UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number : 0-13129
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2829686
(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 SIX LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and September 30, 1996 (Unaudited)
(In thousands)
ASSETS
December 31 September 30
----------- ------------
Investments in joint ventures, at equity $ 4,998 $ 5,440
Cash and cash equivalents 3,610 3,218
--------- ---------
$ 8,608 $ 8,658
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 10 $ 10
Accrued expenses and other liabilities 24 24
Partners' capital 8,574 8,624
--------- ---------
$ 8,608 $ 8,658
========= =========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended December 31, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1995 $ (1,342) $ 10,397
Cash distributions (3) (300)
Net income 2 217
--------- ---------
Balance at December 31, 1995 $ (1,343) $ 10,314
========= =========
Balance at September 30, 1996 $ (1,347) $ 9,971
Cash distributions (3) (300)
Net income 3 250
--------- ---------
Balance at December 31, 1996 $ (1,347) $ 9,921
========= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the three months ended December 31, 1996 and 1995 (Unaudited)
(In thousands, except per Unit data)
1996 1995
---- ----
Revenues:
Interest income $ 47 $ 37
Expenses:
Management fees 22 22
General and administrative 45 75
-------- ------
67 97
-------- ------
Operating loss (20) (60)
Partnership's share of ventures' income 273 279
-------- ------
Net income $ 253 $ 219
======== ======
Net income per
Limited Partnership Unit $ 4.17 $ 3.61
====== ======
Cash distributions per Limited
Partnership Unit $ 5.00 $5.00
====== =====
The above net income and cash distributions per Limited Partnership Unit are
based upon the 60,000 Units of Limited Partnership Interest outstanding for each
period.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 253 $ 219
Adjustments to reconcile net income to
net cash used in operating activities:
Partnership's share of ventures' income (273) (279)
Changes in assets and liabilities:
Accounts payable - affiliates - (5)
Accrued expenses and other liabilities - (22)
------ ------
Total adjustments (273) (306)
------ ------
Net cash used in operating activities (20) (87)
------ ------
Cash flows from investing activities:
Distributions from joint ventures 715 319
Cash contributions to joint ventures - (20)
------ ------
Net cash provided by investing activities 715 299
------ ------
Cash flows from financing activities:
Cash distributions to partners (303) (303)
------ ------
Net increase (decrease) in cash and cash equivalents 392 (91)
Cash and cash equivalents, beginning of period 3,218 2,515
------ ------
Cash and cash equivalents, end of period $3,610 $2,424
====== ======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX
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 consolidated 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 December 31, 1996 and September 30, 1996 and revenues and
expenses for the three months ended December 31, 1996 and 1995. Actual results
could differ from the estimates and assumptions used.
2. Investments in Unconsolidated Joint Ventures
The Partnership has investments in three joint ventures which own
operating investment properties, as discussed further in the Annual Report. The
joint ventures are accounted for on the equity method because the Partnership
does not have a voting control interest in the ventures. Under the equity method
the ventures are carried at cost adjusted for the Partnership's share of the
venture's earnings and losses and distributions.
Summarized operations of the three joint ventures for the three months
ended December 31, 1996 and 1995 are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three months ended December 31, 1996 and 1995 (in thousands)
1996 1995
---- ----
Rental revenues and expense
recoveries $ 2,366 $ 2,330
Interest and other income 10 9
-------- -------
2,376 2,339
Property operating expenses 816 802
Interest expense 695 670
Depreciation and amortization 588 584
-------- -------
2,099 2,056
-------- -------
Net income $ 277 $ 283
======== =======
Net income:
Partnership's share of combined income $ 277 $ 283
Co-venturers' share of combined income - -
--------- -------
$ 277 $ 283
======== =======
<PAGE>
Reconciliation of Partnership's Share of Operations
For the three months ended December 31, 1996 and 1995 (in thousands)
Partnership's share of combined income,
as shown above $ 277 $ 283
Amortization of excess basis (4) (4)
-------- -------
Partnership's share of unconsolidated
ventures' income $ 273 $ 279
======== =======
3. Related Party Transactions
The Adviser earned total management fees of $22,000 for each of the
three-month periods ended December 31, 1996 and 1995. Accounts payable
affiliates at both December 31, 1996 and September 30, 1996 consists of
management fees of $10,000 payable to the Adviser.
Included in general and administrative expenses for the three months ended
December 31, 1996 and 1995 is $28,000 and $29,000, 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, 1996 and 1995 is $4,000 and $200, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
4. Investment in 150 Broadway Office Building
As discussed further in the Annual Report, during the quarter ended
December 31, 1994 the Partnership agreed to assign its second mortgage
interest in the 150 Broadway Office Building to an affiliate of the borrower
in return for a payment of $400,000. Subsequently, the borrower was unable to
perform under the terms of this agreement and the Partnership agreed to
reduce the required cash compensation to $300,000. During the quarter ended
March 31, 1995, the Partnership received $200,000 of the agreed upon sale
proceeds. The remaining $100,000 was funded into an escrow account on May 31,
1995, to be released upon the resolution of certain matters between the
borrower and the first mortgage holder, but in no event later than June 10,
1996. The Partnership recorded income of $200,000 in fiscal 1995 to reflect
the non-refundable cash proceeds received. During fiscal 1996, the borrower
and the first mortgage lender resolved their remaining issues and released
the $100,000 plus accrued interest to the Partnership. The $100,000 was
recognized as income in fiscal 1996. With the release of the escrowed funds,
the Partnership's interest in and any obligations related to the 150 Broadway
Office Building were terminated.
5. Contingencies
As discussed in more detail in the Annual Report for the year ended
September 30, 1996, the Partnership is involved in certain legal actions. At
the present time, the Managing General Partner is unable to determine what
impact, if any, the resolution of these matters may have on the Partnership's
financial statements, taken as a whole.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
As a result of the refinancing of the Mall Corners Shopping Center, the
recent completion of its planned expansion, and the release of escrowed funds
from the sale of the Partnership's interest in the 150 Broadway Office Building
note (as discussed further below), the Partnership will make a special
distribution on February 14, 1997 to Unitholders of record on December 31, 1996.
The Partnership will distribute $2,040,000 to the Limited Partners, or $34 per
original $1,000 Unit. Of this amount, approximately $1,320,000 represents
Partnership reserves that had been previously set aside to cover the costs of
the planned refinancing of the Mall Corners Shopping Center and to pay for its
proposed expansion. These costs and a reserve for other leasing improvements at
Mall Corners were eventually funded out of additional loan proceeds from the
Mall Corners refinancing in December 1995. Of the remainder, $300,000 represents
the amount received from the sale of the Partnership's interest in the 150
Broadway Office Building note and $420,000 represents a distribution of excess
refinancing proceeds from the Mall Corners joint venture. In addition, the
Partnership expects to increase the annual distribution rate from 2.0% to 3.6%
on remaining invested capital, which will total $966 per original $1,000
investment after the special distribution described above. This adjustment would
be effective for the distribution to be paid on May 15, 1997 for the quarter
ending March 31, 1997.
During the first quarter of fiscal 1996, the Mall Corners joint venture
obtained a new first mortgage loan with an initial principal balance of
$20,000,000 and repaid a maturing first mortgage loan which had a principal
balance of $17,246,000 at the time of the refinancing. The prior first mortgage
loan bore interest at 11.5% per annum. Excess loan proceeds were used to
establish certain required escrow deposits, including an amount of $1.7 million
designated to pay for certain planned improvements and an expansion of the
shopping center which added approximately 17,000 square feet to the property's
gross leasable area and was completed during 1996. In addition, excess
refinancing proceeds of $550,000 were available to be distributed to the
Partnership in accordance with the joint venture agreement. However, the
Partnership agreed to allow the joint venture to retain a portion of such
proceeds to pay for the leasing costs incurred in connection with certain leases
executed during the first quarter of fiscal 1996. The Partnership received
excess refinancing proceeds of $420,000, of which $232,000 was received during
the quarter ended December 31, 1996 and the remainder was received subsequent to
the quarter end.
At the present time, real estate values for retail shopping centers in
certain markets are being adversely impacted by the effects of overbuilding and
consolidations among retailers which have resulted in an oversupply of space. To
date, the operations of the Mall Corners property have remained strong and do
not appear to have been affected by this general trend. As of December 31, 1996,
the Mall Corners Shopping Center, located in the suburban Atlanta, Georgia
market, was 90% occupied, compared to 93% as of September 30, 1996. The
construction associated with the relocation and expansion of one of the
property's major tenants increased the leasable area of the center from
approximately 287,000 square feet to approximately 304,000 square feet. The
space formerly occupied by this tenant comprises a significant portion of the
space which is currently vacant. The leasing team is presently marketing this
space to retailers which would complement the existing tenant mix. A total of
nine leases, comprising 22,000 square feet of space, are scheduled to expire
during fiscal 1997. During the first quarter, one of these tenants, which
occupies 5,788 square feet, renewed its lease. The leasing team expects to renew
the majority of the remaining eight leases.
The Partnership's two multi-family apartment properties continue to
perform strongly, with the Regent's Walk and Hurstbourne properties averaging
occupancy levels of 97% and 92%, respectively, for the quarter ended December
31, 1996. In light of the current strength of the national apartment market, the
Partnership may have favorable opportunities to sell one or both of its
multi-family properties in the near term. Significant capital improvement
expenditures continue to be made at both properties in order to enhance their
marketability to prospective tenants as well as potential buyers of the
properties. Over the past 12 to 15 months, development activity for multi-family
properties in many markets has escalated significantly. At Regent's Walk,
management is aware of six new apartment communities in the local market area,
of which four have begun leasing, which will add a total of approximately 1,500
apartment units to the market. To date, the impact of these new properties on
Regents Walk has not been significant. However, as more of the units are made
available, this new competition may limit rental growth at Regent's Walk until
these new apartment communities are substantially leased. The investment in the
Mall Corners Shopping Center currently provides the majority of the
Partnership's net cash flow and would likely be held pending the dispositions of
the two apartment properties. Depending on the availability of favorable sales
opportunities for the two multi-family properties, 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 complete the sale of
its remaining assets within this time frame.
At December 31, 1996, the Partnership had available cash and cash
equivalents of approximately $3,610,000. Such cash and cash equivalents includes
the $2,040,000 to be distributed on February 14, 1997, as discussed further
above. The remaining balance will be utilized for Partnership requirements such
as the payment of operating expenses, the funding of future operating deficits
or capital improvements at the joint ventures, if necessary, as required by the
respective joint venture agreements, and for distributions to the partners. The
source of future liquidity and distributions to the partners is expected to be
from cash generated from the operations of the Partnership's income-producing
investment properties and proceeds from the sale or refinancing of the remaining
investment properties. Such sources are expected to be sufficient to meet the
Partnership's needs on both a short-term and long-term basis.
Results of Operations
Three Months Ended December 31, 1996
- ------------------------------------
The Partnership reported net income of $253,000 for the three months ended
December 31, 1996, as compared to net income of $219,000 for the same period in
the prior year. This increase in net income is the result of a $40,000 decrease
in the Partnership's operating loss which was partially offset by a $6,000
decrease in the Partnership's share of ventures' income. The decrease in the
Partnership's operating loss is primarily attributable to a $30,000 decrease in
general and administrative expenses. The decline in general and administrative
expenses is mainly due to a reduction in certain required professional services
in the current period. Also contributing to the decrease in the Partnership's
operating loss is an increase in interest income which resulted from an increase
in the Partnership's average outstanding cash reserve balances.
The Partnership's share of ventures' income decreased by $6,000 primarily
due to higher property operating expenses at the Regent's Walk and Hurstbourne
properties in the current period which were partially offset by an increase in
rental revenues at the Mall Corners Shopping Center. Rental revenues at Mall
Corners for the first quarter of fiscal 1997 increased by 4% over the same
period in the prior year.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
The status of the litigation involving the Partnership's General Partners
and their affiliates remains unchanged from what was reported in the Annual
Report on Form 10-K for the year ended September 30, 1996.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAINE WEBBER INCOME PROPERTIES SIX
LIMITED PARTNERSHIP
By: Sixth Income Properties Fund, Inc.
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended December 31,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 3,610
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,610
<PP&E> 4,998
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,608
<CURRENT-LIABILITIES> 34
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,574
<TOTAL-LIABILITY-AND-EQUITY> 8,608
<SALES> 0
<TOTAL-REVENUES> 320
<CGS> 0
<TOTAL-COSTS> 67
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 253
<INCOME-TAX> 0
<INCOME-CONTINUING> 253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253
<EPS-PRIMARY> 4.17
<EPS-DILUTED> 4.17
</TABLE>
