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, 1999
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, 1999 and September 30, 1999 (Unaudited)
(In thousands)
ASSETS
December 31 September 30
----------- ------------
Cash and cash equivalents $ 4,201 $ 12,665
Accounts receivable - affiliates - 879
-------- --------
$ 4,201 $ 13,544
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Losses of joint venture in excess
of investments and advances $ 838 $ 765
Accounts payable - affiliates 10 13
Accrued expenses and other liabilities 16 21
Partners' capital 3,337 12,745
-------- --------
$ 4,201 $ 13,544
======== ========
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended December 31, 1999 and 1998
(Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1998 $(1,367) $ 6,102
Cash distributions (6) (9,826)
Net income 103 9,699
------- --------
Balance at December 31, 1998 $(1,270) $ 5,975
======= ========
Balance at September 30, 1999 $(1,187) $ 13,932
Cash distributions (2) (9,484)
Net income 1 77
------- --------
Balance at December 31, 1999 $(1,188) $ 4,525
======= ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF INCOME
For the three months ended December 31, 1999 and 1998 (Unaudited)
(In thousands, except per Unit data)
1999 1998
---- ----
Revenues:
Interest and other income $ 95 $ 88
Expenses:
Management fees 22 36
General and administrative 88 101
------- -------
110 137
------- -------
Operating loss (15) (49)
Partnership's share of
gain on sale of operating
investment property - 10,228
Partnership's share of ventures'
income (losses) 93 (377)
------- -------
Net income $ 78 $ 9,802
======= =======
Net income per Limited Partnership Unit $ 1.29 $161.65
======= =======
Cash distributions per Limited
Partnership Unit $158.07 $163.77
======= =======
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, 1999 and 1998 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 78 $ 9,802
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Partnership's share of gain on sale
of operating investment property - (10,228)
Partnership's share of ventures' income (losses) (93) 377
Changes in assets and liabilities:
Accounts receivable - affiliates 879 -
Accounts payable - affiliates (3) (3)
Accrued expenses and other liabilities (5) 39
-------- --------
Total adjustments 778 (9,815)
-------- --------
Net cash provided by (used in)
operating activities 856 (13)
Cash flows from investing activities:
Distributions from joint ventures 166 13,334
-------- --------
Cash flows from financing activities:
Cash distributions to partners (9,486) (9,832)
-------- --------
Net (decrease) increase in cash and cash equivalents (8,464) 3,489
Cash and cash equivalents, beginning of period 12,665 1,344
-------- --------
Cash and cash equivalents, end of period $ 4,201 $ 4,833
======== ========
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, 1999. 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 December 31, 1999 and September 30, 1999 and revenues and
expenses for the three months ended December 31, 1999 and 1998. Actual results
could differ from the estimates and assumptions used.
The Partnership is currently focusing on potential disposition strategies
for the remaining investment in its portfolio. It had been contemplated that a
sale of the Partnership's Mall Corners investment, which would be followed by an
orderly liquidation of the Partnership, could be completed by the end of
calendar year 1999. However, because of the recently announced closing of an
anchor tenant at Mall Corners, as well as other current vacancies at the
property, the joint venture partner believes that it could be desirable from its
perspective to re-lease some or all of the currently vacant space at the Center
before selling the property. As a result, the Partnership has been exploring its
strategic alternatives, and the disposition plan for the Mall Corners investment
has not yet been finalized. Consequently, a liquidation of the Partnership will
not be completed until the second quarter of calendar year 2000 at the earliest.
There are no assurances, however, that a sale of the remaining investment and a
liquidation of the Partnership will be completed within this time.
2. Investments in Joint Ventures
------------------------------
As of December 31, 1999, the Partnership has an investment in one
remaining joint venture which owns an operating investment property (three at
September 30, 1998) as more fully described in the Partnership's Annual Report.
During the first quarter of fiscal 1999, on November 16, 1998,
Kentucky-Hurstbourne Associates sold its operating investment property, the
Hurstbourne Apartments, to an unrelated party for $22.9 million. The sale
generated net proceeds of approximately $12,941,000 to the Partnership after the
repayment of the outstanding first mortgage loan of approximately $8,124,000,
accrued interest of approximately $30,000, a prepayment penalty of $187,000,
closing proration adjustments of approximately $380,000, closing costs of
approximately $266,000 and a payment of approximately $972,000 to the
Partnership's co-venture partner for its share of the net proceeds in accordance
with the terms of the joint venture agreement. On September 30, 1999, Regent's
Walk Associates, a joint venture in which the Partnership had an interest, sold
its operating investment property, the Regent's Walk Apartments, located in
Overland Park, Kansas, to an affiliate of its unaffiliated joint venture partner
for $17.75 million. The sale generated net proceeds of approximately $8,068,000,
after the assumption of the outstanding first mortgage loan of approximately
$8,624,000, accrued interest of approximately $51,000, closing proration
adjustments of approximately $189,000, and a payment of approximately $818,000
to the Partnership's non-affiliated co-venture partner for its share of the net
proceeds in accordance with the terms of the joint venture agreement. In
addition, as a result of the Regent's Walk sale, the Partnership received
$117,000 which had been held in escrow at the property plus $257,000 as a result
of operations of the property through the date of sale.
With the fiscal 1999 sales of the Hurstbourne and Regent's Walk properties,
the Partnership's only remaining real estate investment is a joint venture
interest in the Mall Corners Shopping Center, a 304,000 square foot retail
center in suburban Atlanta, Georgia. The property was 49% occupied as of
December 31, 1999. During the quarter ended December 31, 1999, the Partnership
initiated the right of first offer provision of the Mall Corners joint venture
agreement. In accordance with the agreement, the Partnership gave formal notice
to the co-venture partner that it was being given the opportunity to make a
first offer for the purchase of the property at a specified sales price of $22
million. The co-venturer had until January 31, 2000 to notify the Partnership of
its intent to purchase the property and to put up a non-refundable deposit in
connection with the transaction. While the co-venturer has expressed an interest
in completing a transaction at the specified price, it did not abide by the
terms of the joint venture agreement by making the required deposit on or before
January 31, 2000. As a result, the Partnership now has the right to complete a
sale to any third-party at terms no less favorable than those specified in the
first offer notice to the co-venturer. Accordingly, the Partnership is currently
in the process of marketing the property for sale and soliciting offers. At the
same time, the Partnership continues its discussions with the co-venturer about
a potential sale transaction. In light of the current leasing status, there
remains the potential need for significant capital at the property to pay for
re-leasing expenses, in the event that a near term sale cannot be completed.
Consequently, the Managing General Partner has recommended that the
Partnership's regular quarterly distributions be suspended until further notice.
As a result, after the payment to be made on February 15, 2000 for the quarter
ended December 31, 1999, no further quarterly distributions are planned.
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 ventures' earnings and losses and distributions.
Summarized operations of the joint ventures for the three months ended
December 31, 1999 and 1998 are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three months ended December 31, 1999 and 1998
(in thousands)
1999 1998
---- ----
Rental revenues and expense recoveries $ 964 $ 2,034
Interest and other income 3 13
-------- --------
967 2,047
Property operating expenses 247 1,015
Interest expense 333 779
Depreciation and amortization 294 630
-------- --------
874 2,424
-------- --------
Operating income (loss) 93 (377)
Gain on sale of operating investment property - 11,245
-------- --------
Net income $ 93 $ 10,868
======== ========
Net income:
Partnership's share of combined income $ 93 $ 9,851
Co-venturers' share of combined income - 1,017
-------- --------
$ 93 $ 10,868
========= ========
The Partnership's share of the combined income of the joint ventures is
presented as follows on the accompanying statements of income (in thousands):
1999 1998
---- ----
Partnership's share of ventures'
income (losses) $ 93 $ (377)
Partnership's share of gain on sale of
operating investment property - 10,228
-------- --------
$ 93 $ 9,851
======== ========
3. Related Party Transactions
--------------------------
The Adviser earned total management fees of $22,000 and $36,000 for the
three-month periods ended December 31, 1999 and 1998, respectively. Accounts
payable - affiliates at December 31, 1999 and September 30, 1999 consist of
management fees of $10,000 and $13,000, respectively, payable to the Adviser.
Included in general and administrative expenses for the three-month
periods ended December 31, 1999 and 1998 is $30,000 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-month
period ended December 31, 1998 is $1,000 representing fees earned by an
affiliate, Mitchell Hutchins Institutional Investors, Inc., for managing the
Partnership's cash assets.
<PAGE>
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, 1999 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
- -------------------------------
As discussed further in the Annual Report, on November 16, 1998,
Kentucky-Hurstbourne Associates, a joint venture in which the Partnership had an
interest, sold its operating investment property, the Hurstbourne Apartments,
located in Louisville, Kentucky, to an unrelated party for $22.9 million. The
sale generated net proceeds of approximately $12,941,000 to the Partnership
after the repayment of the outstanding first mortgage loan of approximately
$8,124,000, accrued interest of approximately $30,000, a prepayment penalty of
$187,000, closing proration adjustments of approximately $380,000, closing costs
of approximately $266,000 and a payment of approximately $972,000 to the
Partnership's co-venture partner for its share of the net proceeds in accordance
with the terms of the joint venture agreement. As a result of the sale of the
Hurstbourne property, the Partnership made a special distribution of $9,300,000,
or $155 per original $1,000 Unit, to the Limited Partners on December 15, 1998.
Approximately $3,641,000 of the Hurstbourne net sale proceeds were retained and
added to the Partnership's cash reserves to ensure that the Partnership has
sufficient capital resources to fund its share of potential capital improvement
expenses at the Mall Corners Shopping Center.
On September 30, 1999, Regent's Walk Associates, a joint venture in which
the Partnership had an interest, sold its operating investment property, the
Regent's Walk Apartments, located in Overland Park, Kansas, to an affiliate of
its unaffiliated joint venture partner for $17.75 million. The sale generated
net proceeds of approximately $8,068,000, after the assumption of the
outstanding first mortgage loan of approximately $8,624,000, accrued interest of
approximately $51,000, closing proration adjustments of approximately $189,000,
and a payment of approximately $818,000 to the Partnership's non-affiliated
co-venture partner for its share of the net proceeds in accordance with the
terms of the joint venture agreement. In addition, as a result of the Regent's
Walk sale, the Partnership received $117,000 which had been held in escrow at
the property plus $257,000 as a result of operations of the property through the
date of sale. The Partnership made a special distribution to the Limited
Partners of $9,180,000, or $153 per original $1,000 investment, on October 15,
1999 to Unitholders of record on the September 30, 1999 sale date. Of the
$153.00 total, $140.30 resulted from the sale of Regent's Walk and $12.70 was
from Partnership reserves that exceed expected future requirements.
With the fiscal 1999 sales of the Hurstbourne and Regent's Walk
properties, the Partnership's only remaining real estate investment is a joint
venture interest in the Mall Corners Shopping Center, a 304,000 square foot
retail center in suburban Atlanta, Georgia. As previously reported, the
Partnership has been focusing on potential disposition strategies for the
remaining investment in its portfolio. As part of the efforts to prepare the
remaining property for sale, the Partnership continues to work with the
property's leasing and management team to develop and implement programs that
will protect and enhance value and maximize cash flow. The Partnership had
previously reported that, although no assurances could be given, it was
contemplated that a liquidation of the Partnership could be completed by
calendar year-end 1999. However, because of the recently announced closing of
Upton's, an anchor tenant at Mall Corners, as well as other current vacancies at
the property, the Partnership's joint venture partner believes that it could be
desirable from its perspective to re-lease some or all of the currently vacant
space at the Center before selling the property. As a result, the Partnership
has been exploring its strategic alternatives, and the disposition plan for the
Mall Corners investment has not yet been finalized. Consequently, a liquidation
of the Partnership will not be completed until the second quarter of calendar
year 2000 at the earliest. There are no assurances, however, that a sale of the
remaining investment and a liquidation of the Partnership will be completed
within this time frame.
As of December 31, 1999, the Mall Corners Shopping Center, located in the
suburban Atlanta, Georgia market, was 49% occupied, as compared to an occupancy
level of 73% at September 30, 1999. As previously reported, the owner of
Upton's, an anchor tenant that leases 16% of the Center's rentable area,
announced on July 19, 1999 that all of the stores in the chain would be closed
in the near future. At the end of the current quarter, Upton's closed its
operations and vacated the premises. To date, Upton's remains current on its
lease obligations. The Partnership and its co-venture partner have had
preliminary discussions with Upton's on a possible settlement to terminate its
lease. In addition, another tenant, Suit Max, discontinued its operation at the
Center during the current quarter and vacated 16,530 square feet or 5% of the
Center's leasable area. Three other tenants also vacated approximately 8,000
square feet or 3% of the Center's leasable area during the quarter. The 49%
occupancy level reflects the vacancy for the five tenants described above, which
represent 24% of the center's leasable area, the former Levitz Furniture store
which represented 16% of the Center's leasable area, the former movie theatre
that occupied 8% of the leasable area and 4 stores that represent 3% of the
leaseable area. The property's leasing team continues to work with prospective
tenants for the existing vacant space. During the quarter, the property's
leasing team renewed three leases that were scheduled to expire during the
quarter ended December 31, 1999. These leases represented 1% of the Center's
leasable area. Also, a lease was signed with one new tenant, which took
occupancy of 3,021 square feet during the quarter, and an existing tenant
expanded its operation by 1,250 square feet. In addition, the property's leasing
team had negotiated a short-term lease for the holiday season with the retailer,
Hit or Miss. This prospective tenant tested a new concept that was not
successful and has vacated the portion of the former Levitz space they had
occupied. As also previously reported, the store formerly occupied by Toys R Us
that abuts Mall Corners Shopping Center remains vacant. While the closing of the
Toys R Us store does not have a direct financial impact on Mall Corners, its
vacancy continues to have a negative impact on the Center's appearance and the
number of shoppers entering the Center.
During the quarter ended December 31, 1999, the Partnership initiated the
right of first offer provision of the Mall Corners joint venture agreement. In
accordance with the agreement, the Partnership gave formal notice to the
co-venture partner that it was being given the opportunity to make a first offer
for the purchase of the property at a specified sales price of $22 million. The
co-venturer had until January 31, 2000 to notify the Partnership of its intent
to purchase the property and to put up a non-refundable deposit in connection
with the transaction. While the co-venturer has expressed an interest in
completing a transaction at the specified price, it did not abide by the terms
of the joint venture agreement by making the required deposit on or before
January 31, 2000. As a result, the Partnership now has the right to complete a
sale to any third-party at terms no less favorable than those specified in the
first offer notice to the co-venturer. Accordingly, the Partnership is currently
in the process of marketing the property for sale and soliciting offers. At the
same time, the Partnership continues its discussions with the co-venturer about
a potential sale transaction. In light of the current leasing status, there
remains the potential need for significant capital at the property to pay for
re-leasing expenses, in the event that a near term sale cannot be completed.
Consequently, the Managing General Partner has recommended that the
Partnership's regular quarterly distributions be suspended until further notice.
As a result, after the payment to be made on February 15, 2000 for the quarter
ended December 31, 1999, no further quarterly distributions are planned.
At December 31, 1999, the Partnership had available cash and cash
equivalents of approximately $4,201,000. Such cash and cash equivalents will be
utilized for Partnership requirements such as the payment of operating expenses,
the funding of future operating deficits or capital improvements at the
remaining joint venture, and for distributions to the partners for the quarter
ended December 31, 1999. 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 property and proceeds from the sale or
refinancing of such property. Such 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, 1999
- ------------------------------------
The Partnership reported net income of $78,000 for the three months ended
December 31, 1999, as compared to net income of $9,802,000 for the same period
in the prior year. This decrease in net income is mainly the result of the
Partnership's share of the gain on the sale of the Hurstbourne Apartments of
$10,228,000 recognized in the first quarter of fiscal 1999. In the current
fiscal year, there was an increase of $470,000 in the Partnership's share of
ventures' income (losses) and a decrease of $34,000 in the Partnership's
operating loss. The increase in the Partnership's share of ventures' income
(losses) was mainly due to the sale of the Hurstbourne Apartments during the
prior year, as Hurstbourne had an operating loss of $538,000 during the same
period in the prior year.
The decrease in the Partnership's operating loss resulted from a $7,000
increase in interest and other income, a $14,000 decrease in management fees,
and a $13,000 reduction in general and administrative expenses. The increase in
interest and other income resulted from higher average outstanding cash balances
in the current period due to the receipt and temporary investment of the
proceeds from the sale of Regent's Walk prior to the distribution to the Limited
Partners which occurred on October 15, 1999. Management fees were lower in the
current period as a result of a decrease in the Partnership's distributable
cash, upon which the management fees are based. General and administrative
expenses declined mainly due to legal fees incurred during the prior period for
the Levitz lease litigation which is discussed further in the Annual Report.
<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: NONE
<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 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the Partnership's unaudited financial statements for the year ended
December 31, 1999 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-30-2000
<PERIOD-END> Dec-31-1999
<CASH> 4,201
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,201
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,201
<CURRENT-LIABILITIES> 26
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,337
<TOTAL-LIABILITY-AND-EQUITY> 4,201
<SALES> 0
<TOTAL-REVENUES> 188
<CGS> 0
<TOTAL-COSTS> 110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 78
<INCOME-TAX> 0
<INCOME-CONTINUING> 78
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.29
</TABLE>
