UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED March 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to _______ .
Commission File Number: 0-15037
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2870345
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(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
March 31, 1999 and September 30, 1998 (Unaudited)
(In thousands)
ASSETS
March 31 September 30
-------- ------------
Operating investment property:
Land $ - $ 391
Buildings and improvements - 2,421
Equipment and fixtures - 61
-------- ---------
- 2,873
Less accumulated depreciation - (1,104)
-------- ---------
- 1,769
Investments in unconsolidated ventures, at equity 831 1,239
Cash and cash equivalents 1,015 1,530
Escrowed funds - 76
Accounts receivable, net - 8
Other assets - 34
-------- ---------
$ 1,846 $ 4,656
======== =========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage note payable $ - $ 1,550
Accounts payable and accrued expenses 45 90
Accounts payable - affiliates 14 7
Accrued interest payable - 14
Accrued real estate taxes - 62
Other liabilities - 4
Partners' capital 1,787 2,929
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$ 1,846 $ 4,656
======== =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1999 and 1998 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Rental income and expense
recoveries $ - $ 135 $ 43 $ 260
Interest and other income 26 324 50 386
------ ------- ------ -------
26 459 93 646
Expenses:
Mortgage interest - 46 18 92
Property operating expenses - 29 13 65
Depreciation and amortization - 30 - 51
Real estate taxes - 20 11 41
Management fees 14 16 28 33
General and administrative 67 37 146 111
------ ------- ------ -------
81 178 216 393
------ ------- ------ -------
Operating income (loss) (55) 281 (123) 253
Partnership's share of
unconsolidated ventures' income 353 480 683 731
Partnership's share of gain (loss)
on sale of operating investment
property - - (60) 4,474
Venture partner's share of
consolidated venture's operations - - 4 -
------ ------- ------ -------
Net income $ 298 $ 761 $ 504 $ 5,458
====== ======= ====== =======
Per Limited Partnership Unit:
Net income $ 7.77 $ 19.83 $13.14 $142.22
====== ======= ====== =======
Cash distributions $ 5.12 $171.03 $43.24 $177.06
====== ======= ====== =======
The above per Limited Partnership Unit information is 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 six months ended March 31, 1999 and 1998 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1997 $ (653) $ 5,655
Cash distributions (5) (6,723)
Net income 58 5,400
------- --------
Balance at March 31, 1998 $ (600) $ 4,332
======= ========
Balance at September 30, 1998 $ (609) $ 3,538
Cash distributions (4) (1,642)
Net income 5 499
------- --------
Balance at March 31, 1999 $ (608) $ 2,395
======= ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1999 and 1998 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 504 $ 5,458
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization - 51
Amortization of deferred financing costs - 3
Partnership's share of unconsolidated
ventures' income (683) (731)
Partnership's share of gain (loss) on sale of
operating investment property 60 (4,474)
Venture partner's share of consolidated
venture's operations (4) -
Changes in assets and liabilities:
Escrow deposits 76 38
Accounts receivable 8 (22)
Other assets 34 3
Accounts payable and accrued expenses (45) (9)
Accounts payable - affiliates 7 (1)
Accrued interest payable (14) -
Accrued real estate taxes (62) (38)
-------- -------
Total adjustments (623) (5,180)
-------- -------
Net cash (used in) provided by operating
activities (119) 278
-------- -------
Cash flows from investing activities:
Net proceeds from sale of operating investment
property 230 -
Distributions from unconsolidated joint ventures 1,031 5,027
-------- -------
Net cash provided by investing activities 1,261 5,027
-------- -------
Cash flows from financing activities:
Distributions to partners (1,646) (6,728)
Principal payments on long-term debt (11) (31)
-------- -------
Net cash used in financing activities (1,657) (6,759)
-------- -------
Net decrease in cash and cash equivalents (515) (1,454)
Cash and cash equivalents, beginning of period 1,530 2,856
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Cash and cash equivalents, end of period $ 1,015 $ 1,402
======== =======
Cash paid during the period for interest $ 32 $ 89
======== =======
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, 1998. 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 March 31, 1999 and September 30, 1998 and revenues and
expenses for the three and six months ended March 31, 1999 and 1998. Actual
results could differ from the estimates and assumptions used.
The Partnership originally invested the net proceeds of the public
offering, through five joint venture partnerships, in seven operating
properties, comprised of five multi-family apartment complexes, one mixed-use
office and retail property and one shopping center. During fiscal 1997, three of
the multi-family properties were sold. A fourth multi-family property was sold
on December 18, 1997. In addition, during the first quarter of fiscal 1999, the
retail portion of the Concourse property was sold. The office portion of this
mixed-use property had been lost through foreclosure proceedings on December 17,
1992. The shopping center property was also sold during the first quarter of
fiscal 1999. Subsequent to these transactions, the Partnership has only one
remaining real estate investment, the Colony Apartments. See Notes 3 and 4 for a
description of these transactions and of the remaining real estate investment.
The Partnership is currently focusing on potential disposition strategies for
the remaining investment in its portfolio. Although no assurances can be given,
it is currently contemplated that the sale of the Partnership's Colony
Apartments investment could be completed during calendar year 1999. The sale of
the remaining property would be followed by an orderly liquidation of the
Partnership.
2. Related Party Transactions
--------------------------
The Adviser earned total management fees of $28,000 and $33,000 for the
six-month periods ended March 31, 1999 and 1998, respectively. Accounts payable
- - affiliates at March 31, 1999 and September 30, 1998 consist of management fees
of $14,000 and $7,000, respectively, payable to the Adviser.
Included in general and administrative expenses for the six months ended
March 31, 1999 and 1998 is $46,000 and $44,000, 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 March 31, 1999 and 1998 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 March 31, 1999, the Partnership's only remaining investment in
unconsolidated joint venture partnerships is its investment in Chicago Colony
Apartments Associates which owns the Colony Apartments, located in Mount
Prospect, Illinois, as more fully described in the Partnership's Annual Report.
On November 17, 1998, Chicago Colony Square Associates sold the Colony
Square Shopping Center to an unrelated third party for $2.3 million. The sale
generated net proceeds of approximately $1,014,000, after the repayment of the
outstanding first mortgage loan of approximately $864,000, accrued interest of
approximately $13,000 (including a prepayment penalty of $9,000), closing
proration adjustments of approximately $221,000 and closing costs of
approximately $188,000. The Partnership received 100% of the net proceeds in
accordance with the terms of the joint venture agreement. As a result of the
sales of The Concourse Retail Plaza (see Note 4) and Colony Square Shopping
Center, a special distribution of approximately $1,253,000, or $33 per original
$1,000 investment, was made on December 15, 1998. Of this total, $5.92
represented net proceeds from the sale of The Concourse Retail Plaza, $26.69
represented net proceeds from the sale of Colony Square Shopping Center and
$0.39 represented Partnership reserves that exceeded future requirements.
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 Lake 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 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 unconsolidated joint ventures for the three and six
months ended March 31, 1999 and 1998 are as follows:
Condensed Combined Summary of Operations
For the three and six months ended March 31, 1999 and 1998
(in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Rental revenues and expense
recoveries $1,701 $1,774 $3,468 $3,773
Interest and other income 82 56 162 151
------ ------- ------ ------
1,783 1,830 3,630 3,924
Property operating expenses 417 403 902 1,063
Interest expense 322 353 665 792
Real estate taxes 367 397 710 821
Depreciation and amortization 223 197 468 515
------ ------- ------ ------
1,329 1,350 2,745 3,191
------ ------- ------ ------
Operating income 454 480 885 733
Gain (loss) on sale of operating
investment property - - (109) 4,869
------ ------ ------ ------
Net income $ 454 $ 480 $ 776 $5,602
====== ====== ====== ======
Net income:
Partnership's share of
combined income $ 353 $ 480 $ 630 $5,334
Co-venturers' share of
combined income 101 - 146 268
------ ------ ------ ------
$ 454 $ 480 $ 776 $5,602
====== ====== ====== ======
Reconciliation of Partnership's Share of Operations
For the three and six months ended March 31, 1999 and 1998
(in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Partnership's share of
combined income, as
shown above $ 353 $ 480 $ 630 $5,334
Amortization of excess basis - - (7) (129)
------ ------ ------- ------
Partnership's share of
unconsolidated ventures'
net income $ 353 $ 480 $ 623 $5,205
====== ====== ======= ======
<PAGE>
The Partnership's share of unconsolidated ventures' net income is
presented as follows in the consolidated statements of operations (in
thousands):
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Partnership's share of
unconsolidated ventures'
income $ 353 $ 480 $ 683 $ 731
Partnership's share of gain
(loss) on sale of
operating investment
property - - (60) 4,474
------ ------ ------- ------
Partnership's share of
unconsolidated ventures'
net income $ 353 $ 480 $ 623 $5,205
====== ====== ======= ======
4. Operating Investment Property
-----------------------------
The Partnership had a controlling interest in one joint venture, West Palm
Beach Concourse Associates, which owned the Concourse Retail Plaza. On November
10, 1998, West Palm Beach Concourse Associates sold The Concourse Retail Plaza
property to an unrelated party for $2 million. The sale generated net proceeds
of approximately $225,000, after the assumption of the outstanding first
mortgage loan of approximately $1,539,000, accrued interest of approximately
$4,000, net closing proration adjustments of approximately $2,000 and closing
costs of approximately $231,000. The Partnership received 100% of the net
proceeds in accordance with the terms of the joint venture agreement. The
Partnership distributed the net proceeds of approximately $225,000, or $5.92 per
original $1,000 investment, from the sale of The Concourse Retail Plaza as part
of a Special Distribution made to the limited partners on December 15, 1998 (see
Note 3).
The following is a summary of property operating expenses for the three
and six-month periods ended March 31, 1999 and 1998 (in thousands):
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Repairs and maintenance $ - $ 7 $ 1 $ 11
Utilities - 1 1 2
Insurance - 1 2 3
Administrative and other - 16 5 41
Management fees - 4 4 8
------- ------ ------- -------
$ - $ 29 $ 13 $ 65
======= ====== ======= =======
5. Mortgage Note Payable
---------------------
Mortgage note payable on the consolidated balance sheet at September 30,
1998 related to the Partnership's consolidated joint venture, West Palm Beach
Concourse Associates, and was secured by the venture's operating investment
property. At September 30, 1998, mortgage note payable consisted of the
following (in thousands):
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 was due on
January 10, 2005. The fair value of
this note payable approximated its
carrying value as of September 30,
1998. $ 1,550
=======
In accordance with the Concourse mortgage loan agreements, certain
insurance premiums and real estate taxes were required to be held in escrow. The
balance of escrow deposits on the accompanying balance sheet at September 30,
1998 consisted of such escrowed insurance premiums and real estate taxes in the
aggregate amounts of $76,000.
On November 10, 1998, in conjunction with the sale of the Concourse Retail
Plaza described in Note 4, the unrelated purchaser of the property assumed the
mortgage note payable. Therefore, the Partnership no longer has any liability
associated with this debt.
<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, 1998 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 previously reported, the Partnership had reviewed its options for The
Concourse Retail Plaza at the beginning of fiscal 1998 and determined that it
was the appropriate time to market the property for sale. During the second
quarter of fiscal 1998, the Partnership initiated discussions with area real
estate firms concerning potential marketing strategies for selling The Concourse
and solicited marketing proposals from several of these firms. After reviewing
their respective proposals and conducting interviews to determine their
expertise and track record in selling properties similar to The Concourse, the
Partnership selected a Florida-based firm. During the third quarter of fiscal
1998, a marketing package was finalized and comprehensive sale efforts began in
early May. On August 14, 1998, a purchase and sale agreement was signed with an
unrelated third party. On November 10, 1998, West Palm Beach Concourse
Associates sold The Concourse Retail Plaza property to this unrelated party for
$2 million. The sale generated net proceeds of approximately $225,000, after the
assumption of the outstanding first mortgage loan of approximately $1,539,000,
accrued interest of approximately $4,000, net closing proration adjustments of
approximately $2,000 and closing costs of approximately $231,000. The
Partnership received 100% of the net proceeds in accordance with the terms of
the joint venture agreement. The mortgage loan, which was assumable, contains a
prohibition on prepayment through January 10, 2000. As a result, any sale
transaction completed prior to such date had to involve an assumption of this
mortgage loan which carries an interest rate of 11.12% per annum. The sale price
was discounted to reflect this above-market interest rate. Nonetheless, the
Managing General Partner believed that a current sale was in the best interests
of the Limited Partners. As discussed further below, the Partnership recorded an
impairment writedown of $418,000 in fiscal 1998 to reflect the net proceeds
received from the sale during the first quarter of fiscal 1999.
As previously reported, the Partnership and its co-venture partner had
begun exploring potential opportunities for the sale of the Colony Square
property in early fiscal 1998. As part of that plan, discussions were held with
real estate brokerage firms with a specialty in small retail centers like Colony
Square. During the third quarter of fiscal 1998, the Partnership and its
co-venture partner selected a real estate brokerage firm to begin marketing this
asset for sale. Subsequently, an offer was received to purchase the Colony
Square Shopping Center from a prospective third-party buyer that met the
Partnership's and co-venture partner's sale criteria. A purchase and sale
agreement was signed on July 9, 1998 with this prospective buyer. On November
17, 1998, Chicago Colony Square Associates sold the Colony Square Shopping
Center to this unrelated party for $2.3 million. The sale generated net proceeds
of approximately $1,014,000, after the repayment of the outstanding first
mortgage loan of approximately $864,000, accrued interest of approximately
$13,000 (including a prepayment penalty of $9,000), closing proration
adjustments of approximately $221,000 and closing costs of approximately
$188,000. The Partnership received 100% of the net proceeds in accordance with
the terms of the joint venture agreement. As a result of the sales of The
Concourse Retail Plaza and Colony Square Shopping Center, a Special Distribution
of approximately $1,253,000, or $33 per original $1,000 investment, was made on
December 15, 1998. Of this total, $5.92 represented net proceeds from the sale
of The Concourse Retail Plaza, $26.69 represented net proceeds from the sale of
Colony Square Shopping Center and $0.39 represented Partnership reserves that
exceeded future requirements.
With the sales of The Concourse and Colony Square, the Partnership now has
one remaining real estate investment, the Colony Apartments, a 783-unit complex
located in Mount Prospect, Illinois. The occupancy level at Colony Apartments
averaged 98% for the quarter, up 1% from the prior quarter and comparable to the
99% level for the same period in the prior year. In addition, the average
monthly rental rate per apartment unit is budgeted to increase by approximately
3% over the next twelve months. With the improvements in the apartment segment
of the real estate market and the strong local job market in this northwest
Chicago suburb, the Partnership and its co-venture partner decided to market the
Colony Apartments for sale during the third quarter of fiscal 1998. A national
real estate firm was selected to market the property and comprehensive sale
efforts began in late June. As a result of these sale efforts, ten offers were
received. These prospective purchasers were then requested to submit best and
final offers. To reduce the prospective buyers' due diligence work and the time
required to complete it, updated operating reports as well as building
evaluation and environmental information on the property were provided to the
top six prospective buyers, who were asked to submit best and final offers and
did so. After completing an evaluation of the best and final offers, the
Partnership and its co-venture partner selected an offer. However, after
protracted negotiations, the Partnership and its co-venture partner were unable
to finalize a purchase and sale agreement with this prospective buyer. In
November 1998, the Partnership and its co-venture partner re-opened discussions
with the other prospective buyers who had previously submitted best and final
offers. Two of these prospective buyers expressed interest. Again, however,
after extensive discussions with them, neither prospect would agree to acquire
the property on terms acceptable to the Partnership. During the current quarter,
the Partnership and its co-venture partner decided to re-market the property for
sale. The Partnership and its co-venture partner are actively pursuing these
marketing efforts and expect to complete a sale of the property and a
liquidation of the Partnership before the end of calendar year 1999. However,
there are no assurances that the sale of the final asset and the liquidation of
the Partnership will be completed within this time frame.
At March 31, 1999, the Partnership had cash and cash equivalents of
approximately $1,015,000. Such cash and cash equivalents will be utilized as
needed for Partnership requirements such as the payment of operating expenses,
distributions to partners, and the funding of operating deficits or capital
improvements of the remaining joint venture, in accordance with the terms of the
joint venture agreement. 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 remaining investment property and from the net
proceeds from the sale or refinancing of such property. Such sources of
liquidity are expected to be sufficient to meet the Partnership's needs on both
a short-term and long-term basis.
As noted above, the Partnership expects to be liquidated by the end of
calendar year 1999. Notwithstanding this, the Partnership believes that it has
made all necessary modifications to its existing systems to make them year 2000
compliant and does not expect that additional costs associated with year 2000
compliance, if any, will be material to the Partnership's results of operations
or financial position.
Results of Operations
Three Months Ended March 31, 1999
- ---------------------------------
The Partnership reported net income of $298,000 for the three months ended
March 31, 1999, as compared to $761,000 for the same period in the prior year.
This decrease in the Partnership's net income is attributable to a $336,000
unfavorable change in the Partnership's operating income (loss) and a $127,000
decrease in the Partnership's share of unconsolidated ventures' income. The
unfavorable change in the Partnership's operating income (loss) is mainly
attributable to other income recognized during the three months ended March 31,
1998 related to the receipt of a residual cash distribution from the HMF joint
venture in connection with the final liquidation of that joint venture. Also
contributing to the unfavorable change in the Partnership's operating income
(loss) was a decrease in interest income and an increase in general and
administrative expenses. Interest income decreased mainly due to a lower average
invested cash balance in the current period as a result of the temporary
investment of the Meadows sale proceeds in the prior year pending the
distribution to the Limited Partners which occurred in February of 1998. General
and administrative expenses increased mainly due to additional required
professional fees incurred during the current three-month period.
The decrease in Partnership's share of unconsolidated ventures' income
resulted mainly from a decrease in the allocation of income to the Partnership
from the Colony Apartments joint venture from 100% to 77.6% in the current
three-month period. In accordance with the joint venture agreement, the method
of allocating income for each period is based upon the percentage of operating
cash flow distributed to each of the joint venture partners during the period.
The total net income at the Colony Apartments joint venture increased by $13,000
for the current three-month period mainly due to increases in rental revenues
stemming from the increases in rental rates achieved at the property over the
past twelve to fifteen months. Also contributing to the decline in the
Partnership's share of unconsolidated ventures' income was the absence of any
income from the Colony Square joint venture for the current period as a result
of the sale of the property on November 17, 1998.
Six Months Ended March 31, 1999
- -------------------------------
The Partnership reported net income of $504,000 for the six months ended
March 31, 1999, as compared to $5,458,000 for the same period in the prior year.
This decrease in the Partnership's net income is mainly attributable to a
$4,474,000 gain recognized during the six-month period ended March 31, 1998 on
the sale of the Meadows property as well as a $60,000 loss recorded on the sale
of the Colony Square property during the current six-month period. Also
contributing to the unfavorable change in net income is an unfavorable change in
the Partnership's operating income (loss) of $376,000. The unfavorable change in
the Partnership's operating income (loss) is mainly attributable to other income
recognized during the six months ended March 31, 1998 related to the receipt of
a residual cash distribution from the HMF joint venture in connection with the
final liquidation of that joint venture. Also contributing to the unfavorable
change in the Partnership's operating income (loss) was an decrease in interest
income and an increase in general and administrative expenses. Interest income
decreased mainly due to a lower average invested cash balance in the current
period as a result of the temporary investment of the Meadows sale proceeds in
the prior year pending the distribution to the Limited Partners which occurred
in February of 1998. General and administrative expenses increased mainly due to
additional required professional fees incurred during the current six-month
period. The unfavorable change in the Partnership's net operating income (loss)
is also partially due to an unfavorable change in the net operating results of
the consolidated Concourse Retail Plaza prior to its sale on November 10, 1998.
The unfavorable change in the net operating results of the Concourse Retail
Plaza was mainly due to a decline in rental revenues as a result of a lower
average occupancy level.
A decrease of $48,000 in the Partnership's share of unconsolidated
ventures' income also contributed to the decrease in the Partnership's net
income for the current six-month period. The decrease in Partnership's share of
unconsolidated ventures' income resulted mainly from a decrease in the
allocation of income to the Partnership from the Colony Apartments joint venture
from 100% to 77.6% in the current six month period. In accordance with the joint
venture agreement, the method of allocating income for each period is based upon
the percentage of operating cash flow distributed to each of the joint venture
partners during the period. The total net income at the Colony Apartments joint
venture increased by $157,000 for the current six-month period mainly due to
increases in rental revenues stemming from the increases in rental rates
achieved at the property over the past twelve to fifteen months. Also
contributing to the decline in the Partnership's share of unconsolidated
ventures' income was a decrease in the net income of the Colony Square joint
venture for the current period as a result of the sale of the property on
November 17, 1998. These unfavorable changes in the Partnership's share of
unconsolidated ventures' income were partially offset by the absence in the
current period of operating results from The Meadows on the Lake Apartments
which reported an operating loss of $72,000 for the first quarter of fiscal 1998
prior to its sale on December 18, 1997.
<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) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
<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: May 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended March 31,
1999 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> Sep-30-1999
<PERIOD-END> Mar-31-1999
<CASH> 1,015
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,015
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,846
<CURRENT-LIABILITIES> 59
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,787
<TOTAL-LIABILITY-AND-EQUITY> 1,846
<SALES> 0
<TOTAL-REVENUES> 776
<CGS> 0
<TOTAL-COSTS> 194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 504
<INCOME-TAX> 0
<INCOME-CONTINUING> 504
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504
<EPS-BASIC> 13.14
<EPS-DILUTED> 13.14
</TABLE>
