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 QUARTER ENDED December 31, 1998
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: 0-12085
PAINE WEBBER GROWTH PROPERTIES TWO LP
--------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2798594
-------------------------------------------------------------------------------
(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 GROWTH PROPERTIES TWO LP
BALANCE SHEETS
December 31, 1998 and March 31, 1998 (Unaudited)
(In thousands)
ASSETS
December 31 March 31
----------- --------
Cash and cash equivalents $30,277 $ 696
======= ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Losses from joint venture in excess
of investment and advances $ - $ 777
Accounts payable and accrued expenses 466 23
Accounts payable - affiliates 350 -
Partners' capital (deficit) 29,461 (104)
------- --------
$30,277 $ 696
======= ========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended December 31, 1998 and 1997 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at March 31, 1997 $ (8) $ 249
Net loss (4) (371)
Cash distributions (4) (447)
------- --------
Balance at December 31, 1997 $ (16) $ (569)
======= ========
Balance at March 31, 1998 $ (11) $ (93)
Net income 300 29,747
Cash distributions (5) (477)
------- --------
Balance at December 31, 1998 $ 284 $ 29,177
======= ========
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES TWO LP
STATEMENTS OF INCOME
For the three and nine months ended December 31, 1998 and 1997 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Reimbursements from
affiliate $ 77 $ 48 $ 175 $ 145
Interest and other income 135 16 167 43
------- ------- ------ -------
212 64 342 188
Expenses:
Management fees 16 16 48 45
General and administrative 17 78 117 164
Brokerage commission
payable to affiliate 350 - 350 -
------- ------- ------ -------
383 94 515 209
------- ------- ------ -------
Operating loss (171) (30) (173) (21)
Partnership's share of gain on
sale of operating investment
property 30,423 - 30,423 -
Partnership's share of
venture's loss (335) (468) (203) (354)
------- ------- ------- -------
Net income (loss) $29,917 $ (498) $30,047 $ (375)
======= ======= ======= =======
Net income (loss) per
Limited Partnership
Unit $886.50 $(14.76) $890.35 $(11.11)
======= ======= ======= =======
Cash distributions per Limited
Partnership Unit $ 4.76 $ 4.76 $ 14.28 $ 13.37
======= ======= ======= =======
The above net income (loss) and cash distributions per Limited Partnership
Unit are based upon the 33,410 Limited Partnership Units outstanding during each
period.
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES TWO LP
STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 1998 and 1997 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) $ 30,047 $ (375)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Partnership's share of gain on sale of operating
investment property (30,423) -
Reimbursements from affiliate (175) (145)
Partnership's share of venture's loss 203 354
Changes in assets and liabilities:
Accounts payable - affiliates 350 -
Accounts payable and accrued expenses 443 (20)
-------- ---------
Total adjustments (29,602) 189
-------- ---------
Net cash provided by (used in)
operating activities 445 (186)
Cash flows from investing activities:
Distributions from joint venture 29,618 635
Cash flows from financing activities:
Distributions to partners (482) (451)
-------- ---------
Net increase (decrease) in cash and
cash equivalents 29,581 (2)
Cash and cash equivalents, beginning of period 696 905
-------- ---------
Cash and cash equivalents, end of period $ 30,277 $ 903
======== =========
See accompanying notes.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES TWO LP
Notes to Financial Statements
(Unaudited)
1. General
-------
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements and footnotes contained in the
Partnership's Annual Report for the year ended March 31, 1998. 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, 1998 and March 31, 1998 and revenues and
expenses for the three- and nine-month periods ended December 31, 1998 and 1997.
Actual results could differ from the estimates and assumptions used.
On December 1, 1998, the Partnership sold its one remaining joint venture
investment, the Portland Center Apartments (see Note 3). Management of the
Partnership is currently pursuing a liquidation of the Partnership which could
be accomplished prior to the end of fiscal 1999. There are no assurances,
however, that a liquidation of the Partnership will be accomplished within this
time frame.
2. Related Party Transactions
--------------------------
The Adviser earns a management fee equal to approximately 10% of the
Distributable Cash of the Partnership, as defined, pursuant to the advisory
agreement. The Adviser earned management fees totalling $48,000 and $45,000 for
the nine-month periods ended December 31, 1998 and 1997, respectively.
Included in general and administrative expenses for the nine months ended
December 31, 1998 and 1997 is $48,000 and $47,000, 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 each of the nine
months ended December 31, 1998 and 1997 is $2,000 representing fees earned by an
affiliate, Mitchell Hutchins Institutional Investors, Inc., for managing the
Partnership's cash assets.
In accordance with the Partnership Agreement, sale or refinancing proceeds
are to be distributed first, 100% to the Limited Partners until the Limited
Partners have received their original capital contributions and a cumulative
annual return of 6% based upon a Limited Partner's Adjusted Capital
Contributions, as defined in the Partnership Agreement. Next, the General
Partners are to receive an amount equal to 1% of the total amount distributed to
Limited Partners for the return of their Adjusted Capital Contribution and the
6% cumulative preferred return. Then a real estate brokerage commission is
payable to the Partnership's Adviser. In connection with the sale of each
property, the Adviser is entitled to receive a real estate brokerage commission
in an amount equal to the lower of 2% of the selling prices of the properties in
the portfolio or 50% of the standard real estate brokerage commission that would
be charged by unaffiliated third parties providing comparable services in the
areas where the property is located. Pursuant to this provision, a total of
$350,000 will be paid to the Adviser (which is included in accounts payable
affiliates as of December 31, 1998) which represents 0.357% of the selling
prices of the properties, or 50% of the standard fee. Any remaining sale or
refinancing proceeds would be distributed initially 90% to the Limited Partners
and 10% to the General Partners until the Limited Partner's cumulative preferred
return totals 10%; thereafter, 85% would be distributed to the Limited Partners
and 15% to the General Partners. To date, all sale and refinancing proceeds have
been distributed 100% to the Limited Partners. Based on an estimated Final
Distribution of $850 per original $1,000 investment, Limited Partners who
acquired their Units during the original offering period will have received a
full return of their original capital contributions, their cumulative preferred
return of 6%, as defined in the Partnership Agreement, and their proportionate
share of $1,400,000 which represents a 90% share in the remaining sale or
refinancing proceeds after the payment of the brokerage commission to the
Adviser. The General Partners of the Partnership will receive a total of
approximately $640,000 as their 1% share and 10% residual share noted above.
3. Investments in Joint Venture Partnerships
-----------------------------------------
As of December 31, 1997, the Partnership had an investment in one joint
venture partnership which owned an operating property as more fully described in
the Partnership's Annual Report. The joint venture, Oregon Portland Associates,
owned Portland Center, a 525-unit high-rise apartment property, located in
Portland, Oregon, which also contains 28,000 square feet of commercial space. On
December 1, 1998, Oregon Portland Associates sold the Portland Center Apartments
and Office Complex to a third party. As previously reported, the Partnership had
been focusing on a near-term sale of the Portland Center property, the
Partnership's only remaining real estate asset, to be followed by the
liquidation of the Partnership. The property was extensively marketed during the
first and second quarters of fiscal 1998 resulting in 13 offers to purchase the
property, most of which were at a sale price substantially in excess of the
property's most recent independent appraised value. The prospective purchasers
were then asked to submit their best and final offers which resulted in final
offers from seven prospective buyers. The Partnership then completed an
evaluation of the seven final offers, as well as the relative strength of the
prospective purchasers, and selected one of the offers. On November 25, 1997,
the Partnership executed a purchase and sale agreement with a prospective buyer.
During the fourth quarter of fiscal 1998, the prospective buyer decided to
terminate the purchase and sale agreement and discontinued its efforts to
acquire the property. The Partnership subsequently re-opened discussions with
the other prospective purchasers who had previously submitted best and final
offers. Following negotiations, the Partnership selected an offer from one of
these prospective buyers and signed a purchase and sale agreement. Because the
Partnership's joint venture agreement gave the co-venture partner a right of
first refusal to purchase the property, this purchase and sale agreement was
then submitted to the partner for its review. The co-venturer opted to exercise
its right of first refusal and then assigned its right to purchase the property
to a third party at closing. Portland Center was sold for $48,950,000. The joint
venture received net proceeds of approximately $29,252,000 from the sale after
receiving credits for proration adjustments of approximately $290,000 and net
working capital of approximately $2,705,000 and after deducting closing costs of
approximately $396,000, the assumption of the existing first mortgage note of
$22,165,000 and accrued interest of approximately $132,000. From the net sale
proceeds, the joint venture will be obligated to pay a tax to the city of
Portland of approximately $370,000. The remainder of the net proceeds will be
split between the Partnership and its co-venture partner in accordance with the
joint venture agreement with the co-venturer receiving approximately $360,000
and the Partnership receiving approximately $28,500,000.
Pursuant to the Partnership Agreement, after Limited Partners have received
a return of their Adjusted Capital Contribution, as defined in the Partnership
Agreement, as well as a cumulative preferred return of 6% based on that Adjusted
Capital Contribution, the General Partners are to receive an amount equal to 1%
of the total amount distributed to Limited Partners for the return of their
Adjusted Capital Contribution and the 6% cumulative preferred return. Then a
real estate brokerage commission is payable to the Partnership's Adviser. In
connection with the sale of each property, the Adviser is entitled to receive a
real estate brokerage commission in an amount equal to the lower of 2% of the
selling prices of the properties in the portfolio or 50% of the standard real
estate brokerage commission that would be charged by unaffiliated third parties
providing comparable services in the areas where the property is located.
Pursuant to this provision, a total of $350,000 will be paid to the Adviser
which represents 0.357% of the selling prices of the properties, or 50% of the
standard fee. Any remaining sale or refinancing proceeds would be distributed
initially 90% to the Limited Partners and 10% to the General Partners until the
Limited Partner's cumulative preferred return totals 10%; thereafter, 85% would
be distributed to the Limited Partners and 15% to the General Partners. To date,
all sale and refinancing proceeds have been distributed 100% to the Limited
Partners. Based on an estimated Final Distribution of $850 per original $1,000
investment, Limited Partners who acquired their Units during the original
offering period will have received a full return of their original capital
contributions, their cumulative preferred return of 6%, as defined in the
Partnership Agreement, and their proportionate share of $1,400,000 which
represents a 90% share in the remaining sale or refinancing proceeds after the
payment of the brokerage commission to the Adviser. The General Partners of the
Partnership will receive a total of approximately $640,000 as their 1% share and
10% residual share noted above.
The Partnership will distribute the net proceeds from the sale of Portland
Center, along with the remaining Partnership cash reserves after the payment of
all liquidation-related expenses, after receiving final documentation from the
Department of Housing and Urban Development (HUD) for the sale and related
assumption of the HUD-insured first mortgage loan which is secured by Portland
Center. Because the buyer assumed the existing HUD-insured mortgage loan secured
by the property, the sale transaction must be approved by HUD. The Partnership
is currently awaiting receipt of the final approval from HUD for the loan
assumption. Such approval is not expected to be received for a period of between
90 and 120 days. The Partnership expects to complete an orderly liquidation
immediately after receiving this formal approval.
The joint venture is accounted for by using the equity method because the
Partnership does not have a voting control interest in the venture. Under the
equity method, the investment is carried at cost adjusted for the Partnership's
share of the venture's earnings and losses and distributions. For income tax
reporting purposes, the joint venture is required to maintain its accounting
records on a calendar year basis. As a result, the joint venture is accounted
for based on financial information which is three and nine months in arrears to
that of the Partnership. Due to the Partnership's policy of accounting for
significant lag-period transactions in the period in which they occur, the
Partnership accelerated the recognition of the operating results of Oregon
Portland Associates during the quarter ended December 31, 1998 and recognized a
gain of $30,423,000 on the sale of the Portland Center operating investment
property. Accordingly, the Partnership's share of venture's loss for the nine
months ended December 31, 1998 reflects the Partnership's share of Portland
Center's operations for the period January 1, 1998 through the date of sale.
Summarized operating results of the joint venture, for the periods
indicated, are as follows.
CONDENSED SUMMARY OF OPERATIONS
For the periods July 1, 1998 through December 1, 1998 and January 1, 1998
through December 1, 1998 and the three and nine months ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Three January 1, Nine
July 1, 1998 Months 1998 Months
through Ended through Ended
December 1, September 30, December 1, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental revenues and
expense recoveries $ 2,424 $ 1,485 $ 5,405 $ 4,634
Interest and other income 155 37 171 107
-------- -------- ------- -------
2,579 1,522 5,576 4,741
Property operating expenses 1,328 1,096 2,439 2,402
Real estate taxes 229 124 481 372
Interest expense 797 428 1,610 1,285
Depreciation and amortization 563 346 1,251 1,039
-------- -------- ------- -------
2,917 1,994 5,781 5,098
-------- -------- ------- -------
Operating loss (338) (472) (205) (357)
Gain on sale of operating
investment property 30,873 - 30,873 -
-------- -------- ------- -------
$ 30,535 $ (472) $30,668 $ (357)
======== ======== ======= =======
</TABLE>
<PAGE>
1998 1997 1998 1997
---- ---- ---- ----
Net income (loss):
Partnership's share of net
income (loss) $30,088 $ (468) $30,220 $ (354)
Co-venturer's share of net
income (loss) 447 (4) 448 (3)
------- ------- ------- --------
Net income (loss) $30,535 $ (472) $30,668 $ (357)
======= ======= ======= ========
The Partnership's share of venture's net income (loss) is presented as
follows in the statements of operations (in thousands):
1998 1997 1998 1997
---- ---- ---- ----
Partnership's share of
venture's income (loss) $ (335) $ (468) $ (203) $ (354)
Partnership's share of
gain on sale of
operating investment
property 30,423 - 30,423 -
------- ------- ------- --------
$30,088 $ (468) $30,220 $ (354)
======= ======= ======= ========
<PAGE>
PAINE WEBBER GROWTH PROPERTIES TWO LP
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 March 31, 1998 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
- -------------------------------
On December 1, 1998, Oregon Portland Associates, a joint venture in which
the Partnership has an interest, sold the property known as the Portland Center
Apartments and Office Complex, located in Portland, Oregon, to EQR-Portland
Center, L.L.C. ("EQR"), the designated assignee of the Partnership's co-venture
partner. The Partnership had executed a purchase and sale agreement with an
unrelated third party which was then presented to the co-venture partner under
the right of first refusal provision of the joint venture agreement. Under the
terms of the joint venture agreement, the partner then had 30 days to decide
whether to agree to buy the property at the price and on the terms offered by
the prospective purchaser, or to waive its first refusal right and agree to a
sale to the prospective buyer. On June 12, 1998, the co-venture partner notified
the Partnership that it would be exercising its right to buy the property. At
closing, the co-venturer assigned its purchase rights to EQR. Portland Center
was sold for $48,950,000. The joint venture received net proceeds of
approximately $29,252,000 from the sale after receiving credits for proration
adjustments of approximately $290,000 and net working capital of approximately
$2,705,000 and after deducting closing costs of approximately $396,000, the
assumption of the existing first mortgage note of $22,165,000 and accrued
interest of approximately $132,000. From the net sale proceeds, the joint
venture will be obligated to pay a tax to the city of Portland of approximately
$370,000. The remainder of the net proceeds will be split between the
Partnership and its co-venture partner in accordance with the joint venture
agreement with the co-venturer receiving approximately $360,000 and the
Partnership receiving approximately $28,500,000. The Partnership will distribute
the net proceeds from the sale of Portland Center, along with the remaining
Partnership cash reserves after the payment of all liquidation-related expenses,
after receiving final documentation from the Department of Housing and Urban
Development (HUD) for the sale and related assumption of the HUD-insured first
mortgage loan which is secured by Portland Center.
Pursuant to the Partnership Agreement, after Limited Partners have
received a return of their Adjusted Capital Contribution, as defined in the
Partnership Agreement, as well as a cumulative preferred return of 6% based on
that Adjusted Capital Contribution, the General Partners are to receive an
amount equal to 1% of the total amount distributed to Limited Partners for the
return of their Adjusted Capital Contribution and the 6% cumulative preferred
return. Then a real estate brokerage commission is payable to the Partnership's
Adviser. In connection with the sale of each property, the Adviser is entitled
to receive a real estate brokerage commission in an amount equal to the lower of
2% of the selling prices of the properties in the portfolio or 50% of the
standard real estate brokerage commission that would be charged by unaffiliated
third parties providing comparable services in the areas where the property is
located. Pursuant to this provision, a total of $350,000 will be paid to the
Adviser which represents 0.357% of the selling prices of the properties, or 50%
of the standard fee. Any remaining sale or refinancing proceeds would be
distributed initially 90% to the Limited Partners and 10% to the General
Partners until the Limited Partner's cumulative preferred return totals 10%;
thereafter, 85% would be distributed to the Limited Partners and 15% to the
General Partners. To date, all sale and refinancing proceeds have been
distributed 100% to the Limited Partners. Based on an estimated Final
Distribution of $850 per original $1,000 investment, Limited Partners who
acquired their Units during the original offering period will have received a
full return of their original capital contributions, their cumulative preferred
return of 6%, as defined in the Partnership Agreement, and their proportionate
share of $1,400,000 which represents a 90% share in the remaining sale or
refinancing proceeds after the payment of the brokerage commission to the
Adviser. The General Partners of the Partnership will receive a total of
approximately $640,000 as their 1% share and 10% residual share noted above.
As previously reported, the Partnership had been focusing on a near-term
sale of the Portland Center property, the Partnership's only remaining real
estate asset, to be followed by the liquidation of the Partnership. The property
was extensively marketed during the first and second quarters of fiscal 1998
resulting in 13 offers to purchase the property, most of which were at a sale
price substantially in excess of the property's most recent independent
appraised value. The prospective purchasers were then asked to submit their best
and final offers which resulted in final offers from seven prospective buyers.
The Partnership then completed an evaluation of the seven final offers, as well
as the relative strength of the prospective purchasers, and selected one of the
offers. On November 25, 1997, the Partnership executed a purchase and sale
agreement with a prospective buyer. During the fourth quarter of fiscal 1998,
the prospective buyer decided to terminate the purchase and sale agreement and
discontinued its efforts to acquire the property. The Partnership subsequently
re-opened discussions with the other prospective purchasers who had previously
submitted best and final offers. Following negotiations, the Partnership
selected an offer from one of these prospective buyers and signed a purchase and
sale agreement. Because the Partnership's joint venture agreement gave the
co-venture partner a right of first refusal to purchase the property, this
purchase and sale agreement was then submitted to the partner for its review. As
noted above, the co-venturer opted to exercise its right of first refusal and
then assigned its right to purchase the property to a third party at closing.
Because the buyer assumed the existing HUD-insured mortgage loan secured by the
property, the sale transaction must be approved by HUD. The Partnership is
currently awaiting receipt of the final approval from HUD for the loan
assumption. Such approval is not expected to be received for a period of between
90 and 120 days. The Partnership expects to complete an orderly liquidation
immediately after receiving this formal approval.
At December 31, 1998, the Partnership had available cash and cash
equivalents of approximately $30,277,000. Such cash and cash equivalents will be
utilized for the working capital needs of the Partnership and for distributions
to the partners. The source of future liquidity to the partners is expected to
be through interest income earned on the proceeds received from the sale of the
final operating investment property. These sources of liquidity are expected to
be sufficient to meet the Partnership's needs through its expected liquidation
date.
As noted above, the Partnership expects to be liquidated in early calendar
year 1999. Notwithstanding this, the Partnership believes that it has made all
necessary modifications to its existing systems to make them year 2000 compliant
and does not expect that additional costs associated with year 2000 compliance,
if any, will be material to the Partnership's results of operations or financial
position.
Results of Operations
Three Months Ended December 31, 1998
- ------------------------------------
The Partnership reported net income of $29,917,000 for the three months
ended December 31, 1998, as compared to a net loss of $498,000 for the same
period in the prior year. This favorable change of $30,415,000 in the
Partnership's net income (loss) is mainly attributable to the $30,423,000
recognized as the Partnership's share of the gain on the sale of Portland Center
in the current quarter.
The Partnership reported an operating loss of $171,000 for the three
months ended December 31, 1998, as compared to an operating loss of $30,000 for
the same period in the prior year. The increase in operating loss was primarily
attributable to the brokerage commission payable to the Adviser of $350,000, as
discussed further above, which was partially offset by an increase in interest
and other income of $119,000 and a decrease in general and administrative
expenses of $61,000. Interest and other income increased mainly as a result of
interest earned on the proceeds from the sale of Portland Center which have been
temporarily invested pending the Final Distribution to the Limited Partners.
General and administrative expenses decreased as a result of a decline in
certain legal fees.
The Partnership recognized a net loss of $335,000 from its share of the
Portland Center joint venture's operations for the current three-month period,
as compared to a net loss of $468,000 for the same period in the prior year. Due
to the Partnership's policy of accounting for significant lag-period
transactions in the period in which they occur, the Partnership accelerated the
recognition of the operating results of Oregon Portland Associates during the
quarter ended December 31, 1998 and recognized the gain on the sale of the
operating investment property. Accordingly, the current period includes Portland
Center's operations for the five-month period from July 1, 1998 through December
1, 1998. The increase in total revenues from the Portland Center joint venture
for the additional two-month period, of $1,057,000, exceeded the increase in
total expenses of $923,000. This more favorable change in the venture's revenues
was primarily due to an increase in average rental rates when compared to the
prior period.
Nine Months Ended December 31, 1998
- -----------------------------------
The Partnership reported net income of $30,047,000 for the nine months
ended December 31, 1998, as compared to a net loss of $375,000 for the same
period in the prior year. This favorable change of $30,422,000 in the
Partnership's net operating results is mainly attributable to the $30,423,000
recognized as the Partnership's share of the gain on the sale of Portland Center
in the current period.
The Partnership reported an operating loss of $173,000 for the nine months
ended December 31, 1998, as compared to an operating loss of $21,000 for the
same period in the prior year. The increase in operating loss was primarily
attributable to the brokerage commission of $350,000 payable to the Adviser, as
discussed further above, which was partially offset by an increase in interest
and other income of $124,000 and a decrease in general and administrative
expenses of $61,000. Interest and other income increased mainly as a result of
interest earned on the proceeds from the sale of Portland Center which have been
temporarily invested pending the Final Distribution to the Limited Partners.
General and administrative expenses decreased as a result of a decline in
certain legal fees.
The Partnership recognized a net loss of $203,000 from its share of the
Portland Center joint venture's operations for the current nine-month period, as
compared to a net loss of $354,000 for the same period in the prior year. Due to
the Partnership's policy of accounting for significant lag-period transactions
in the period in which they occur, the Partnership accelerated the recognition
of the operating results of Oregon Portland Associates during the period ended
December 31, 1998 and recognized the gain on the sale of the operating
investment property. Accordingly, the current period includes Portland Center's
operations for the eleven-month period from January 1, 1998 through December 1,
1998. The increase in total revenues from the Portland Center joint venture for
the additional two-month period, of $835,000, exceeded the increase in total
expenses of $683,000. This more favorable change in the venture's revenues was
primarily due to an increase in average rental rates when compared to the prior
period.
<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:
A Current Report on Form 8-K dated December 1, 1998 was filed during the
current quarter to report the sale of the Portland Center Apartments and Office
Complex and is hereby incorporated herein by reference.
<PAGE>
PAINE WEBBER GROWTH PROPERTIES TWO LP
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 GROWTH PROPERTIES TWO LP
By: SECOND PW GROWTH PROPERTIES, INC.
----------------------------------
Managing General Partner
By: /s/ Walter V. Arnold
---------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Date: February 9, 1999
<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,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
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