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 May 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: 0-17147
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, LP
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2798638
- ------------------------------- ----------------
(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 QUALIFIED PLAN PROPERTY FUND THREE, LP
BALANCE SHEETS
May 31, 1997 and August 31, 1996 (Unaudited)
(In thousands)
ASSETS
May 31 August 31
------ ---------
Real estate investments:
Investment property held for sale $ - $ 4,720
Land 650 1,150
Mortgage loans receivable 4,850 9,185
-------- --------
5,500 15,055
Cash and cash equivalents 636 973
Interest receivable 63 85
Tax and tenant security deposit escrows - 71
Prepaid expenses - 14
Deferred expenses, net 6 9
-------- --------
$ 6,205 $ 16,207
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 4 $ 18
Accounts payable and accrued expenses 30 113
Tenant security deposits - 13
Partners' capital 6,171 16,063
-------- --------
$ 6,205 $ 16,207
======== ========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the nine months ended May 31, 1997 and 1996 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at August 31, 1995 $ 10 $ 15,878
Net income 11 1,050
Cash distributions (9) (876)
------ --------
Balance at May 31, 1996 $ 12 $ 16,052
====== ========
Balance at August 31, 1996 $ 11 $ 16,052
Net income 27 2,656
Cash distributions (7) (12,568)
------ --------
Balance at May 31, 1997 $ 31 $ 6,140
====== ========
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, LP
STATEMENTS OF INCOME
For the three and nine months ended May 31, 1997 and 1996 (Unaudited)
(In thousands, except per Unit amounts)
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Interest from mortgage loans $ 133 $ 255 $ 544 $ 766
Land rent 18 36 77 117
Other interest income 31 11 80 32
------ ------ ------ -------
182 302 701 915
Expenses:
Management fees 6 21 48 63
General and administrative 77 51 206 223
Amortization of deferred
expenses 1 1 3 3
------ ------ ------ -------
84 73 257 289
------ ------ ------ -------
Operating income 98 229 444 626
Income (loss) from operations of
investment property held
for sale, net (47) 138 230 435
Gain on sale of investment
property held for sale 1,359 - 1,359 -
Gain on sale of land - - 650 -
------ ------ ------ -------
Net income $1,410 $ 367 $2,683 $ 1,061
====== ====== ====== =======
Net income per Limited
Partnership Unit $38.99 $10.17 $74.20 $ 29.34
====== ====== ====== =======
Cash distributions per Limited
Partnership Unit $181.80 $ 8.16 $351.12 $ 24.48
======= ====== ======= =======
The above net income and cash distributions per Limited Partnership Unit are
based upon the 35,794 Units of Limited Partnership Interest outstanding during
each period.
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, LP
STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1997 and 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 2,683 $ 1,061
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of investment property held for sale (1,359) -
Gain on sale of land (650) -
Amortization of deferred expenses 3 3
Changes in assets and liabilities:
Interest receivable 22 -
Tax and tenant security deposit escrows 71 -
Prepaid expenses 14 11
Accounts payable - affiliates (14) -
Accounts payable and accrued expenses (83) (50)
Tenant security deposits (13) -
------- -------
Total adjustments (2,009) (36)
------- -------
Net cash provided by operating activities 674 1,025
------- -------
Cash flows from investing activities:
Net proceeds from sale of operating investment
property 6,079 -
Net proceeds from sale of land 1,150 -
Proceeds from repayment of mortgage loans 4,335 -
------- -------
Net cash provided by investing activities 11,564 -
------- -------
Cash flows from financing activities:
Distributions to partners (12,575) (885)
------- -------
Net (decrease) increase in cash and cash equivalents (337) 140
Cash and cash equivalents, beginning of period 973 790
------- -------
Cash and cash equivalents, end of period $ 636 $ 930
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, LP
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 August 31, 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 require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities as of May 31, 1997 and August 31, 1996 and revenues
and expenses for the three and nine months ended May 31, 1997 and 1996.
Actual results could differ from the estimates and assumptions used.
As discussed further in Notes 2 and 4, the Partnership expects to liquidate
its remaining real estate investments during fiscal 1997, with the final
transaction scheduled to close during the fourth quarter. As a result, a
liquidation of the Partnership is expected to commence once this final
transaction is completed. As part of such liquidation, the proceeds from the
prepayment of the final mortgage loan and land investment, along with any
remaining cash reserves after the payment of all liquidation-related
expenses, will be distributed to the Limited Partners. The formal liquidation
of the Partnership is expected to be completed prior to the end of calendar
1997.
2. Mortgage Loan and Land Investments
The outstanding first mortgage loans and the cost of the related land to the
Partnership at May 31, 1997 and August 31, 1996 are as follows (in
thousands):
Amount of Mortgage Loan Cost of Land
Property 5/31/97 8/31/96 5/31/97 8/31/96
-------- ------- ------- ------- -------
Appletree Apartments $4,850 $4,850 $ 650 $ 650
Omaha, NE
Woodcroft Shopping Center
Durham, NC (1)
Phase I - 3,100 - 360
Phase II - 1,235 - 140
------ ------ ------ ------
$4,850 $9,185 $ 650 $1,150
====== ====== ====== ======
(1) See below for discussion of the Woodcroft Shopping Center's mortgage loan
repayment and related land sale on December 20, 1996.
The interest rates on the mortgage loans range from 11% to 11.25% per annum.
The land leases have terms of 40 years. Among the provisions of the lease
agreements, the Partnership is entitled to additional rent based upon the
gross revenues from the operating properties in excess of a base amount, as
defined. For the nine months ended May 31, 1997 and 1996, additional rent of
$4,000 and $21,000, respectively, was earned from the Woodcroft Shopping
Center investments. The lessees have the option to purchase the land for
specified periods of time, as discussed in the Annual Report, at a price
based on fair market value, as defined, but in no event less than the
original cost to the Partnership. As of May 31, 1997, the option to purchase
the land underlying the Appletree Apartments was exercisable. The
Partnership's investments were structured to share in the appreciation in
value of the underlying real estate. Accordingly, upon either sale,
refinancing, maturity of the mortgage or exercise of the option to purchase
the land, the Partnership will receive a share of the appreciation above a
specified base amount.
In December 1996, Woodcroft's owner agreed upon sale terms with a third-party
buyer. The sale transaction closed on December 20, 1996. As part of the
transaction, the Partnership received $4,335,000 from the Woodcroft borrower
which represented the full repayment of the first leasehold mortgage loan
secured by the Woodcroft Shopping Center which matured on December 17, 1996.
Simultaneously, the Woodcroft owner purchased the Partnership's interest in
the underlying land for the amount of $500,000. In addition, under the terms
of the ground lease, the Partnership was entitled to a share of the
property's appreciation. This resulted in a participation payment to the
Partnership of $650,000. In total, the Partnership received $5,485,000 to
close the transaction. As a result of this transaction, the Partnership made
a special distribution of $153 per original $1,000 investment on January 15,
1997 to Unitholders of record as of December 20, 1996.
During the quarter ended May 31, 1997, the Partnership reached an agreement
with the owner of the Appletree Apartments on the terms of a transaction to
prepay the first leasehold mortgage loan which is scheduled to mature on June
1, 1999 and purchase the underlying land from the Partnership. The parties
have been having discussions concerning the terms of such a transaction for
more than a year. The transaction is expected to close in the fourth quarter
of fiscal 1997. Under the agreed upon terms of the transaction, the
Partnership will receive $4,850,000 from the Appletree borrower, which
represents the full repayment of the first leasehold mortgage loan.
Simultaneously, the Appletree owner will purchase the Partnership's interest
in the underlying land at a price equal to $1,125,000, which represents a
premium of $475,000 over the Partnership's cost basis in the land of
$650,000. In addition, the Partnership will receive a mortgage loan
prepayment penalty of 1.25% of the mortgage note balance, or $60,625, and a
land lease termination fee of $16,250 in accordance with the terms of the
agreements. If this transaction closes as expected, the proceeds will be
distributed to the Limited Partners in conjunction with the liquidation of
the Partnership.
As discussed further above, the Woodcroft loan was repaid in December 1996
and the Appletree loan is expected to be repaid in the fourth quarter of
fiscal 1997. As a result of these circumstances, based on an expected
short-term maturity, the estimated fair value of the Partnership's remaining
mortgage loan investments approximated their carrying values as of May 31,
1997 and August 31, 1996 since the estimated fair values of the collateral
properties exceeded the principal balances of the loans.
3. Related Party Transactions
The Adviser earned basic management fees of $48,000 and $63,000 for the
nine-month periods ended May 31, 1997 and 1996, respectively. Accounts
payable - affiliates at May 31, 1997 and August 31, 1996 consists of
management fees of $4,000 and $18,000, respectively, payable to the Adviser.
Included in general and administrative expenses for the nine-month periods
ended May 31, 1997 and 1996 is $117,000 and $118,000, 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 nine months
ended May 31, 1997 and 1996 is $6,000 and $4,000, respectively, representing
fees earned by an affiliate, Mitchell Hutchins Institutional Investors, Inc.,
for managing the Partnership's cash assets.
<PAGE>
4. Investment Property Held For Sale
As discussed in the Annual Report, the Partnership foreclosed under the terms
of the mortgage loan secured by the Westside Creek Apartments on March 23,
1989 due to nonpayment of the required debt service. The Adviser has employed
a local property management company to conduct the day-to-day operations of
the property under the direction of the Managing General Partner since
assuming ownership. The property consists of 142 units and is located in
Little Rock, Arkansas. The net carrying value of the Partnership's investment
in the Westside Creek Apartments, of $4,720,000, was classified as investment
property held for sale on the accompanying balance sheet as of August 31,
1996.
During the quarter ended Novemer 30, 1996, the Partnership received an offer
to purchase the Westside Creek property and entered into negotiations for a
sale contract. The sale, to an unrelated third-party, closed on March 28,
1997 at a sale price of $6,100,000. The Partnership recongized a gain of
approximately $1.4 million on the sale of Westside Creek in the third quarter
of fiscal 1997. As a result of the sale of the Partnership's wholly-owned
Westside Creek Apartments, a Special Distribution of approximately
$6,336,000, or $177 per original $1,000 investment, was made on April 15,
1997 to Unitholders of record as of March 28, 1997. Of this amount,
approximately $167 represented net proceeds from the sale of the Westside
Creek Apartments and $10 represented a distribution of Partnership reserves
that exceeded expected future requirements.
The Partnership recognizes income from the operations of investment property
held for sale in the amount of the excess of the property's gross revenues
over the sum of property operating expenses (including capital improvement
costs), taxes and insurance. Summarized operating results of the Westside
Creek investment property for the three- and nine-month periods ended May 31,
1997 (through the date of sale) and 1996 are as follows (in thousands):
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Rental income $ 67 $ 240 $ 524 $ 731
Other income 10 8 26 23
------- ------- ------- ------
77 248 550 754
Expenses:
Property operating expenses 89 89 243 256
Property taxes and insurance 35 21 77 63
------- ------- ------- ------
124 110 320 319
------- ------- ------- ------
Income (loss) from
operations, net $ (47) $ 138 $ 230 $ 435
======= ======= ======= ======
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, LP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
As discussed further below, the Partnership expects to liquidate its
remaining real estate investments during fiscal 1997, with the final transaction
scheduled to close during the fourth quarter. As a result, a liquidation of the
Partnership is expected to commence once this final transaction is completed. As
part of such liquidation, the proceeds from the prepayment of the final mortgage
loan and land investment, along with any remaining cash reserves after the
payment of all liquidation-related expenses, will be distributed to the Limited
Partners. The formal liquidation of the Partnership is expected to be completed
prior to the end of calendar 1997.
As reported in the first quarter, in December 1996 the owner of the
Woodcroft Shopping Center agreed upon sale terms with a third-party buyer. The
sale transaction closed on December 20, 1996. As part of the transaction, the
Partnership received $4,335,000 from the Woodcroft borrower which represented
the full repayment of the first leasehold mortgage loan secured by the Woodcroft
Shopping Center which matured on December 17, 1996. Simultaneously, the
Woodcroft owner purchased the Partnership's interest in the underlying land for
the amount of $500,000. In addition, under the terms of the ground lease, the
Partnership was entitled to a share of the property's appreciation. This
resulted in a participation payment to the Partnership of $650,000. In total,
the Partnership received $5,485,000 to close the transaction. As a result of
this transaction, the Partnership made a special distribution of $153 per
original $1,000 investment on January 15, 1997 to Unitholders of record as of
December 20, 1996. This special distribution was paid along with the regular
quarterly distribution for the quarter ended November 30, 1996.
Also as reported during the quarter ended November 30, 1996, the
Partnership received an offer to purchase the Westside Creek property and
entered into negotiations for a sale contract. Westside Creek consisted of two
separately-owned phases which shared their amenities with one another and
allocated expenses by agreement through a common management company. The sale
transaction involved both phases, which management believes maximized the
proceeds to the Partnership. The Partnership owned Phase I which included the
common entrance, leasing office and clubhouse, and had negotiated a favorable
allocation of the sales price with the owner of Phase II based on Phase I's
physical advantages. In order to capitalize on this potential for a combined
sale of both phases, and in light of the possible near-term repayment of the
Appletree mortgage loan and related land sale, management believed that pursuing
a current sale of the Westside Creek property was in the best interests of the
Limited Partners. The transaction closed on March 28, 1997. Westside Creek -
Phase I was sold for $6,100,000. As a result of the sale of the Partnership's
wholly-owned Westside Creek Apartments, a Special Distribution of approximately
$6,336,000, or $177 per original $1,000 investment, was made on April 15, 1997
to Unitholders of record as of March 28, 1997. Of this amount, approximately
$167 represented net proceeds from the sale of the Westside Creek Apartments and
$10 represented a distribution of Partnership reserves that exceeded expected
future requirements.
During the quarter ended May 31, 1997, the Partnership reached an
agreement with the owner of the Appletree Apartments on the terms of a
transaction to prepay the first leasehold mortgage loan which is scheduled to
mature on June 1, 1999 and purchase the underlying land from the Partnership.
The parties have been having discussions concerning the terms of such a
transaction for more than a year. The transaction is expected to close in the
fourth quarter of fiscal 1997. Under the agreed upon terms of the transaction,
the Partnership will receive $4,850,000 from the Appletree borrower, which
represents the full repayment of the first leasehold mortgage loan.
Simultaneously, the Appletree owner will purchase the Partnership's interest in
the underlying land at a price equal to $1,125,000, which represents a premium
of $475,000 over the Partnership's cost basis in the land of $650,000. In
addition, the Partnership will receive a first mortgage loan prepayment penalty
of 1.25% of the mortgage note balance, or $60,625, and a land lease termination
fee of $16,250 in accordance with the terms of the agreements. If this
transaction closes as expected, the proceeds described above will be distributed
to the Limited Partners in conjunction with the liquidation of the Partnership.
At May 31, 1997, the Partnership had available cash and cash equivalents
of approximately $636,000. Such cash and cash equivalents will be used for
working capital requirements and for distributions to the partners. The source
of future distributions to the partners will be the cash to be generated from
the repayment of the remaining mortgage loan receivable and the proceeds from
the sale of the land underlying the Appletree Apartments, as discussed further
above. As noted above, the proceeds of the Appletree prepayment transaction,
along with any remaining Partnerships cash reserves after payment of all
liquidation-related expenses, are expected to be distributed to the Limited
Partners prior to the end of calendar 1997.
<PAGE>
Results of Operations
Three Months Ended May 31, 1997
- -------------------------------
The Partnership reported net income of $1,410,000 for the three-month
period ended May 31, 1997, as compared to net income of $367,000 for the same
period in the prior year. This favorable change in net operating results is the
result of the gain of $1,359,000 recognized in the current period on the sale of
the Partnership's wholly-owned Westside Creek Apartments, as discussed further
above. The gain on the sale of the Westside Creek Apartments represented the
difference between the gross purchase price of $6.1 million net of selling
costs, and the net carrying value of the operating investment property. The gain
on the sale of the Westside Creek Apartments was partially offset by a $185,000
unfavorable change in net operating results of investment property held for sale
and a $131,000 decrease in operating income. The unfavorable change in net
operating results of investment property held for sale was due to the sale of
Westside Creek on March 28, 1997, resulting in less than one month of operations
being recorded in the current three-month period. Operating income decreased
mainly due to declines in interest from mortgage loans and land rent of $122,000
and $18,000, respectively, and a $26,000 increase in general and administrative
expenses. Interest from mortgage loans and land rent decreased due to the
Woodcroft Shopping Center's mortgage loan repayment and land sale in December
1996, as discussed further above. General and administrative expenses increased
mainly due to the timing of the performance of the annual independent appraisal
work on the Partnership's investments. An increase in interest earned on short
term investments of $20,000 and a $15,000 decrease in management fees partially
offset the decreases in interest from mortgage loans and land rent and the
increase in general and administrative expenses. Interest earned on short-term
investments increased primarily due to the higher average outstanding cash
balances resulting from the temporary investment of the proceeds from the sale
of Westside Creek and the Woodcroft mortgage repayment and land sale prior to
the special distributions to the Limited Partners which occurred on April 15,
1997 and January 15, 1997, respectively. Management fees decreased due to the
reduction in adjusted capital contributions, upon which such fees are based, due
to the sale of Westside Creek and the Woodcroft mortgage loan repayment and land
sale, and the subsequent returns of capital, as described above.
Nine Months Ended May 31, 1997
- ------------------------------
The Partnership reported net income of $2,683,000 for the nine-month
period ended May 31, 1997, as compared to net income of $1,061,000 for the same
period in the prior year. This favorable change in net operating results is the
result of the $1,359,000 gain recognized in the current period on the sale of
the Partnership's wholly-owned Westside Creek Apartments and the $650,000 gain
recognized in the current period on the sale of the land underlying the
Woodcroft Shopping Center, as discussed further above. The gain on the sale of
the Westside Creek Apartments represented the difference between the gross
purchase price of $6.1 million net of selling costs, and the net carrying value
of the operating investment property. The gain on the sale of the land
underlying the Woodcroft Shopping Center represented the share of the property's
appreciation due to the Partnership under the terms of the ground lease. The
gains on the sales of the Westside Creek Apartments and the land underlying the
Woodcroft Shopping Center were partially offset by a $205,000 decrease in income
from operations of investment property held for sale and a $182,000 decrease in
operating income. The decline in income from operations of investment property
held for sale was due to the sale of Westside Creek on March 28, 1997, resulting
in less than six months of operations being recorded in the current nine-month
period. Operating income decreased mainly due to declines in interest from
mortgage loans and land rent of $222,000 and $40,000, respectively. Interest
from mortgage loans and land rent decreased due to the Woodcroft Shopping
Center's mortgage loan repayment and land sale in December 1996, as discussed
further above. An increase in interest earned on short term investments of
$48,000 and decreases in general and administrative expenses and management fees
of $17,000 and $15,000, respectively, partially offset the decreases in interest
from mortgage loans and land rent. Interest earned on short-term investments
increased primarily due to the higher average outstanding cash balances
resulting from the temporary investment of the proceeds from the sale of
Westside Creek and the Woodcroft mortgage repayment and land sale prior to the
special distributions to the Limited Partners which occurred on April 15, 1997
and January 15, 1997, respectively. General and administrative expenses
decreased due to a reduction in certain required professional fees during the
current nine-month period. Management fees decreased due to the reduction in
adjusted capital contributions, upon which such fees are based, due to the sale
of Westside Creek and the Woodcroft mortgage loan repayment and land sale, and
the subsequent returns of capital, as described above.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously reported, 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 of interests in 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 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 the General Partners, and the allocation of the
$125 million settlement fund among investors in the various partnerships 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. 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 settlement was held in December 1996, and in March 1997 the
court issued a final approval of the settlement. The release of the $125 million
of settlement proceeds has not occurred to date pending the resolution of an
appeal of the settlement agreement by two of the plaintiff class members. 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.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including those
offered by the Partnership. The complaint alleged, among other things, that
PaineWebber and its related entities committed fraud and misrepresentation and
breached fiduciary duties allegedly owed to the plaintiffs by selling or
promoting limited partnership investments that were unsuitable for the
plaintiffs and by overstating the benefits, understating the risks and failing
to state material facts concerning the investments. The complaint sought
compensatory damages of $15 million plus punitive damages against PaineWebber.
In September 1996, the court dismissed many of the plaintiffs' claims as barred
by applicable securities arbitration regulations. Mediation with respect to the
Abbate action was held in December 1996. As a result of such mediation, a
settlement between PaineWebber and the plaintiffs was reached which provided for
the complete resolution of such action. Final releases and dismissals with
regard to this action were received during the quarter ended May 31, 1997.
Based on the settlement agreements discussed above covering all of the
outstanding unitholder litigation, and notwithstanding the appeal of the class
action settlement referred to above, management does not expect that the
resolution of these matters 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:
A Current Report on Form 8-K dated March 28, 1997 was filed during the
third quarter of fiscal 1997 to report the sale of the Partnership's Westside
Creek Apartments investment property and is hereby incorporated by reference.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND THREE, 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 QUALIFIED PLAN PROPERTY FUND THREE, LP
By: THIRD QUALIFIED PROPERTIES, INC.
--------------------------------
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: July 14, 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 May 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> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 636
<SECURITIES> 0
<RECEIVABLES> 4,913
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 699
<PP&E> 650
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,205
<CURRENT-LIABILITIES> 34
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,171
<TOTAL-LIABILITY-AND-EQUITY> 6,205
<SALES> 0
<TOTAL-REVENUES> 2,940
<CGS> 0
<TOTAL-COSTS> 257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,683
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,683
<EPS-PRIMARY> 74.20
<EPS-DILUTED> 74.20
</TABLE>
