' deficit (1,165) (1,187)
-------- --------
$ 2,447 $ 2,165
======== ========
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the three months ended December 31, 1997 and 1996 (Unaudited)
(In thousands)
General Limited
Partner Partners
------- --------
Balance at September 30, 1996 $ (206) $ (1,056)
Net income 1 73
------- ---------
Balance at December 31, 1996 $ (205) $ (983)
======= =========
Balance at September 30, 1997 $ (205) $ (982)
Net income 1 21
------- ---------
Balance at December 31, 1997 $ (204) $ (961)
======= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three months ended December 31, 1997 and 1996 (Unaudited)
(In thousands, except per Unit data)
1997 1996
---- ----
Revenues:
Interest and other income $ 34 $ 24
Expenses:
General and administrative 67 42
------ ------
Operating loss (33) (18)
Partnership's share of ventures' income 55 92
------ ------
Net income $ 22 $ 74
====== ======
Net income per Limited Partnership Unit $ 0.61 $ 2.09
====== ======
The above net income 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, 1997 and 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 22 $ 74
Adjustments to reconcile net income to
net cash used in operating activities:
Partnership's share of ventures' income (55) (92)
Changes in assets and liabilities:
Accounts payable and accrued expenses 3 2
------- -------
Total adjustments (52) (90)
------- -------
Net cash used in operating activities (30) (16)
Cash flows from investing activities:
Distributions from joint ventures 312 -
------- -------
Net increase (decrease) in cash and cash equivalents 282 (16)
Cash and cash equivalents, beginning of period 2,165 1,739
------- -------
Cash and cash equivalents, end of period $ 2,447 $ 1,723
======= =======
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, 1997. 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, 1997 and September 30, 1997 and revenues and
expenses for the three-month periods ended December 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 three-month
periods ended December 31, 1997 and 1996 is $22,000 and $21,000, 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 three months
ended December 31, 1997 and 1996 is $1,000 and $2,000, 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.
Summarized operating results of the joint ventures for the three months
ended December 31, 1997 and 1996 are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three months ended December 31, 1997 and 1996
(in thousands)
1997 1996
---- ----
Revenues:
Rental revenues and
expense recoveries $ 2,852 $ 2,962
Interest and other income 140 205
-------- --------
2,992 3,167
Expenses:
Property operating expenses 1,176 1,249
Interest expense 1,060 1,120
Depreciation and amortization 697 670
-------- --------
2,933 3,039
-------- --------
Net income $ 59 $ 128
======== ========
Net income:
Partnership's share of
combined net income $ 55 $ 92
Co-venturers' share of
combined net income 4 36
------- -------
$ 59 $ 128
======= =======
<PAGE>
PAINE WEBBER INCOME PROPERTIES FIVE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information Relating to Forward-Looking Statements
- --------------------------------------------------
The following discussion of financial condition includes forward-looking
statements which reflect management's current views with respect to future
events and financial performance of the Partnership. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified in Item 7 of the Partnership's Annual Report on Form 10-K for the
year ended September 30, 1997 under the heading "Certain Factors Affecting
Future Operating Results", which could cause actual results to differ materially
from historical results or those anticipated. The words "believe", "expect",
"anticipate," and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which were made based on facts and conditions as they existed as of
the date of this report. The Partnership undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
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. As
previously reported, the Partnership's management is focusing 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 Greenbrier Apartments, located in
Indianapolis, Indiana, was 91% for the quarter ended December 31, 1997, up from
87% for the prior quarter and down from 94% for the same period one year ago. As
discussed further in the Annual Report, because the first mortgage loan secured
by the Greenbrier Apartments is scheduled to mature on June 29, 1998, the
Partnership and its joint venture partner have begun to review both refinancing
and sale opportunities. During the first quarter of fiscal 1998, the Partnership
and the co-venturer agreed to initiate a marketing program for the possible sale
of the property. Subsequent to the end of the first quarter, the Partnership and
the co-venturer engaged a national real estate brokerage firm to market
Greenbrier for sale. The formal marketing campaign is expected to begin in early
March. If satisfactory offers to purchase the property are received, the
Partnership would expect to sell the Greenbrier investment. Should the joint
venture be unable to obtain a satisfactory sale price, the venture would proceed
with the refinancing of the outstanding first mortgage loan. While, given
current market conditions, management is optimistic regarding the prospects for
refinancing the venture's $5.4 million first mortgage loan, there are no
assurances that either a sale or refinancing will be completed.
The average occupancy level for the Seven Trails West Apartments, located
in St. Louis, Missouri, was 92% for the quarter ended December 31, 1997,
unchanged from the prior quarter and down slightly from the 93% average for the
same period one year ago. The property's occupancy level is comparable to other
competitive properties in the local market. As previously reported, in order to
improve the property's competitive position excess cash flow is being reinvested
in property improvements. In addition to the replacement of carpeting, vinyl
flooring, and appliances in units as needed, exterior repairs and enhancements
continue to be made to upgrade the appearance of the property as a whole. As a
result of these ongoing improvements, higher than expected rental rate increases
have been implemented at the property. Further rental rate increases are planned
for fiscal year 1998. As a result of these rental rate increases, the Seven
Trails joint venture has begun to produce excess net cash flow. In the fourth
quarter of fiscal 1997, the Partnership received a distribution of $70,000 from
the Seven Trails joint venture, and during the quarter ended December 31, 1997
the Partnership received another distribution of approximately $173,000.
The occupancy level at the Carriage Hill Apartments, located in
Randallstown, Maryland, averaged 95% for the quarter ended December 31, 1997,
unchanged from the prior quarter and the same period in the prior year. 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 was completed in fiscal year 1996
and greater than 90% of the residents currently pay for their individual gas
usage. Until recently, residents have had the option upon renewal of their
leases to lower their current monthly rental rate and begin paying their own gas
bill or to continue with landlord-paid gas and accept a rental rate increase.
However, in order to have all residents paying for individual gas usage by the
end of fiscal year 1998, any tenant with landlord-paid gas who renews their
lease after October 1, 1997 will now pay their own utility costs. The property's
leasing team continues to offer prospective residents the option of renting an
updated apartment unit. So far, 26 units have been updated and leased at higher
rental rates. These 26 apartment units are priced at an additional monthly rent
of $75 per apartment, which is an average increase in excess of 10% over the
prior rental rate.
Bell Plaza Shopping Center in Amarillo, Texas, was 98% leased as of
December 31, 1997, down slightly from 99% last quarter. However, two tenants
that closed their operations in the Center in January 1997, with leases
totalling 3,237 square feet, are no longer meeting their contractual rental
obligations. As a result, the property's management team is actively pursuing
the available legal remedies for the collection of all unpaid rent. Subsequent
to the quarter-end, the property's leasing team signed a lease with a new tenant
for approximately 1,500 square feet, replacing the only tenant who vacated
during the quarter ended December 31, 1997. The property's leasing team is
actively negotiating a potential lease for a portion of the remaining 5,000
square feet of vacant space at Bell Plaza. Three leases totalling 9,000 square
feet or 6% of the Center's total leasable area come up for renewal during
calendar year 1998. As previously reported, the Partnership had been exploring
the potential for a sale of the Bell Plaza Shopping Center property. However,
based on discussions with local and regional brokers specializing in retail
properties, the Partnership and its co-venture partner have decided not to
pursue a near-term sale at this time. In light of current market conditions,
both the Partnership and the co-venturer believe that it would be in their best
interests to continue to work on improving the tenant mix and cash flow of the
property before pursuing sale strategies for Bell Plaza.
At December 31, 1997, the Partnership had cash and cash equivalents of
$2,447,000. 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, 1997
- ------------------------------------
The Partnership reported net income of $22,000 for the three-month period
ended December 31, 1997, as compared to net income of $74,000 for the same
period in the prior year. This unfavorable change of $52,000 in net operating
results is primarily due to a decrease of $37,000 in the Partnership's share of
ventures' income. The Partnership's share of ventures' income decreased mainly
due to a reduction in combined rental revenues which was partially offset by
lower property operating expenses and interest expense. Rental revenues
decreased partly due to lower average occupancy levels at the Greenbrier and
Seven Trails properties and the lower average leasing level at the Bell Plaza
Shopping Center for the current quarter when compared to the same period in the
prior year. In addition, rental revenues were lower at the Carriage Hill
property in the current three-month period due to process of transferring the
utility payments to the tenants, as discussed further above. Property operating
expenses decreased mainly due to a reduction in utilities expense and certain
administrative costs at the Carriage Hill joint venture. Interest expense
decreased mainly due to the scheduled amortization of outstanding mortgage loan
balances at three of the four joint ventures.
An increase of $15,000 in the Partnership's operating loss also
contributed to the unfavorable change in net operating results for the current
three-month period. The Partnership's operating loss increased due to an
increase in general and administrative expenses. General and administrative
expenses increased primarily due to the timing of certain recurring professional
services as compared to the prior year. An increase in interest income of
$10,000 partially offset the increase in general and administrative expenses.
Interest income was higher in the current three-month period due to an increase
in the Partnership's average outstanding cash reserve balances.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings NONE
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 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended December 31,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 2,447
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,447
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,447
<CURRENT-LIABILITIES> 50
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,165)
<TOTAL-LIABILITY-AND-EQUITY> 2,447
<SALES> 0
<TOTAL-REVENUES> 89
<CGS> 0
<TOTAL-COSTS> 67
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22
<INCOME-TAX> 0
<INCOME-CONTINUING> 22
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
