UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from_______to _____.
Commission File Number: 0-15037
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2870345
- ------------------------------- ---------------
(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 SEVEN LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and September 30, 1997 (Unaudited)
(In thousands)
ASSETS
December 31 September 30
----------- ------------
Operating investment property:
Land $ 486 $ 486
Buildings and improvements 2,990 2,990
Equipment and fixtures 75 75
--------- ----------
3,551 3,551
Less accumulated depreciation (1,275) (1,257)
--------- ----------
2,276 2,294
Investments in unconsolidated ventures,
at equity 1,229 1,406
Cash and cash equivalents 7,769 2,856
Escrowed funds 13 72
Accounts receivable, net 41 26
Deferred expenses, net 95 103
Other assets 23 32
--------- ----------
$ 11,446 $ 6,789
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage note payable $ 1,599 $ 1,614
Accounts payable and accrued expenses 348 84
Accounts payable - affiliates 7 7
Accrued interest payable 15 15
Accrued real estate taxes - 58
Other liabilities 9 9
Partners' capital 9,468 5,002
--------- ----------
$ 11,446 $ 6,789
========= ==========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended December 31, 1997 and 1996 (Unaudited)
(In thousands, except per Unit data)
1997 1996
---- ----
Revenues:
Rental income and expense recoveries $ 125 $ 119
Interest and other income 62 80
------- -------
187 199
Expenses:
Mortgage interest 46 48
Property operating expenses 36 38
Depreciation and amortization 21 36
Real estate taxes 21 22
Management fees 17 -
General and administrative 74 39
------- -------
215 183
------- -------
Operating income (loss) (28) 16
Partnership's share of unconsolidated
ventures' income (losses) 251 (110)
Partnership's share of gain on sale
of operating investment property 4,474 -
------- -------
Net income (loss) $ 4,697 $ (94)
======= =======
Net income (loss) per Limited
Partnership Unit $122.39 $ (2.44)
======= =======
Cash distributions per Limited
Partnership Unit $ 6.03 $ -
======= =======
The above net income (loss) and cash distributions per Limited Partnership
Unit are based upon the 37,969 Limited Partnership Units outstanding during each
period.
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended December 31, 1997 and 1996 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1996 $ (756) $ (621)
Net loss (1) (93)
-------- --------
Balance at December 31, 1996 $ (757) $ (714)
======== ========
Balance at September 30, 1997 $ (653) $ 5,655
Cash distributions (2) (229)
Net income 49 4,648
-------- --------
Balance at December 31, 1997 $ (606) $ 10,074
======== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1997 and 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $ 4,697 $ (94)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 21 36
Amortization of deferred financing costs 2 2
Partnership's share of unconsolidated ventures'
income (losses) (251) 110
Partnership's share of gain on sale of
operating investment property (4,474) -
Changes in assets and liabilities:
Escrow deposits 59 60
Accounts receivable (15) 6
Deferred expenses 3 -
Other assets 9 (2)
Accounts payable and accrued expenses 264 (12)
Accrued real estate taxes (58) (59)
Other liabilities - (1)
-------- -------
Total adjustments (4,440) 140
-------- -------
Net cash provided by operating activities 257 46
Cash flows from investing activities:
Distributions from unconsolidated joint ventures 4,902 542
Cash flows from financing activities:
Distributions to partners (231) -
Principal payments on long-term debt (15) (13)
-------- -------
Net cash used in financing activities (246) (13)
-------- -------
Net increase in cash and cash equivalents 4,913 575
Cash and cash equivalents, beginning of period 2,856 5,067
-------- -------
Cash and cash equivalents, end of period $ 7,769 $ 5,642
======== =======
Cash paid during the period for interest $ 44 $ 46
======== =======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES
SEVEN LIMITED PARTNERSHIP
Notes to Consolidated 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, 1997. In the
opinion of management, the accompanying consolidated financial statements, which
have not been audited, reflect all adjustments necessary to present fairly the
results for the interim period. All of the accounting adjustments reflected in
the accompanying interim financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of December 31, 1997 and September 30, 1997 and revenues and
expenses for the three months ended December 31, 1997 and 1996. Actual results
could differ from the estimates and assumptions used.
2. Related Party Transactions
--------------------------
Included in general and administrative expenses for the three months ended
December 31, 1997 and 1996 is $22,000 and $21,000, respectively, representing
reimbursements to an affiliate of the Managing General Partner for providing
certain financial, accounting and investor communication services to the
Partnership.
Also included in general and administrative expenses for the three months
ended December 31, 1997 and 1996 is $1,000 and $6,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
3. Investments in Unconsolidated Joint Venture Partnerships
--------------------------------------------------------
As of December 31, 1997, the Partnership had investments in two
unconsolidated joint ventures (four at December 31, 1996) which own two
operating properties (six at December 31, 1996), as more fully described in the
Partnership's Annual Report. On June 27, 1997, HMF Associates, a joint venture
in which the Partnership had an interest, sold the properties known as The Hunt
Club Apartments and The Marina Club Apartments to an unrelated third party for
approximately $5.3 million and $3.1 million, respectively. The Partnership
received net proceeds of approximately $288,000 in connection with the sale of
these two assets in accordance with a discounted mortgage loan payoff agreement
reached with the lender in April 1997. The third property owned by HMF
Associates, the Enchanted Woods Apartments, located in Federal Way, Washington,
had been under contract for sale to the same buyer that purchased The Hunt Club
and Marina Club properties, however, the buyer subsequently withdrew the offer
to purchase Enchanted Woods. The Partnership made a special capital distribution
of $1,898,450, or $50 per original $1,000 investment, on August 15, 1997 to
unitholders of record as of June 27, 1997. Of this amount, $7.60 per original
$1,000 investment represented net sale proceeds from the disposition of The Hunt
Club Apartments and The Marina Club Apartments, $41.48 per original $1,000
investment represented proceeds from the settlements of litigation covering
construction-related defects at the Hunt Club, Marina Club and Enchanted Woods
properties as discussed further in the Annual Report, and $0.92 per original
$1,000 investment represented Partnership reserves that exceeded expected future
requirements. On September 9, 1997, HMF Associates sold The Enchanted Woods
Apartments to an unrelated third party for approximately $9.2 million. The
Partnership received net proceeds of approximately $261,000 in connection with
the sale in accordance with the discounted mortgage loan payoff agreement
referred to above.
On December 18, 1997, Daniel Meadows Partnership, a joint venture in which
the Partnership had an interest, sold its operating investment property, The
Meadows on the Lakes Apartments, located in Birmingham, Alabama, to an unrelated
third party for $9.525 million. The sale generated net proceeds of approximately
$4.4 million, after repayment of the outstanding first mortgage loan of
approximately $4.7 million and closing costs of approximately $400,000. The
Partnership received 100% of the net proceeds in accordance with the terms of
the joint venture agreement. The Partnership will make a special distribution to
the Limited Partners totalling approximately $6,265,000, or $165 per original
$1,000 investment, on February 13, 1998. Of this amount, $116.39 per original
$1,000 investment represents the net proceeds from the sale of The Meadows on
the Lake Apartments, $13.52 per original $1,000 investment represents net
proceeds from the disposition of the Enchanted Woods Apartments, and $35.09 per
original $1,000 investment represents Partnership reserves that exceed expected
future requirements.
The unconsolidated joint venture investments are accounted for using the
equity method because the Partnership does not have a voting control interest in
the ventures. Under the equity method, the assets, liabilities, revenues and
expenses of the joint ventures do not appear in the Partnership's financial
statements. Instead, the investments are carried at cost adjusted for the
Partnership's share of the ventures' earnings and losses and distributions.
Summarized operations of the four unconsolidated joint ventures for the three
months ended December 31, 1997 and 1996 are as follows:
Condensed Combined Summary of Operations
For the three months ended December 31, 1997 and 1996
(in thousands)
1997 1996
---- ----
Rental revenues and expense recoveries $ 1,999 $ 2,644
Interest and other income 95 100
--------- ---------
2,094 2,744
Property operating expenses 660 951
Interest expense 439 999
Real estate taxes 424 476
Depreciation and amortization 318 430
--------- ---------
1,841 2,856
Operating income (loss) 253 (112)
Gain on sale of operating investment property 4,869 -
--------- ---------
Net income (loss) $ 5,122 $ (112)
========= =========
Net income (loss):
Partnership's share of combined
income (loss) $ 4,854 $ (108)
Co-venturers' share of combined
income (loss) 268 (4)
--------- ---------
$ 5,122 $ (112)
========= =========
Reconciliation of Partnership's Share of Operations
For the three months ended December 31, 1997 and 1996
(in thousands)
1997 1996
---- ----
Partnership's share of combined income
(losses), as shown above $ 4,854 $ (108)
Amortization of excess basis (129) (2)
--------- ----------
Partnership's share of unconsolidated
ventures' net income (loss) $ 4,725 $ (110)
========= ==========
The Partnership's share of the unconsolidated ventures' net income (loss)
is presented as follows in the consolidated statements of operations (in
thousands):
1997 1996
---- ----
Partnership's share of unconsolidated
ventures' income (losses) $ 251 $ (110)
Partnership's share of gain on
sale of operating investment property 4,474 -
--------- ----------
Partnership's share of unconsolidated
ventures' net income (loss) $ 4,725 $ (110)
========= ===========
4. Operating Investment Property
-----------------------------
The Partnership has a controlling interest in one joint venture, West Palm
Beach Concourse Associates, which owns the Concourse Retail Plaza. The Retail
Plaza consists of 30,473 net rentable square feet located in West Palm Beach
Florida. Subsequent to a settlement and assignment agreement executed in fiscal
1990, the Partnership's co-venture partner is Seventh Income Properties Fund,
Inc., the Managing General Partner of the Partnership. The amended and restated
terms of the joint venture agreement are more fully described in the
Partnership's Annual Report. The Partnership employs the services of a local
unaffiliated property management company to administer the day-to-day operations
of the investment property.
<PAGE>
The following is a summary of property operating expenses for the
three-month period ended December 31, 1997 and 1996 (in thousands):
1997 1996
---- ----
Repairs and maintenance $ 4 $ 7
Utilities 1 1
Insurance 2 2
Administrative and other 25 24
Management fees 4 4
------ ------
$ 36 $ 38
====== ======
5. Mortgage Note Payable
---------------------
Mortgage note payable on the consolidated balance sheets relates to the
Partnership's consolidated joint venture, West Palm Beach Concourse Associates,
and is secured by the venture's operating investment property. At December 31,
1997 and September 30, 1997, mortgage note payable consists of the following (in
thousands):
December 30 September 30
----------- ------------
11.12% first mortgage, payable
in installments of $20 per month,
including interest, through January
1, 2005. All outstanding principal
and accrued interest is due on
January 10, 2005. The fair value of
this note payable approximated its
carrying value as of December 31,
1997 and September 30, 1997. $ 1,599 $ 1,614
======= =======
In accordance with the Concourse mortgage loan agreements, certain
insurance premiums and real estate taxes are required to be held in escrow. The
balance of escrow deposits on the accompanying balance sheets at December 31,
1997 and September 30, 1997 consists of such escrowed insurance premiums and
real estate taxes in the aggregate amounts of $13,000 and $72,000, respectively.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
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, 1997 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 June 27, 1997 HMF Associates
sold the properties known as The Hunt Club Apartments and The Marina Club
Apartments to an unrelated third party for approximately $5.3 million and $3.1
million, respectively. The Partnership received net proceeds of approximately
$288,000 in connection with the sale of these two assets in accordance with a
discounted mortgage loan payoff agreement reached with the lender in April 1997.
The third property owned by the joint venture, the Enchanted Woods Apartments,
located in Federal Way, Washington, had been under contract for sale to the same
buyer that purchased The Hunt Club and Marina Club properties, however, the
buyer subsequently withdrew the offer to purchase Enchanted Woods. The
Partnership made a special capital distribution of $1,898,450, or $50 per
original $1,000 investment, on August 15, 1997 to unitholders of record as of
June 27, 1997. Of this amount, $7.60 per original $1,000 investment represented
net sale proceeds from the disposition of The Hunt Club Apartments and The
Marina Club Apartments, $41.48 per original $1,000 investment represented
proceeds from the settlements of litigation covering construction-related
defects at the Hunt Club, Marina Club and Enchanted Woods properties as
discussed further in the Annual Report, and $0.92 per original $1,000 investment
represented Partnership reserves that exceeded expected future requirements. On
September 9, 1997, HMF Associates sold The Enchanted Woods Apartments to an
unrelated third party for approximately $9.2 million. The Partnership received
net proceeds of approximately $261,000 in connection with the sale in accordance
with the discounted mortgage loan payoff agreement referred to above.
As previously reported, in early fiscal 1997 the Partnership and its
co-venture partner had received unsolicited offers from prospective purchasers
to acquire The Meadows on the Lake Apartments, located in Birmingham, Alabama.
After carefully reviewing the offers, the Partnership determined that the
property should sell at a higher price and directed the co-venture partner to
market the property for sale. During the fourth quarter of fiscal 1997, several
offers were received. One of these offers was from a qualified buyer and met the
Partnership's sale criteria. This offer was accepted by the Partnership and its
co-venture partner; however, a sale agreement could not be finalized with this
prospective buyer. Negotiations were then undertaken with one of the other
potential buyers, resulting in a purchase and sale agreement which was signed on
November 12, 1997. On December 18, 1997, The Meadows on the Lakes Apartments was
sold to an unrelated third party for $9.525 million. The sale generated net
proceeds of approximately $4.4 million, after repayment of the outstanding first
mortgage loan of approximately $4.7 million and closing costs of approximately
$400,000. The Partnership received 100% of the net proceeds in accordance with
the terms of the joint venture agreement. The Partnership will make a special
distribution to the Limited Partners totalling approximately $6,265,000, or $165
per original $1,000 investment, on February 13, 1998. Of this amount, $116.39
per original $1,000 investment represents the net proceeds from the sale of The
Meadows on the Lake Apartments, $13.52 per original $1,000 investment represents
net proceeds from the disposition of the Enchanted Woods Apartments, and $35.09
per original $1,000 investment represents Partnership reserves that exceed
expected future requirements.
The Partnership is focusing on potential disposition strategies for the
remaining investments in its portfolio, which consist of two retail properties
and one multi-family apartment complex. The sale of the Partnership's remaining
assets would be followed by a liquidation of the Partnership. It is currently
contemplated that sales of the Partnership's assets could be completed within
the next one to two years. 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. Of the three assets remaining after the sale of the Meadows on
the Lake Apartments, the Colony Apartments property has significant equity above
the outstanding debt obligation based on the estimated current property value,
while the two retail properties would not be expected to yield substantial net
proceeds after the mortgage debt if sold under current market conditions.
At Colony Apartments the occupancy level averaged 97% for the quarter
ended December 31, 1997, unchanged from the previous quarter. During the first
quarter of fiscal 1998, the property management team focused its leasing efforts
on the two-bedroom units at Colony Apartments. The improving local economy is
enabling tenants who normally share two-bedroom apartments with roommates to
afford one-bedroom apartments on their own. Asking rental rates on vacant
two-bedroom units were closely monitored by the leasing team and adjusted as
needed in order to maintain an overall occupancy level above 95%. As a result of
the marketing program targeting the two-bedroom units, the property ended the
first quarter with only four unleased two-bedroom apartments. Assuming that the
overall market for multi-family apartment properties remains strong, the
Partnership may have favorable opportunities to sell its interest in the Colony
Apartments in the near term. The potential to sell this asset, which represents
the Partnership's sole source of liquidity, on favorable terms may prompt the
accelerated dispositions of the two remaining retail properties.
Occupancy levels at the Concourse Retail Plaza and the Colony Square
Shopping Center were 90% and 100%, respectively, as of December 31, 1997.
Management continues to closely monitor the operating performance of the three
restaurant tenants at the Concourse Retail Plaza. Two of these tenants, which
occupy approximately 40% of the property's leasable space, reported declining
sales during fiscal 1996 and fell behind on their rental payments. Management
negotiated agreements with both tenants to cure the rental delinquencies which,
in one of the cases, involved the forgiveness of a portion of the delinquency
and a reduction in the future monthly rent payment in return for an increase in
the term of the lease obligation. One of these tenants is currently meeting the
modified terms of its rental obligations. The Partnership had pursued legal
action for eviction against the other tenant, a locally owned southwestern
restaurant which occupies 28% of the Plaza, because of a failure to pay the
modified rent. Subsequently, a court judgement for eviction was entered against
this restaurant tenant. This tenant is now experiencing improved sales and is
paying its rent as modified under the court judgement. However, the Partnership
is pursuing additional legal action to obtain a summary judgement on the total
rental arrearage owed. The Partnership will continue to collect this tenant's
rent while also looking for a replacement tenant in the event of a default. In
addition, a locally owned and operated far eastern restaurant, which occupies
12% of the leasable area, experienced a slow down in sales due to the decline in
tourism during the off-season and fell behind in its rental obligations during
the fourth quarter of fiscal 1997. This tenant is attempting to pay its
arrearage as its seasonal tourist business increases during the winter months.
During the fourth quarter of fiscal 1997, the property's leasing team began
discussions with a popular south Florida Caribbean restaurant chain on a lease
for a 3,953 square foot vacant restaurant space. The Partnership believes that
the potential addition of this new restaurant would add stability to the tenant
base and make the Plaza more appealing to prospective future buyers. The
property's leasing team is also in discussion with a 1,200 square foot mortgage
company tenant regarding its lease renewal. Two other tenants, a 3,200 square
foot health care provider and a 1,200 square foot print shop, have leases coming
up for renewal over the next 12 months. The leasing team expects these tenants
to renew their leases.
As noted above, the Partnership is currently reviewing its disposition
options for the Concourse Retail Plaza. For the past four years, 80% of the
Plaza's 30,473 square feet has been leased to four restaurant operators which,
for the most part, have performed poorly. One of the options under review is the
development of a leasing plan that would put an emphasis on a greater mixture of
office and retail uses. This could involve the conversion of one of the larger
restaurant out parcel buildings into professional/service office space. Another
option would be to market the property for sale after attempting to stabilize
the current tenant base. However, the prospects for stabilizing the tenant
roster are uncertain at the present time in light of the bleak economic
conditions which currently exist in the local sub-market. Management is aware of
several restaurant tenants in the local market whose businesses have failed in
recent months, and, despite diligent efforts, the Partnership has been unable to
identify and secure viable tenants to replace any of the three financially
troubled restaurant tenants referred to above. Another factor impacting a
possible near term sale of the Concourse Retail Plaza is the property's first
mortgage loan. The mortgage loan, which is assumable, contains a prohibition on
prepayment through January 10, 2000. As a result, any sale transaction completed
prior to such date would have to involve an assumption of this mortgage loan
which carries an interest rate of 11.12% per annum. Management expects to
formalize its strategy for positioning the Concourse property for sale during
fiscal 1998. In light of the potential for an accelerated disposition of the
Concourse Retail Plaza and the continued financial difficulties of a substantial
portion of the property's tenant base, management concluded during fiscal 1997
that the carrying value of the Concourse operating investment property was
impaired in accordance with Statement of Financial Accounting Standards (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Accordingly, an impairment loss of $1,000,000 was
recognized in the fourth quarter of fiscal 1997 to write down the net carrying
value of the Concourse property to its current estimated fair market value of
approximately $2.3 million, as determined by an independent appraisal.
During the first quarter of fiscal 1998, the leasing team at the Colony
Square Shopping Center signed a renewal and expansion lease with a jewelry
repair store that relocated from its 600 square foot space into a 1,200 square
foot space. Also during the first quarter, the Center's grocery store expanded
into the recently vacated jewelry store, which brought the Center leasing level
to 100%. There are seven tenants leasing a total of 10,170 square feet of the
Center's 39,572 square foot leasable area that have leases coming up for renewal
over the next 12 months. The property's leasing team expects that most of these
leases will be renewed. Asking rental rates at the Colony Square are up slightly
from one year ago which may provide an opportunity to renew the leases at
slightly higher rental rates. With an occupancy level of 100% and a stable base
of locally owned and operated tenants, the Partnership believes it would be
appropriate to explore a possible sale of the property. Accordingly, management
has initiated discussions with a prominent local retail real estate consulting
firm for the purpose of determining various options for the property.
At December 31, 1997, the Partnership and its consolidated venture had
cash and cash equivalents of approximately $7,769,000. Such cash and cash
equivalents include the proceeds from the sales of the Enchanted Woods and
Meadows properties. Such proceeds, along with certain excess cash reserves, will
be distributed to the Limited Partners on February 13, 1998, as discussed
further above. The remainder of the cash and cash equivalents will be utilized
as needed for Partnership requirements such as the payment of operating
expenses, the funding of operating deficits or capital improvements of the joint
ventures in accordance with the terms of the respective joint venture
agreements, to the extent economically justified, and for distributions to
partners. The source of future liquidity and distributions to the partners is
expected to be from available net cash flow generated by the operations of the
Partnership's investment properties and from net proceeds from the sale or
refinancing of such properties. Such sources of liquidity are expected to be
sufficient to meet the Partnership's needs on both a short-term and a long-term
basis.
Results of Operations
Three Months Ended December 30, 1997
- ------------------------------------
The Partnership reported net income of $4,697,000 for the three months
ended December 31, 1997, as compared to a net loss of $94,000 for the same
period in the prior year. This favorable change in the Partnership's net
operating results is mainly attributable to a $4,474,000 gain recognized in the
current three-month period on the sale of the Meadows property and to an
improvement in the Partnership's share of unconsolidated ventures' income
(losses). The Partnership recognized income of $251,000 from its share of the
operating results of its unconsolidated joint ventures for the first quarter of
fiscal 1998, as compared to a net loss of $110,000 for the same period in the
prior year. The favorable change in the Partnership's share of unconsolidated
ventures' income (losses) is primarily attributable to the sale of the
properties owned by the HMF joint venture in fiscal year 1997, as discussed
further above. The HMF joint venture had been generating sizable operating
losses prior to the sales of its assets. Increases in net income at the Colony
Apartments and Colony Square joint ventures, which were mainly the result of
higher revenues, also contributed to the improvement in the Partnership's share
of unconsolidated ventures' income (losses) for the current three-month period.
The impact of the gain on the sale of The Meadows on the Lake Apartments and the
favorable change in the Partnership's share of unconsolidated ventures' income
(losses) was partially offset by an unfavorable change in the Partnership's
operating income (loss) of $45,000. The unfavorable change in the Partnership's
operating income (loss) is primarily attributable to an increase in general and
administrative expenses for the current three-month period. General and
administrative expenses increased by $52,000 primarily due to certain additional
legal and audit fees incurred in the first quarter of fiscal 1998 and due to the
timing of certain recurring professional services compared to the same period in
the prior year.
<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) A Current Report on Form 8-K dated December 18, 1997 was filed during the
current quarter of fiscal 1998 to report the sale of The Meadows on the
Lake Apartments and is hereby incorporated by reference.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN 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 SEVEN
LIMITED PARTNERSHIP
By: SEVENTH INCOME PROPERTIES FUND, INC.
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Dated: February 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the quarter ended December 31,
1997 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-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 7,769
<SECURITIES> 0
<RECEIVABLES> 256
<ALLOWANCES> 215
<INVENTORY> 0
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0
0
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</TABLE>
