UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 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
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(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
June 30, 1999 and September 30, 1998 (Unaudited)
(In thousands)
ASSETS
June 30 September 30
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Operating investment property:
Land $ - $ 391
Buildings and improvements - 2,421
Equipment and fixtures - 61
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- 2,873
Less accumulated depreciation - (1,104)
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- 1,769
Investments in unconsolidated
ventures, at equity 5 1,239
Cash and cash equivalents 1,831 1,530
Escrowed funds - 76
Accounts receivable, net - 8
Other assets - 34
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$ 1,836 $ 4,656
======= =========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage note payable $ - $ 1,550
Accounts payable and accrued expenses 34 90
Accounts payable - affiliates 6 7
Accrued interest payable - 14
Accrued real estate taxes - 62
Other liabilities - 4
Partners' capital 1,796 2,929
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$ 1,836 $ 4,656
======= =========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended June 30, 1999 and 1998 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Rental income and
expense recoveries $ - $ 134 $ 43 $ 394
Interest and other income 24 18 74 404
----- ------- ------ -------
24 152 117 798
Expenses:
Mortgage interest - 45 18 137
Property operating expenses - 17 13 82
Depreciation and amortization - 26 - 77
Real estate taxes - 20 11 61
Management fees 15 14 43 47
General and administrative 52 47 198 159
----- ------- ------ -------
67 169 283 563
----- ------- ------ -------
Operating income (loss) (43) (17) (166) 235
Partnership's share of
unconsolidated ventures'
income 240 390 923 1,121
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 $ 197 $ 373 $ 701 $ 5,830
===== ======= ====== =======
Per Limited Partnership Unit:
Net income $ 5.13 $ 9.72 $18.27 $151.93
====== ======= ====== =======
Cash distributions $ 4.90 $ 5.12 $48.14 $182.18
====== ======= ====== =======
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 nine months ended June 30, 1999 and 1998 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1997 $ (653) $ 5,655
Cash distributions (7) (6,917)
Net income 61 5,769
-------- --------
Balance at June 30, 1998 $ (599) $ 4,507
======== ========
Balance at September 30, 1998 $ (609) $ 3,538
Cash distributions (6) (1,828)
Net income 7 694
-------- --------
Balance at June 30, 1999 $ (608) $ 2,404
======== ========
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES SEVEN LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30, 1999 and 1998 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 701 $ 5,830
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Depreciation and amortization - 77
Amortization of deferred financing costs - 4
Partnership's share of unconsolidated
ventures' income (923) (1,121)
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 15
Accounts receivable 8 (54)
Other assets 34 3
Accounts payable and accrued expenses (56) (38)
Accounts payable - affiliates (1) (1)
Accrued interest payable (14) -
Accrued real estate taxes (62) (18)
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Total adjustments (882) (5,607)
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Net cash (used in) provided by
operating activities (181) 223
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Cash flows from investing activities:
Net proceeds from sale of operating
investment property 230 -
Distributions from unconsolidated joint ventures 2,097 5,060
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Net cash provided by investing activities 2,327 5,060
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Cash flows from financing activities:
Distributions to partners (1,834) (6,924)
Principal payments on long-term debt (11) (47)
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Net cash used in financing activities (1,845) (6,971)
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Net increase (decrease) in cash and cash equivalents 301 (1,688)
Cash and cash equivalents, beginning of period 1,530 2,856
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Cash and cash equivalents, end of period $ 1,831 $ 1,168
======= =======
Cash paid during the period for interest $ 32 $ 133
======= =======
See accompanying notes.
<PAGE>
PAINE WEBBER INCOME PROPERTIES
SEVEN LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
(Unaudited)
1. General
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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 June 30, 1999 and September 30, 1998 and revenues and
expenses for the three and nine months ended June 30, 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, a joint venture interest in 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 $43,000 and $47,000 for the
nine-month periods ended June 30, 1999 and 1998, respectively. Accounts payable
- - affiliates at June 30, 1999 and September 30, 1998 consist of management fees
of $6,000 and $7,000, respectively, payable to the Adviser.
Included in general and administrative expenses for the nine months ended
June 30, 1999 and 1998 is $69,000 and $66,000, 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 nine months
ended June 30, 1999 and 1998 is $3,000 and $7,000, 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 June 30, 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
nine months ended June 30, 1999 and 1998 are as follows:
Condensed Combined Summary of Operations
For the three and nine months ended June 30, 1999 and 1998
(in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
Rental revenues and
expense recoveries $1,707 $1,796 $5,175 $5,569
Interest and other income 73 40 235 191
------ ------ ------ ------
1,780 1,836 5,410 5,760
Property operating expenses 533 474 1,435 1,537
Interest expense 320 347 985 1,139
Real estate taxes 366 402 1,076 1,223
Depreciation and amortization 249 223 717 738
------ ------ ------ ------
1,468 1,446 4,213 4,637
------ ------ ------ ------
Operating income 312 390 1,197 1,123
Gain (loss) on sale of
operating investment
property - - (109) 4,870
------ ------ ------ ------
Net income $ 312 $ 390 $1,088 $5,993
====== ====== ====== ======
Net income:
Partnership's share of
combined income $ 240 $ 390 $ 870 $5,725
Co-venturers' share of
combined income 72 - 218 268
------ ------ ------ ------
$ 312 $ 390 $1,088 $5,993
====== ====== ====== ======
Reconciliation of Partnership's Share of Operations
For the three and nine months ended June 30, 1999 and 1998
(in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
Partnership's share of
combined income, as
shown above $ 240 $ 390 $ 870 $5,725
Amortization of excess basis - - (7) (130)
------ ------ ------ ------
Partnership's share of
unconsolidated ventures'
net income $ 240 $ 390 $ 863 $5,595
====== ====== ====== ======
The Partnership's share of unconsolidated ventures' net income is
presented as follows in the accompanying consolidated statements of operations
(in thousands):
<PAGE>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
Partnership's share of
unconsolidated ventures'
income $ 240 $ 390 $ 923 $1,121
Partnership's share of gain
(loss) on sale of
operating investment
property - - (60) 4,474
------ ------ ------ -------
Partnership's share of
unconsolidated
ventures' net income $ 240 $ 390 $ 863 $5,595
====== ====== ====== ======
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 nine-month periods ended June 30, 1999 and 1998 (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
Repairs and maintenance $ - $ 4 $ 1 $ 15
Utilities - 1 1 3
Insurance - 1 2 4
Administrative and other - 8 5 49
Management fees - 3 4 11
----- ------ ----- -------
$ - $ 17 $ 13 $ 82
===== ====== ===== =======
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 amount 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.
The Partnership and its co-venture partner had also 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, a joint venture interest in the Colony
Apartments, a 783-unit complex located in Mount Prospect, Illinois. 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 1998. 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 and its co-venture partner.
During the second quarter of fiscal 1999, the Partnership and its
co-venture partner decided to re-market the Colony Apartments property for sale.
A new real estate firm with a strong background in selling apartment properties
was selected and new sales materials were prepared. The new marketing campaign
was undertaken on April 21, 1999. Colony Apartments was then widely marketed to
over 200 prospective purchasers. Of these prospects, approximately 61 requested
and received the complete marketing package. Seventeen offers were subsequently
received from these prospective buyers of which five submitted best and final
offers. After interviewing each prospective buyer and conducting a review of
their financial capabilities and previous acquisitions, the Partnership and its
co-venture partner selected an offer. A purchase and sale contract was
subsequently negotiated with this unrelated third-party prospective purchaser
and an agreement was signed on June 28, 1999. In accordance with the provisions
of the purchase and sale agreement, the prospective buyer completed its due
diligence work within 15 days and made a non-refundable deposit of $500,000. The
only remaining contingency is for approval by the lender for an assumption of
the first mortgage loan as part of the sale transaction. The Partnership expects
to receive this approval by September 15, 1999.
Colony Apartments is under a contract for sale to this unrelated
third-party buyer for $41,500,000. Chicago Colony Associates, the joint venture
in which the Partnership and its co-venture partner hold an interest, is
expected to receive distributable net sale proceeds of approximately $23,350,000
after deducing estimated closing costs and property proration adjustments of
$1,150,000, a deduction for the assumption by the buyer of the $16,800,000 first
mortgage debt secured by the property, and an estimated $200,000 which would be
used at the Colony joint venture to pay for the remaining property operating
expenses and other joint venture costs. The net sale proceeds of $23,350,000
would then be divided between the Partnership and its co-venture partner. The
Partnership is expected to receive approximately $18,100,000 and the
non-affiliated co-venture partner is expected to receive approximately
$5,250,000 as its share of the sale proceeds. The total proceeds of
approximately $18,100,000, or approximately $477 per original $1,000 investment,
would be included in the Partnership's Final Distribution to the Limited
Partners, along with the remaining Partnership cash reserves after the payment
of all liquidation-related expenses. Assuming that the sale of the Colony
Apartments closes as expected, the Final Distribution is expected to be paid
prior to the end of calendar year 1999.
At June 30, 1999, the Partnership had cash and cash equivalents of
approximately $1,831,000. 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, if necessary, 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 June 30, 1999
- --------------------------------
The Partnership reported net income of $197,000 for the three months ended
June 30, 1999, as compared to $373,000 for the same period in the prior year.
This decrease in the Partnership's net income is attributable to a $26,000
increase in the Partnership's operating loss and a $150,000 decrease in the
Partnership's share of unconsolidated ventures' income. The unfavorable change
in the Partnership's operating loss is attributable to the sale of the
consolidated Concourse Retail Plaza on November 10, 1998. The consolidated
Concourse joint venture generated net income of $26,000 during the same period
in the prior year.
The decrease in the 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% in the prior year 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 decreased by
$52,000 for the current three-month period mainly due to an increase in repairs
and maintenance expenses related to preparing the property for a possible sale
transaction.
Nine Months Ended June 30, 1999
- -------------------------------
The Partnership reported net income of $701,000 for the nine months ended
June 30, 1999, as compared to $5,830,000 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 nine-month period ended June 30, 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 nine-month period. Also
contributing to the unfavorable change in net income was an unfavorable change
in the Partnership's operating income (loss) of $401,000. The unfavorable change
in the Partnership's operating income (loss) is mainly attributable to other
income recognized during the nine months ended June 30, 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 nine-month period. The unfavorable change in the Partnership's net
operating income (loss) was 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 joint venture was mainly due to a decline in rental revenues as
a result of a lower average occupancy level.
A decrease of $198,000 in the Partnership's share of unconsolidated
ventures' income also contributed to the decrease in the Partnership's net
income for the current nine-month period. The decrease in the 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% in the prior year to 77.6% in the current nine 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 $105,000 for the current
nine-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 joint venture that owned The
Meadows on the Lake Apartments which reported an operating loss of $72,000 for
the first quarter of fiscal 1998 prior to the sale of the property 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: August 9, 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 June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-END> Jun-30-1999
<CASH> 1,831
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,831
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,836
<CURRENT-LIABILITIES> 40
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,796
<TOTAL-LIABILITY-AND-EQUITY> 1,836
<SALES> 0
<TOTAL-REVENUES> 1,040
<CGS> 0
<TOTAL-COSTS> 261
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 701
<INCOME-TAX> 0
<INCOME-CONTINUING> 701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701
<EPS-BASIC> 18.27
<EPS-DILUTED> 18.27
</TABLE>
