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 FEBRUARY 28, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to _________.
Commission File Number: 0-15036
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
February 28, 1998 and August 31, 1997 (Unaudited)
(In thousands)
ASSETS
February 28 August 31
----------- ---------
Real estate investments:
Investment properties held for sale, net $12,100 $12,100
Land - 770
Mortgage loan - 4,230
------- -------
12,100 17,100
Cash and cash equivalents 1,820 1,711
Interest receivable - 32
Accounts receivable 19 9
Deferred expenses, net - 70
Other assets 7 19
------- -------
$13,946 $18,941
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 28 $ 32
Accounts payable and accrued expenses 78 190
Unearned rental income 3 3
Tenant security deposits 75 72
Partners' capital 13,762 18,644
------- --------
$13,946 $18,941
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
STATEMENTS OF INCOME
For the three and six months ended February 28, 1998 and 1997
(Unaudited) (In thousands, except per Unit amounts)
Three Months Ended Six Months Ended
February 28, February 28,
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Interest from mortgage
loans $ 53 $ 179 $ 148 $ 358
Land rent 78 27 114 54
Interest and other income 68 23 92 48
------ ------- ------ -------
199 229 354 460
Expenses:
Management fees 30 36 60 71
General and administrative 94 76 179 171
Amortization of deferred
expenses 66 5 70 9
------ ------- ------ -------
190 117 309 251
------ ------- ------ -------
Operating income 9 112 45 209
Income from operations of
investment properties
held for sale, net 345 150 700 372
Gain on sale of land 1,516 - 1,516 -
------ ------- ------ -------
Net income $1,870 $ 262 $2,261 $ 581
====== ======= ====== =======
Net income per Limited
Partnership Unit $ 2.06 $ 0.29 $ 2.49 $ 0.64
====== ====== ====== =======
Cash distributions per
Limited Partnership Unit $ 7.60 $ 0.35 $ 7.96 $ 0.71
====== ====== ====== =======
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.
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the six months ended February 28, 1998 and 1997 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at August 31, 1996 $ 11 $22,486
Net income 6 575
Cash distributions (7) (640)
----- -------
Balance at February 28, 1997 $ 10 $22,421
===== =======
Balance at August 31, 1997 $ 12 $18,632
Net income 23 2,238
Cash distributions (6) (7,137)
----- -------
Balance at February 28, 1998 $ 29 $13,733
===== =======
See accompanying notes.
<PAGE>
PAINE WEBBER QUALIFIED PLAN PROPERTY FUND FOUR, LP
STATEMENTS OF CASH FLOWS
For the six months ended February 28, 1998 and 1997 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 2,261 $ 581
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of land (1,516) -
Amortization of deferred expenses 70 10
Changes in assets and liabilities:
Interest receivable 32 -
Accounts receivable (10) (33)
Other assets 12 3
Accounts payable - affiliates (4) -
Accounts payable and accrued expenses (112) (152)
Unearned rental income - (26)
Tenant security deposits 3 27
-------- --------
Total adjustments (1,525) (171)
-------- --------
Net cash provided by operating
activities 736 410
--------- ---------
Cash flows from investing activities:
Repayment of mortgage loan 4,230 -
Net proceeds from sale of land 2,286 -
-------- --------
Net cash provided by investing
activities 6,516 -
-------- --------
Cash flows from financing activities:
Distributions to partners (7,143) (647)
-------- ---------
Net increase (decrease) in cash and
cash equivalents 109 (237)
Cash and cash equivalents, beginning of period 1,711 2,060
-------- --------
Cash and cash equivalents, end of period $ 1,820 $ 1,823
======== ========
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, 1997. 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 February 28, 1998 and August 31, 1997 and revenues and
expenses for the three and six months ended February 28, 1998 and 1997. Actual
results could differ from the estimates and assumptions used.
As discussed further in Note 2, the Partnership's mortgage loan and land
investments secured by the Park South Apartments were repaid in January 1998.
Subsequent to this transaction, the Partnership has two remaining wholly-owned
real estate investments (see Note 3). Both of these properties are being
actively marketed for sale. The goal of the Managing General Partner is to
complete the sales of the two remaining assets and a liquidation of the
Partnership by December 31, 1998. There are no assurances, however, that the
sales of the remaining assets and the liquidation of the Partnership will be
completed within this time frame.
2. Mortgage Loan and Land Investments
----------------------------------
The outstanding first mortgage loan and the cost of the related land to
the Partnership at August 31, 1997 were as follows (in thousands):
Property Amount of Mortgage Loan Cost of Land
-------- ----------------------- ------------
Park South Apartments
Charlotte, North Carolina $4,230 $ 770
On January 20, 1998, the Partnership received $4,230,000 from the borrower
of the mortgage loan secured by the Park South Apartments, which represented the
full repayment of the first leasehold mortgage loan held by the Partnership.
Simultaneously, the Park South owner purchased the Partnership's interest in the
underlying land at a price of $2,286,000 which included a premium of $1,516,000
over the Partnership's cost basis in the land of $770,000. This premium
represented a 50% share in the appreciation in the value of the operating
investment property above a specified base amount as called for under the terms
of the ground lease. The Park South mortgage loan opened to prepayment without
penalty on December 29, 1997. The Partnership owned a 77% interest in the land
underlying the Park South Apartments and had an equivalent interest in the first
mortgage loan secured by the improvements. The remaining 23% interest in the
land and mortgage loan receivable was owned by an affiliated partnership,
PaineWebber Mortgage Partners Five, LP.
The Park South loan was secured by a first mortgage on the property, the
owner's leasehold interest in the land and an assignment of all tenant leases.
Interest was payable monthly and the principal was due at maturity on December
28, 2001. The annual interest rate on the Park South mortgage loan was 9%. The
land lease had a term of 40 years. Among the provisions of the lease agreement,
the Partnership was entitled to additional rent based upon gross revenues of the
underlying property in excess of a base amount, as defined. During the six
months ended February 28, 1998, the Partnership received additional rent under
the terms of the Park South Apartments land lease totalling $87,000. The
Partnership received no additional rent for the six months ended February 28,
1997.
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, is
located in Sunnyvale, California and was 100% leased as of February 28, 1998.
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 exceeded 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
effective in the fourth quarter of fiscal 1996. 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 February 28, 1998 and
August 31, 1997.
During fiscal 1997, the Partnership contracted with a national real estate
firm with a strong background in selling R&D buildings in the Silicon Valley
area to market the property for sale. As a result of these marketing efforts,
the Partnership received several offers from qualified third-party buyers to
acquire the property. After reviewing the offers, the Partnership accepted an
offer from one of these potential buyers and negotiated and executed a purchase
and sale agreement during the first quarter of fiscal 1998. The sale remained
subject to the satisfactory completion of the buyer's due diligence which was
scheduled to be completed in December 1997. At the conclusion of the buyer's due
diligence period, the offer to purchase the property was withdrawn. In early
1998 the Partnership and its marketing agent decided to refocus attention on a
select group of potential investors that had expressed previous interest in
acquiring the property. These potential buyers were contacted which resulted in
the receipt of two written offers. Subsequently, one of these offers was
selected and negotiations on a purchase and sale agreement were successfully
completed. A purchase and sale agreement was executed by the Partnership and the
prospective buyer on March 11, 1998. The buyer has thirty days to perform its
due diligence and then would have thirty days thereafter to close this
transaction.
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. The status of this environmental issue is not
expected to impact the completion of the prospective sale transaction described
above.
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 97% occupied as of February 28, 1998, is comprised of
130,470 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. Accordingly, 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 sheets at
February 28, 1998 and August 31, 1997.
<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
three and six months ended February 28, 1998 and 1997 are as follows (in
thousands):
Three Months Ended Six Months Ended
February 28, February 28,
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Rental income $ 409 $ 358 $ 809 $ 743
Other income 89 77 162 166
------- ------- ------- -------
498 435 971 909
Expenses:
Property operating
expenses 98 236 162 448
Property taxes and
insurance 55 49 109 89
------- ------- ------- -------
153 285 271 537
------- ------- ------- -------
Income from
operations, net $ 345 $ 150 $ 700 $ 372
======== ======= ======= =======
Property operating expenses for the six months ended February 28, 1997
include capital improvement costs of $154,000.
4. Related Party Transactions
--------------------------
The Adviser earned basic management fees of $60,000 and $71,000 for the
six-month periods ended February 28, 1998 and 1997, respectively. Accounts
payable - affiliates at February 28, 1998 and August 31, 1997 consists of
management fees of $28,000 and $32,000, respectively, payable to the Adviser.
Included in general and administrative expenses for the six months ended
February 28, 1998 and 1997 is $89,000 and $94,000, 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 six months
ended February 28, 1998 and 1997 is $1,000 and $3,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
<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
- -------------------------------
As discussed further below, the Partnership's mortgage loan and land
investments secured by the Park South Apartments were repaid on January 20,
1998. Subsequent to this transaction, the Partnership has two remaining
wholly-owned real estate investments, the Martin Sunnyvale Research and
Development Center and the Bell Forge Square Shopping Center. The Partnership
assumed direct ownership of these two properties following foreclosure
proceedings resulting from defaults under the terms of the Partnership's first
leasehold mortgage loans. Both of these properties are being actively marketed
for sale, and management's goal would be to complete the sales of the two
remaining assets and a liquidation of the Partnership by December 31, 1998. As
discussed further below, it is expected that the wholly-owned Martin Sunnyvale
Research and Development Center will be sold in mid-calendar year 1998, and the
Bell Forge Square Shopping Center will be sold during the second half of
calendar 1998. There are no assurances, however, that the sales of the remaining
assets and the liquidation of the Partnership will be completed within this time
frame. The net proceeds from any future sales transactions will be distributed
to the Limited Partners along with the remaining Partnership cash reserves after
the payment of all liquidation-related expenses.
The first mortgage loan secured by the Park South Apartments was scheduled
to mature on December 28, 2001; however, it opened to prepayment without penalty
on December 29, 1997. On January 20, 1998, the Partnership received $4,230,000
from the borrower of the mortgage loan secured by Park South, which represented
the full repayment of the first leasehold mortgage loan held by the Partnership.
Simultaneously, the Park South owner purchased the Partnership's interest in the
underlying land at a price of $2,286,000 which included a premium of $1,516,000
over the Partnership's cost basis in the land of $770,000. This premium
represented a 50% share in the appreciation in the value of the operating
investment property above a specified base amount as called for under the terms
of the ground lease. The Partnership owned a 77% interest in the land underlying
the Park South Apartments and had an equivalent interest in the first mortgage
loan secured by the improvements. The remaining 23% interest in the land and
mortgage loan receivable was owned by an affiliated partnership, PaineWebber
Mortgage Partners Five, LP. The net proceeds of the Park South transaction were
distributed to the Limited Partners on February 27, 1998 in the form of a
special distribution totalling approximately $6,548,000, or $146 per original
$1,000 investment.
The Partnership's wholly-owned, 39,000 square foot Martin Sunnyvale
Research and Development Center remained 100% leased as of February 28, 1998. No
leases expire at the property until April 30, 1999. As previously reported, 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
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 and the continued
improvement in the local market conditions, the market value of the Martin
Sunnyvale property has increased substantially over the past two years.
Accordingly, management believes that this would be the appropriate time to sell
the property. Consequently, during fiscal 1997 the Partnership contracted with
a national real estate firm with a strong background in selling R&D buildings in
the Silicon Valley area to market the property for sale. As a result of these
marketing efforts, the Partnership received several offers from qualified
third-party buyers to acquire the property. After reviewing the offers, the
Partnership accepted an offer from one of these potential buyers and negotiated
and executed a purchase and sale agreement during the first quarter of fiscal
1998. The sale remained subject to the satisfactory completion of the buyer's
due diligence which was scheduled to be completed in December 1997. At the
conclusion of the buyer's due diligence period, the offer to purchase the
property was withdrawn. In early 1998 the Partnership and its marketing agent
decided to refocus attention on a select group of potential investors that had
expressed previous interest in acquiring the property. These potential buyers
were contacted which resulted in the receipt of two written offers.
Subsequently, one of these offers was selected and negotiations on a purchase
and sale agreement were successfully completed. A purchase and sale agreement
was executed by the Partnership and the prospective buyer on March 11, 1998. The
buyer has thirty days to perform its due diligence and then would have thirty
days thereafter to close this transaction.
As previously reported, the Partnership was notified by a California state
water agency in fiscal 1994 of a potential environmental problem at the Martin
Sunnyvale property. 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. The
status of this environmental issue is not expected to impact the completion of
the prospective sale transaction described above.
At the Partnership's other wholly-owned investment property, the Bell
Forge Square Shopping Center in Nashville, Tennessee, the leasing level was 97%
as of February 28, 1998, up from 92% as of August 31, 1997. A 6,000 square foot
sports grill opened for business during the quarter ended November 30, 1997.
During the current quarter, lease renewal negotiations resulted in the signing
of a 3-year lease extension with a 3,300 square foot furniture store whose lease
was due to expire in August 1998, as well as a 3-year lease extension with a
3,165 square foot hot tub dealership, whose lease was due to expire in September
1998. Also during the second quarter, a 3,300 square foot jewelry store, whose
lease expires on August 31, 1999, filed for bankruptcy and vacated its space at
the Center. In addition to pursuing the Partnership's claims for unpaid rent,
the property's leasing team is pursuing a replacement tenant for this space as
well as a currently vacant space of 4,002 square feet which was occupied by a
furniture store which closed its operations last year. This former tenant
remains obligated to pay rent on this space through October 31, 2000, the end of
its lease term. This tenant had been meeting its rental obligations through
September 1997, however, it has not made any rental payments since then. The
property's management team is pursuing legal action on this matter.
As discussed further in the Annual Report, the Partnership decided to
explore potential opportunities to sell the Bell Forge Square property during
fiscal 1997 and hired a Nashville-based real estate firm specializing in the
sale of retail properties to market the property for sale. As a result of this
firm's marketing efforts, the Partnership received offers from two prospective
third-party buyers. After reviewing the offers, the Partnership accepted an
offer from one of these potential buyers and negotiated a purchase and sale
agreement which was signed on January 5, 1998. On February 10, 1998, the
Partnership received notice that the potential buyer would not be proceeding
with its efforts to close the sale transaction upon the expiration of its due
diligence period due to its inability to secure a financing commitment. This
potential buyer continues to assess the possibility of purchasing the property
despite no longer being under contract with the Partnership. Subsequently, the
Partnership has met with a new brokerage firm about re-marketing the Bell Forge
Square property for sale. This firm is also based in Nashville and specializes
in the sale of retail properties. On March 20, 1998, a brokerage agreement was
executed with this real estate firm for the marketing of the property.
At February 28, 1998, the Partnership had available cash and cash
equivalents of $1,820,000. 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 investments and the future sales or refinancings
of 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 February 28, 1998
- ------------------------------------
The Partnership reported net income of $1,870,000 for the three months
ended February 28, 1998, as compared to net income of $262,000 for the same
period in the prior year. This $1,608,000 increase in net income is primarily
due to the gain of $1,516,000 recognized on the sale of the land underlying the
Park South Apartments on January 20, 1998, as discussed further above. This
increase is also partly attributable to a $195,000 increase in net income from
operations of investment properties held for sale (Martin Sunnyvale and Bell
Forge Square) which was partially offset by a decrease in the Partnership's
operating income of $103,000. Net income from the operations of investment
properties held for sale increased primarily due to a decrease in property
operating expenses at Martin Sunnyvale. Property operating expenses decreased at
Martin Sunnyvale due to capital expenditures and leasing commissions incurred in
February 1997 related to new tenants. In accordance with the Partnership's
accounting policy for assets held for sale, all capital improvements and leasing
costs are expensed as incurred.
The Partnership's operating income decreased partly due to a reduction in
interest from mortgage loans as a result of the repayment of the Park South
first leasehold mortgage loan on January 20, 1998. In addition, total expenses
increased due to the write-off of the deferred expenses related to the Park
South Apartments as a result of the repayment of the first mortgage loan and the
sale of the underlying land. Land rent actually increased by $51,000 for the
current three-month period despite the termination of the Park South ground
lease due to the receipt of additional rent owed through the date of the
termination.
<PAGE>
Six Months Ended February 28, 1998
- ----------------------------------
The Partnership reported net income of $2,261,000 for the six months ended
February 28, 1998, as compared to net income of $581,000 for the same period in
the prior year. This $1,680,000 increase in net income is primarily due to the
gain of $1,516,000 recognized on the sale of the land underlying the Park South
Apartments on January 20, 1998, as discussed further above. This increase in net
income is also partly attributable to a $328,000 increase in net income from the
operations of investment properties held for sale (Martin Sunnyvale and Bell
Forge Square) which was partially offset by a decrease in the Partnership's
operating income of $164,000. Net income from the operations of investment
properties held for sale increased primarily due to a decrease in property
operating expenses. Property operating expenses decreased due to the capital
expenditures and leasing commissions incurred in February 1997 related to new
tenants at Martin Sunnyvale and tenant improvements related to the Michael's
store expansion at Bell Forge Square in 1997. As noted above, in accordance with
the Partnership's accounting policy, such costs are expensed as incurred.
The Partnership's operating income decreased partly due to a decrease in
interest from mortgage loans as a result of the repayment of the Park South
first leasehold mortgage loan on January 20, 1998. In addition, total expenses
increased due to the write-off of the deferred expenses related to the Park
South Apartments as a result of the repayment of the first mortgage loan and the
sale of the underlying land. Land rent actually increased by $60,000 for the
current six-month period despite the termination of the Park South ground lease
due to the receipt of additional rent owed through the date of the termination.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings NONE
Items 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 January 20, 1998 was filed to report
the repayment of the first leasehold mortgage loan secured by Park South
Apartments and related sale of the Partnership's interest in the underlying land
and is hereby incorporated herein by reference.
<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: April 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended February 28,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 1,820
<SECURITIES> 0
<RECEIVABLES> 19
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,839
<PP&E> 12,100
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,946
<CURRENT-LIABILITIES> 184
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,762
<TOTAL-LIABILITY-AND-EQUITY> 13,946
<SALES> 0
<TOTAL-REVENUES> 2,570
<CGS> 0
<TOTAL-COSTS> 309
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,261
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,261
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.49
</TABLE>
