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 November 30, 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: 0-15036
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
(Exact name of registrant as specified in its charter)
Delaware 04-2841746
(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 FOUR, LP
Balance Sheets
November 30, 1996 and August 31, 1996(Unaudited)
(In thousands)
Assets
November 30 August 31
----------- ---------
Real estate investments:
Investment properties held for sale, net $12,100 $12,100
Land 1,115 1,115
Mortgage loans, net 7,285 7,285
------- -------
20,500 20,500
Cash and cash equivalents 1,964 2,060
Interest receivable 60 60
Accounts receivable 61 14
Deferred expenses, net 94 99
Other assets 104 68
------- -------
$22,783 $22,801
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 32 $ 32
Accounts payable and accrued expenses 186 201
Unearned rental income - 26
Tenant security deposits 72 45
Partners' capital 22,493 22,497
------- -------
$22,783 $22,801
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
STATEMENTS OF INCOME
For the three months ended November 30, 1996 and 1995 (Unaudited)
(In thousands, except per Unit amounts)
1996 1995
---- ----
Revenues:
Interest from mortgage loans $ 179 $ 338
Land rent 27 99
Other interest income 25 38
-------- -------
231 475
Expenses:
Management fees 35 51
General and administrative 94 85
Amortization of deferred expenses 5 25
-------- -------
134 161
-------- -------
Operating income 97 314
Income from operations of investment
properties held for sale, net 222 242
Gain on sale of land - 1,378
-------- ------
Net income $ 319 $ 1,934
======== =======
Net income per Limited
Partnership Unit $0.35 $2.13
===== =====
Cash distributions per Limited
Partnership Unit $0.36 $0.56
===== =====
The above net income and cash distributions per Limited Partnership Unit are
based upon the 896,993 Units ($50 per Unit) of Limited Partnership Interest
outstanding during each period.
<PAGE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended November 30, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at August 31, 1995 $ (18) $29,265
Net income 20 1,914
Cash distributions (7) (506)
------- -------
Balance at November 30, 1995 $ (5) $30,673
======= =======
Balance at August 31, 1996 $ 11 $22,486
Net income 3 316
Cash distributions (3) (320)
------- -------
Balance at November 30, 1996 $ 11 $22,482
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
STATEMENTS OF CASH FLOWS
For the three months ended November 30, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 319 $ 1,934
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of land - (1,378)
Amortization of deferred expenses 5 25
Changes in assets and liabilities:
Interest receivable - 58
Accounts receivable (47) 15
Other assets (36) 10
Accounts payable and accrued expenses (15) (6)
Unearned rental income (26) -
Other liabilities - (50)
Tenant security deposits 27 -
-------- -------
Total adjustments (92) (1,326)
-------- -------
Net cash provided by operating activities 227 608
-------- -------
Cash flows from investing activities:
Net proceeds from sale of land - 3,440
Proceeds received from repayment of mortgage loan - 6,188
-------- -------
Net cash provided by investing activities - 9,628
-------- -------
Cash flows from financing activities:
Distributions to partners (323) (513)
-------- -------
Net (decrease) interest in cash and cash equivalents (96) 9,723
Cash and cash equivalents, beginning of period 2,060 1,851
-------- -------
Cash and cash equivalents, end of period $ 1,964 $11,574
======== =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, 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 November 30, 1996 and August 31, 1996 and
revenues and expenses for the three months ended November 30, 1996 and 1995.
Actual results could differ from the estimates and assumptions used.
2. Mortgage Loan and Land Investments
----------------------------------
The following are the first mortgage loans outstanding and the cost of the
related land to the Partnership at November 30, 1996 and August 31, 1996 (in
thousands):
Amount of Mortgage Loan Cost of Land
----------------------- ------------------
Property 11/30/96 8/31/96 11/30/96 8/31/96
-------- -------- ------- -------- -------
Willow Creek Apartments
Wichita, Kansas $ 3,055 $ 3,055 $ 345 $ 345
Park South Apartments
Charlotte, North Carolina 4,230 4,230 770 770
------- ------- -------- -------
$ 7,285 $ 7,285 $ 1,115 $ 1,115
======= ======= ======== =======
In general, the loans are secured by first mortgages on the properties, the
owner's leasehold interest in the land and an assignment of all tenant
leases. Interest is payable monthly and the principal is due at maturity. The
interest rates on the mortgage loans range from 9.0% to 11%. The land leases
have terms of 40 years. Among the provisions of the lease agreements, the
Partnership is entitled to additional rent based upon gross revenues of the
underlying properties in excess of a base amount, as defined. During the
three months ended November 30, 1995, the Partnership received additional
rent under the terms of the Park South Apartments land lease totalling
$22,000. During the three months ended November 30, 1996, the Partnership did
not receive any additional rent. The lessees have the option to purchase the
land for specified periods of time, beginning between February of 1995 and
December of 1997, at a price based on fair market value, as defined, but not
less than the original cost to the Partnership. The Partnership's investments
are structured to share in the appreciation in the value of the underlying
real estate. Accordingly, upon either sale, refinancing, maturity of the
mortgage loan or exercise of the option to repurchase the land, the
Partnership will receive a 40% to 50% share of the appreciation above a
specified base amount.
The Willow Creek mortgage loan became prepayable in November 1995. Management
believes that the potential for a near term prepayment of this loan is high.
As a result of these circumstances, based on an expected short-term maturity,
the estimated fair value of the Willow Creek mortgage loan approximated its
carrying value as of November 30, 1996 since the estimated fair value of the
collateral property exceeds the principal balance of the loan. The fair value
of the Park South loan, which does not become prepayable until December 1997,
has been estimated using discounted cash flow analysis and also approximated
the loan's carrying value as of November 30, 1996.
The mortgage loan secured by The Corner at Seven Corners Shopping Center
became prepayable in February 1995. On December 16, 1994, the borrower
notified the Partnership of its intent to prepay the loan and exercise the
option to purchase the land during 1995. On November 22, 1995, the borrower
of The Corner at Seven Corners loan prepaid the Partnership's first leasehold
mortgage loan and purchased the Partnership's interest in the underlying land
for total consideration of $9,628,000. The principal balance of the mortgage
loan was $6,188,000 plus interest accrued through November 22, 1995 of
$43,000. The Partnership's cost basis in the land was $2,062,000. Pursuant to
the ground lease, the Partnership received $1,378,000 in excess of its land
investment as its share of the appreciation in value of the operating
investment property above a specified base amount. Such amount was recorded
as a gain in the Partnership's financial statements for the quarter ended
November 30, 1995. The net proceeds from this prepayment transaction were
distributed to the Limited Partners as part of a special distribution paid on
January 31, 1996 in the amount of approximately $9,598,000, or $214 per
original $1,000 investment.
3. Investment Properties Held for Sale
-----------------------------------
Martin Sunnyvale Research and Development Center
------------------------------------------------
The Partnership foreclosed under the terms of the mortgage loan secured by
the Martin Sunnyvale Research and Development Center on July 12, 1991. The
borrower had defaulted on the payment terms of the loan due to significant
lease turnover during 1991. The property contains 39,000 rentable square feet
and is located in Sunnyvale, California. The combined carrying value of the
original land and loan investments, of $5,100,000, was adjusted to
management's estimate of the fair value of the property as of the date of the
foreclosure, of $3,400,000, and reclassified to investment properties held
for sale. Subsequent to the date of the foreclosure and through August 31,
1994, the Partnership had recorded provisions for possible investment loss
totalling $900,000 to write down the carrying value of the Martin Sunnyvale
investment property to $2,500,000 to reflect additional declines in its
estimated fair value, net of selling expenses. During fiscal 1996, real
estate values for R&D office properties in Northern California recovered
somewhat as a result of the resurgence in the growth of the high technology
industries. As a result of lower market vacancy levels and increasing rental
rates, the estimated fair value of the Martin Sunnyvale property improved
significantly during fiscal 1996 to an amount which exceeds the cost basis
established for the property in fiscal 1991 of $3,400,000. Accordingly, the
Partnership adjusted the valuation account with respect to the Martin
Sunnyvale property and recognized a recovery of possible investment loss of
$900,000 in the fiscal 1996 income statement. The carrying value of the
investment, of $3,400,000, is included in the balance of investment
properties held for sale on the accompanying balance sheets as of November
30, 1996 and August 31, 1996.
During fiscal 1994, the Partnership was notified by a California state
water agency of a potential environmental problem at Martin Sunnyvale. As a
result of governmental required testing, management learned that there has
been a contamination of the underground soil and water at the site. The
environmental testing was paid for by one of the parties identified as a
potential contaminator. Management believes that this contamination occurred
prior to the Partnership's initial mortgage loan and ground lease investments
in the property, which were made in 1985. The California state water agency
has issued a site cleanup order identifying two companies which had occupied
the Martin Sunnyvale property prior to the Partnership's investment.
Management has engaged local counsel to monitor all legal actions to insure
that the Partnership's rights are fully protected. Management will seek full
indemnification from the parties identified as being potentially responsible.
Bell Forge Square Shopping Center
---------------------------------
On October 4, 1991, the Partnership received a deed in lieu of foreclosure
on the mortgage loan secured by the Bell Forge Square Shopping Center. The
property, which was 90% occupied as of November 30, 1996, is comprised of
126,890 leasable square feet and is located in Nashville, Tennessee. The
Managing General Partner estimated that the fair value of the investment
property, net of selling expenses, at the date title to the mortgaged
property was transferred was approximately equal to the combined cost of the
land and the face amount of the Partnership's mortgage loan. The combined
value of the land and the face amount of the mortgage loan, of $9,000,000,
was reclassified to investment properties held for sale. During fiscal 1992,
the Partnership had recorded a provision for possible investment loss of
$600,000 to write down the carrying value of the Bell Forge Square investment
property to reflect a decline in its estimated fair value, net of selling
expenses, as of August 31, 1992. During fiscal 1993, the Partnership recorded
an adjustment to reduce the valuation allowance by $300,000 to reflect an
increase in the estimated fair value of the Bell Forge Square property as of
August 31, 1993. The resulting net carrying value of $8,700,000 is included
in the balance of investment properties held for sale on the accompanying
balance sheet at November 30, 1996 and August 31, 1996.
<PAGE>
The Partnership recognizes income from the investment properties held for
sale equal to its share of the excess of the properties' gross revenues over
property operating expenses (including capital improvement costs), taxes and
insurance. Combined summarized operating results of the Martin Sunnyvale
Research and Development Center and Bell Forge Square Shopping Center for the
quarters ended November 30, 1996 and 1995 are as follows (in thousands):
1996 1995
---- ----
Revenues:
Rental income $ 385 $ 360
Other income 89 58
------- -------
474 418
Expenses:
Property operating expenses 212 127
Property taxes and insurance 40 49
--------- --------
252 176
-------- --------
Income from operations, net $ 222 $ 242
======== ========
Property operating expenses for the three months ended November 30, 1996 and
1995 include capital improvement costs of $154,000 and $80,000, respectively.
4. Related Party Transactions
--------------------------
The Adviser earned basic management fees of $35,000 and $51,000 for the
three-month periods ended November 30, 1996 and 1995, respectively. Accounts
payable - affiliates at both November 30, 1996 and August 31, 1996 consists
of management fees of $32,000 payable to the Adviser.
Included in general and administrative expenses for the three months ended
November 30, 1996 and 1995 is $47,000 and $43,000, 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 November 30, 1996 and 1995 is $3,000 and $5,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
5. Contingencies
--------------
As discussed in more detail in the Annual Report, the Partnership is involved
in certain legal actions. At the present time, the Managing General Partner
is unable to estimate the impact, if any, of these matters on the
Partnership's financial statements, taken as a whole.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's wholly-owned, 39,000 square foot Martin Sunnyvale
Research and Development Center remained 100% leased as of November 30, 1996.
During the current quarter, the largest tenant at Martin Sunnyvale vacated
17,784 square feet when its lease expired at the beginning of November 1996.
However, a replacement tenant has executed a five-year lease through November
2001 for the entire 17,784 square foot space at an average rental rate which is
40% higher than the previous tenant had been paying. This transaction completed
the successful re-leasing of the three tenant spaces at the property. The other
two spaces were re-leased during fiscal 1996 at rental rates 40% and 60% higher
than the previous leases. As a result of the significant increase in rental
income, the market value of the Martin Sunnyvale property has increased
substantially. Accordingly, management believes that it would be appropriate to
begin to market the property for sale. Such marketing efforts will begin in the
second quarter of fiscal 1997.
As previously reported, the Partnership was notified by a California state
water agency in fiscal 1994 of a potential environmental problem at Martin
Sunnyvale. As a result of governmental required testing, management learned that
there has been a contamination of the underground soil and water at the site.
The state water agency has issued a final report identifying two tenants which
had occupied the property prior to 1985 and may have caused the environmental
problem. Both prior tenants are Fortune 500 companies and both have been ordered
at their own expense to perform the necessary testing, cleanup and documentation
as required by the California state water agency. The Partnership will be
required to monitor the efforts of these two firms. The environmental testing
was paid for by one of the parties identified as a potential contaminator.
Management has engaged local counsel to monitor all legal actions to insure that
the Partnership's rights are fully protected. In addition, management will seek
full indemnification from the parties identified as being responsible. This
matter is not expected to have any long-term impact on the market value of the
Partnership's operating property.
At the Partnership's other wholly-owned commercial investment, Bell Forge
Square Shopping Center in Nashville, Tennessee, occupancy stood at 90% at
November 30, 1996, as compared to 100% at August 31, 1996. During the current
quarter, two tenants, a furniture store and a pet store, occupying 10% of the
center's rentable area, vacated their spaces prior to the termination of their
leases. The former furniture store tenant remains current on its rental
obligations to date although it seeks to terminate its lease as soon as a new
tenant can be found. The former pet store tenant has ceased operations and
stopped paying rent. The Partnership has commenced legal action to enforce the
lease obligation. The property's leasing team has begun marketing this vacant
space to prospective tenants. As previously reported, although Discovery Zone,
which occupies 9% of the center's net rentable area, has filed for protection
under Chapter 11 of the U.S. Bankruptcy Code, it continues to pay its
post-petition rent and operate its store at Bell Forge Square. While there are
likely to be some store closings as part of the company's bankruptcy
reorganization plan, it is uncertain at this time whether the Bell Forge Square
location would be affected by such actions. At the present time, real estate
values for retail shopping centers in certain markets are being adversely
impacted by the effects of certain consolidations and bankruptcies among
retailers which have resulted in an oversupply of space and the generally flat
rate of growth in overall retail sales. To date, the operations of the Bell
Forge Square property have not been affected by this general trend. During the
quarter ended November 30, 1996, management decided to explore potential
opportunities to sell the Bell Forge Square property. Formal marketing efforts
are expected to begin by the end of the second fiscal quarter.
The mortgage loan secured by the Willow Creek Apartments bears interest at
a rate of 11.00% per annum. As previously reported, since current market
interest rates for first mortgage loans are considerably lower than this rate,
and with the continued availability of credit in the capital markets for real
estate transactions, the likelihood of the Partnership's mortgage loan
investment being prepaid has been high since the time that the terms of such
mortgage loan allowed for prepayment. The Willow Creek loan became prepayable in
November 1995. However, the Willow Creek loan includes a prepayment premium for
any prepayment between November 1995 and October 2000 at rates between 5% and 1%
of the mortgage loan balance. To date, the Partnership has received no notice
from the Willow Creek borrower indicating an intent to prepay the mortgage loan
and repurchase the underlying land. The average occupancy level at Willow Creek
for the quarter ended November 30, 1996 was 98%. Recent improvements in
occupancy at the Willow Creek Apartments are the result of an aggressive
marketing program that has included the use of lower rental rates, concessions
and shorter than one-year lease terms. The owner's property management team
expects to implement rental rate increases in the second quarter of fiscal 1997.
Occupancy at the Park South Apartments in Charlotte, North Carolina, was
92% for the quarter ended November 30, 1996. Operations of the property continue
to fully support the debt service and ground lease payments owed to the
Partnership despite a recent weakening in market conditions for existing
properties in the greater Charlotte area. Over the past year, more than 3,900
new apartment units have been added to the overall Charlotte market.
Approximately 1,500 of these new units are in southeast Charlotte, where Park
South is located, and 708 of these new units are in Park South's submarket. In
addition, a new rental community is under construction within one mile of Park
South which will include 400 rental units, a retail center and a movie theater.
This property's pre-leasing program began in late August. In order to remain
competitive with these new units, Park South currently offers reduced rental
rates and/or discounted move-in rates to prospective tenants. As an incentive to
renew leases, current tenants are offered minimal increases at the expiration of
their leases. The use of rental concessions and renewal incentives is expected
to continue throughout fiscal 1997.
At November 30, 1996, the Partnership had available cash and cash
equivalents of $1,964,000. Such cash and cash equivalents will be used for the
working capital needs of the Partnership, distributions to the partners and, if
necessary, for tenant improvement expenses and other leasing costs of the
Partnership's wholly-owned investment properties. The source of future liquidity
and distributions to the partners is expected to be through cash generated from
the Partnership's real estate and mortgage loan investments, the repayment of
the mortgage loans receivable and the future sales or refinancings of the
underlying land and the investment properties. Such sources of liquidity are
expected to be adequate to meet the Partnership's needs on both a short-term and
long-term basis.
Results of Operations
Three Months ended November 30, 1996
- ------------------------------------
The Partnership reported net income of $319,000 for the three months ended
November 30, 1996, as compared to net income of $1,934,000 for the same period
in the prior year. The decrease in net income is primarily attributable to the
gain recognized in the prior period on the sale of The Corner at Seven Corners
land, of $1,378,000. In addition, the Partnership's net income decreased due to
a decrease in operating income of $217,000. Operating income decreased primarily
due to a decrease in revenues of $244,000. Revenues decreased due to declines in
interest earned on mortgage loans of $159,000, land rent revenue of $72,000 and
other interest income of $13,000. Interest earned on mortgage loans and land
rent revenue decreased as a result of The Corner at Seven Corners mortgage
repayment and related land sale which occurred during the prior year. Interest
income decreased due to the inclusion of The Corner at Seven Corners' sales
proceeds in the invested cash balances in the prior period pending the special
distribution to the Limited Partners which was made on January 31, 1996. The
decrease in revenues was partially offset by a reduction in management fees of
$16,000 and a decline in amortization of deferred expenses of $20,000.
Management fees decreased due to a reduction in adjusted capital contributions,
upon which such fees are based, as a result of the capital distribution which
followed the sale of the The Corner at Seven Corners investment. Amortization of
deferred expenses decreased due to the write-off of the remaining deferred
acquisition expenses associated with The Corner at Seven Corners investments at
the time of the sale.
A decrease of $20,000 in income from investment properties held for sale
also contributed to the decline in net income in the current period. Income from
investment properties held for sale decreased primarily due to a decline in net
operating income at Martin Sunnyvale of $27,000. Net operating income declined
at Martin Sunnyvale due to a temporary decrease in rental income as a result of
the tenant turnover during November, as discussed further above, and an increase
in capital improvement expenditures.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
- -------------------------
In November 1994, a series of purported class actions (the "New York
Limited Partnership Actions") were filed in the United States District Court for
the Southern District of New York concerning PaineWebber Incorporated's sale and
sponsorship of various limited partnership investments, including those offered
by the Partnership. The lawsuits were brought against PaineWebber Incorporated
and Paine Webber Group Inc. (together "PaineWebber"), among others, by allegedly
dissatisfied partnership investors. In March 1995, after the actions were
consolidated under the title In re PaineWebber Limited Partnership Litigation,
the plaintiffs amended their complaint to assert claims against a variety of
other defendants, including Fourth Qualified Properties, Inc. and Properties
Associates ("PA"), which are the General Partners of the Partnership and
affiliates of PaineWebber. On May 30, 1995, the court certified class action
treatment of the claims asserted in the litigation.
The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in Paine Webber Qualified Plan
Property Fund Four, LP, PaineWebber, Fourth Qualified Properties, Inc. and PA
(1) failed to provide adequate disclosure of the risks involved; (2) made false
and misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs, who
purported to be suing on behalf of all persons who invested in Paine Webber
Qualified Plan Property Fund Four, LP, also alleged that following the sale of
the partnership interests, PaineWebber, Fourth Qualified Properties, Inc. and PA
misrepresented financial information about the Partnership's value and
performance. The amended complaint alleged that PaineWebber, Fourth Qualified
Properties, Inc. and PA violated the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and the federal securities laws. The plaintiffs
sought unspecified damages, including reimbursement for all sums invested by
them in the partnerships, as well as disgorgement of all fees and other income
derived by PaineWebber from the limited partnerships. In addition, the
plaintiffs also sought treble damages under RICO.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions 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 has been preliminarily approved by the court and 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
proposed settlement was held in December 1996, and a ruling by the court as a
result of this final hearing is currently pending.
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.
Mediation with respect to the Abbate action was held in December 1996. As a
result of such mediation, a tentative settlement between PaineWebber and the
plaintiffs was reached which would provide for complete resolution of such
action. PaineWebber anticipates that releases and dismissals with regard to this
action will be received by February 1997.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
described above. However, PaineWebber has agreed not to seek indemnification for
any amounts it is required to pay in connection with the settlement of the New
York Limited Partnership Actions. At the present time, the General Partners
cannot estimate the impact, if any, of the potential indemnification claims on
the Partnership's financial statements, taken as a whole. Accordingly, no
provision for any liability which could result from the eventual outcome of
these matters has been made in the accompanying financial statements of the
Partnership.
Items 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 QUALIFIED PLAN PROPERTY FUND FOUR, 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 FOUR, LP
By: FOURTH QUALIFIED PROPERTIES, INC.
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: January 13, 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 November 30,
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> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 1,964
<SECURITIES> 0
<RECEIVABLES> 7,406
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,085
<PP&E> 13,215
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,783
<CURRENT-LIABILITIES> 290
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,493
<TOTAL-LIABILITY-AND-EQUITY> 22,783
<SALES> 0
<TOTAL-REVENUES> 453
<CGS> 0
<TOTAL-COSTS> 134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 319
<INCOME-TAX> 0
<INCOME-CONTINUING> 319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
