PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and March 31, 1994
(Unaudited)
ASSETS
December 31 March 31
Operating investment properties:
Land $ 3,962,243 $ 3,962,243
Buildings and improvements 25,781,025 25,674,103
29,743,268 29,636,346
Less accumulated depreciation (7,921,462) (7,229,205)
21,821,806 22,407,141
Investments in unconsolidated joint ventures 34,342,382 34,924,925
Cash and cash equivalents 6,297,725 6,262,903
Escrowed cash 181,014 144,074
Prepaid expenses 48,307 10,494
Accounts receivable, net 147,752 54,656
Accounts receivable - affiliates 209,445 368,937
Deferred rent receivable - 46,205
Deferred expenses and other assets, net 224,315 150,490
$63,272,746 $64,369,825
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 488,111 $ 228,253
Accrued interest payable 61,231 -
Bonds payable 1,862,993 1,884,120
Notes payable and deferred interest 9,928,597 10,263,737
Minority interest in net assets of
consolidated joint venture 187,383 187,383
Partners' capital 50,744,431 51,806,332
$63,272,746 $64,369,825
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended December 31, 1994 and 1993
(Unaudited)
General Limited
Partner Partners
Balance at March 31, 1993 $(778,264) $55,053,222
Net loss (17,582) (1,653,794)
BALANCE AT DECEMBER 31, 1993 $(795,846) $53,399,428
Balance at March 31, 1994 $(804,233) $52,610,565
Net loss (11,171) (1,050,730)
BALANCE AT DECEMBER 31, 1994 $(815,404) $51,559,835
See accompanying notes.
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended December 31, 1994 and 1993
(Unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
REVENUES:
Rental income and expense
reimbursements $ 458,532 $ 423,362 $1,353,923 $1,240,189
Interest and other income 87,580 55,177 234,124 171,321
546,112 478,539 1,588,047 1,411,510
EXPENSES:
Property operating expenses 328,100 324,793 934,013 958,000
Depreciation and amortization 283,129 255,912 807,190 763,536
Interest expense 208,851 278,052 707,652 787,003
General and administrative 185,467 174,949 456,774 468,625
Bad debt expense - - 3,293 71,974
1,005,547 1,033,706 2,908,922 3,049,138
Operating loss (459,435) (555,167) (1,320,875) (1,637,628)
Investment income:
Interest income on notes
receivable from ventures 200,000 200,000 600,000 600,000
Partnership's share of
unconsolidated ventures'
income (losses) 39,023 (145,342) (341,026) (633,748)
NET LOSS $ (220,412) $(500,509)$(1,061,901)$(1,671,376)
Net loss per Limited
Partnership Unit $(0.11) $(0.25) $(0.53) $(0.75)
The above net loss per Limited Partnership Unit is based upon the 2,000,000
Limited Partnership Units outstanding during each period.
See accompanying notes.
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
1994 1993
Cash flows from operating activities:
Net loss $(1,061,901) $(1,671,376)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Partnership's share of unconsolidated
ventures' losses 341,026 633,748
Depreciation and amortization 807,190 763,536
Interest expense on zero coupon loans 229,800 693,848
Changes in assets and liabilities:
Escrowed cash (36,940) -
Restricted cash - (144,074)
Prepaid expenses (37,813) 10,759
Accounts receivable (93,096) (41,428)
Accounts receivable - affiliates 159,492 153,980
Deferred rent receivable 46,205 49,469
Other assets (42,782) (74,317)
Accounts payable and accrued expenses 321,089 356,472
Accounts payable - affiliates - (34,646)
Total adjustments 1,694,171 2,367,347
Net cash provided by operating
activities 632,270 695,971
Cash flows from investing activities:
Distributions from unconsolidated joint
ventures 1,768,776 1,657,178
Additions to operating investment properties (106,922) (342,251)
Additional investments in unconsolidated
joint ventures (1,527,259) (212,199)
Net cash provided by investing
activities 134,595 1,102,728
Cash flows from financing activities:
Repayment of principal and deferred
interest on long-term debt (4,044,940) (22,108)
Repayment of principal on bonds payable (21,127) -
Issuance of note payable 3,480,000 -
Payment of deferred financing costs (145,976) -
Net cash used for financing
activities (732,043) (22,108)
Net increase in cash and cash equivalents 34,822 1,776,591
Cash and cash equivalents, beginning of period 6,262,903 4,470,421
Cash and cash equivalents, end of period $ 6,297,725 $ 6,247,012
Cash paid during the period for interest $ 2,476,450 $ 93,155
See accompanying notes.
1. General
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes in the
Partnership's Annual Report for the year ended March 31, 1994.
In the opinion of management, the accompanying financial statements, which
have not been audited, reflect all adjustments necessary to present fairly
the results for the interim period. All of the accounting adjustments
reflected in the accompanying interim financial statements are of a normal
recurring nature.
2. Investments in Unconsolidated Joint Venture Partnerships
As of December 31, 1994 and 1993, the Partnership had investments in five
unconsolidated joint venture partnerships which own operating properties as
more fully described in the Partnership's Annual Report. The unconsolidated
joint ventures are accounted for by 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
unconsolidated 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 each venture's earnings, losses and distributions.
The Partnership reports its share of unconsolidated joint venture earnings
or losses three months in arrears.
Summarized operations of the unconsolidated joint ventures, for the
periods indicated, are as follows:
CONDENSED COMBINED SUMMARY OF OPERATIONS
For the three and nine months ended September 30, 1994 and 1993
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Revenues:
Rental revenues and
expense recoveries $2,843,000 $2,639,000 $8,213,000 $7,937,000
Interest and other income 72,000 47,000 143,000 128,000
2,915,000 2,686,000 8,356,000 8,065,000
Expenses:
Property operating expenses 951,000 962,000 2,668,000 2,770,000
Real estate taxes 684,000 596,000 2,069,000 1,919,000
Mortgage interest expense 169,000 272,000 840,000 929,000
Interest expense payable to
partner 200,000 200,000 600,000 600,000
Depreciation and amortization 733,000 742,000 2,237,000 2,226,000
2,737,000 2,772,000 8,414,000 8,444,000
Net income (loss) $ 178,000 $ (86,000) $ (58,000) $ (379,000)
Net loss:
Partnership's share of
combined income (loss) $ 60,000 $ (124,000) $ (277,000) $ (570,000)
Co-venturers' share of
combined income (loss) 118,000 38,000 219,000 191,000
$ 178,000 $ (86,000) $ (58,000) $ (379,000)
RECONCILIATION OF PARTNERSHIP'S SHARE OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Partnership's share of combined
loss, as shown above $ 60,000 $(124,000) $(277,000) $(570,000)
Amortization of excess basis (21,000) (21,000) (64,000) (64,000)
Partnership's share of
unconsolidated
ventures' income (loss) $ 39,000 $(145,000) $(341,000) $(634,000)
3.Operating Investment Properties
At December 31, 1994 and March 31, 1994, the Partnership's balance sheet
includes two operating investment properties: the wholly-owned Crystal Tree
Commerce Center and the Sunol Center Office Buildings, owned by Sunol Center
Associates, a majority-owned and controlled joint venture. The Crystal Tree
Commerce Center consists of three one-story retail plazas containing an
aggregate of 74,923 square feet of leasable space and one four-story office
building containing 40,115 square feet of leasable space, located in North
Palm Beach, Florida. The Sunol Center Office Buildings comprise 116,680
square feet of leasable space, located in Pleasanton, California. The
Partnership reports the operations of Sunol Center Associates on a three-
month lag.
The following is a combined summary of property operating expenses for the
Crystal Tree Commerce Center and the Sunol Center Office Buildings as
reported in the Partnership's consolidated statements of operations for the
three and nine-month periods ended December 31, 1994 and 1993:
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
Real estate taxes $ 29,698 $ 69,616 $ 165,571 $ 235,470
Repairs and maintenance 98,352 92,474 249,381 212,084
Utilities 30,505 30,849 100,133 99,590
Management fees 39,886 36,233 85,388 81,735
Administrative and other 129,659 95,621 333,540 329,121
$ 328,100 $324,793 $934,013 $958,000
4. Related Party Transactions
Accounts receivable - affiliates at December 31, 1994 and March 31, 1994
includes $100,000 at both dates due from one joint venture for interest
earned on a permanent loan and $94,911 and $78,036, respectively, of investor
servicing fees due from three of the joint ventures for reimbursement of
certain expenses incurred in reporting Partnership operations to the Limited
Partners of the Partnership. Accounts receivable - affiliates at December
31, 1994 and March 31, 1994 also includes $14,534 of expenses paid by the
Partnership on behalf of the joint ventures and other affiliates. The
balance of accounts receivable - affiliates at March 31, 1994 represents cash
transfers between the Partnership and the consolidated Sunol Center joint
venture during the three-month lag period.
Included in general and administrative expenses for the nine months ended
December 31, 1994 and 1993 is $152,729 and $149,775, 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 December 31, 1994 and 1993 is $11,169 and $7,359, respectively,
representing fees earned by Mitchell Hutchins Institutional Investors, Inc.
for managing the Partnership's cash assets.
5. Notes Payable
Notes payable and deferred interest at December 31, 1994 and March 31,
1994 consist of the following:
December 31 March 31
9.125% nonrecourse loan payable to an
insurance company, which is secured by the
625 North Michigan Avenue operating
investment property. Monthly payments
including interest of approximately
$55,000 are due beginning July 1, 1994
through maturity on May 1, 1999. The
terms of the note were modified effective
May 31, 1994 (see discussion below). $6,455,488 $6,962,910
8.39% nonrecourse note payable to an
insurance company, which is secured by the
Crystal Tree Commerce Center operating
investment property. Monthly payments
including interest of approximately
$28,000 are due beginning November 15,
1994 through maturity on September 19,
2001 (see discussion below). 3,473,109 -
$1,886,473 nonrecourse note payable to a
financial institution which was secured by
the Lake Sammamish Limited Partnership
operating investment property. The note
had a term of seven years and bore
interest at 10.5% per annum compounded
annually. Interest and principal
totalling approximately $3,797,000 was to
be due and payable by the Partnership at
maturity, on August 1, 1995. Accrued
interest through March 31, 1994 amounted
to $1,414,354 (see discussion below). - 3,300,827
$ 9,928,597 $10,263,737
On April 29, 1988, the Partnership borrowed $4,000,000 in the form of a
zero coupon loan secured by the 625 North Michigan operating property which
had a scheduled maturity date in May of 1995. The terms of the loan
agreement required that if the loan ratio, as defined, exceeded 80%, the
Partnership was required to deposit additional collateral in an amount
sufficient to reduce the loan ratio to 80%. During fiscal 1994, the lender
informed the Partnership that based on an interim property appraisal, the
loan ratio exceeded 80% and that a deposit of additional collateral was
required. Subsequently, the Partnership submitted an appraisal which
demonstrated that the loan ratio exceeded 80% by an amount less than
previously demanded by the lender. In December 1993, the Partnership
deposited additional collateral of $144,088 in accordance with the higher
appraised value. The lender accepted the Partnership's deposit of additional
collateral (included in escrowed cash on the accompanying balance sheet at
March 31, 1994) but disputed whether the Partnership had complied with the
terms of the loan agreement regarding the 80% loan ratio. During the quarter
ended June 30, 1994, an agreement was reached with the lender of the zero
coupon loan on a proposal to refinance the loan and resolve the outstanding
disputes. The terms of the agreement called for the Partnership to make a
principal pay down of approximately $541,000, including the application of
the additional collateral referred to above. The maturity date of the loan,
which now requires principal and interest payments on a monthly basis as set
forth above, was extended to May 31, 1999. The terms of the loan agreement
also required the establishment of an escrow account for real estate taxes,
as well as a capital improvement escrow which is to be funded with monthly
deposits from the Partnership aggregating approximately $700,000 through the
scheduled maturity date. Formal closing of the modification and extension
agreement occurred on May 31, 1994.
In addition, during 1986 and 1987 the Partnership received the proceeds
from three additional nonrecourse zero coupon loans in the initial amounts of
$3 million, $4.5 million and approximately $1.9 million, which were secured
by the Warner/Red Hill office building, the Monterra Apartments and the
Chandler's Reach Apartments, respectively. Legal liability for the repayment
of the two loans secured by the Warner/Red Hill and Monterra properties
rested with the related joint ventures and, accordingly, these amounts were
recorded on the books of the joint ventures. The Partnership indemnified
Warner/Red Hill Associates and Crow/PaineWebber - LaJolla, Ltd., along with
the related co-venture partners, against all liabilities, claims and expenses
associated with these borrowings. Interest expense on the Warner/Red Hill
and Monterra loans accrued at 9.36%, compounded annually, and was due at
maturity in August of 1993 and September of 1994, respectively, at which time
total principal and interest payments aggregating approximately $5,763,000
and $8,645,000, respectively, became due and payable. The nonrecourse zero
coupon loan secured by the Chandler's Reach Apartments, which bore interest
at 10.5%, compounded annually, matured on August 1, 1994 with an outstanding
balance of approximately $3,462,000. During the quarter ended December 31,
1993, the Partnership negotiated and signed a letter of intent to modify and
extend the maturity of the Warner/Red Hill zero coupon loan with the existing
lender. The terms of the extension and modification agreement, which was
finalized in August 1994, provide for a 10-year extension of the note
effective as of the original maturity date of August 15, 1993. During the
terms of the agreement, the loan will bear interest at 2.875% per annum and
monthly principal and interest payments of $23,906 will be required. The
Partnership made principal and interest payments on behalf of the venture
totalling approximately $246,000 for the period from August 15, 1993 through
June 30, 1994 in conjunction with the closing of the modification agreement.
In addition, the lender required a participation in the proceeds of a future
sale or debt refinancing in order to enter into this agreement. Accordingly,
upon the sale or refinancing of the property, the lender will receive 40% of
the residual value of the property, as defined, after the payment of the
outstanding balance of the loan payable. The extension and modification
agreement also required the Partnership to establish an escrow account in the
name of the joint venture and to fund such escrow with an equity contribution
of $350,000. The escrowed funds are to be used solely for the payment of
capital and tenant improvements, leasing commissions and real estate taxes
related to the Warner/Red Hill property. The balance of the escrow account
is to be maintained at a minimum level of $150,000. In the event that the
escrow balance falls below $150,000, all net cash flow from the property is
to be deposited into the escrow until the minimum balance is re-established.
During September 1994, the Partnership obtained three new nonrecourse,
current-pay mortgage loans and used the proceeds to pay off the zero coupon
loans secured by the Monterra and Chandler's Reach apartment properties.
These three new loans are in the amounts of $3,600,000 secured by the
Chandler's Reach Apartments, $4,920,000 secured by the Monterra Apartments
and $3,480,000 secured by the Crystal Tree Commerce Center. The legal
liability for the loans secured by the Chandler's Reach Apartments and the
Monterra Apartments rests with the related joint ventures and, accordingly,
these amounts are recorded on the books of the joint ventures. The legal
liability for the loan secured by the Crystal Tree Commerce Center rests with
the Partnership and, accordingly, this loan is recorded on the books of the
Partnership. The Partnership has indemnified the Monterra and Chandler's
Reach joint ventures, along with the related co-venture partners, against all
liabilities, claims and expenses associated with these borrowings. The three
new nonrecourse loans have terms of seven years and mature in September of
2001. The Chandler's Reach loan bears interest at a rate of 8.33% and
requires monthly principal and interest payments of approximately $28,600.
This loan will have an outstanding balance of approximately $3,193,000 at
maturity. The Monterra loan bears interest at a rate of 8.45% and requires
monthly principal and interest payments of approximately $39,500. This loan
will have an outstanding balance of approximately $4,372,000 at maturity.
The Crystal Tree loan bears interest at a rate of 8.39% and requires monthly
principal and interest payments of approximately $27,800. This loan will
have an outstanding balance of approximately $3,089,000 at maturity. In
order to close the above refinancings, the Partnership was required to
contribute capital of approximately $583,000. This amount consisted of
approximately $348,000 for closing costs, approximately $128,000 for interest
payments due for August and September on the matured Monterra note balance
and a partial paydown of outstanding principal of approximately $107,000.
6. Bonds Payable
Bonds payable consist of the Sunol Center joint venture's share of
liabilities for bonds issued by the City of Pleasanton, California for public
improvements that benefit the Sunol Center operating investment property.
Bond assessments are levied on a semi-annual basis as interest and principal
become due on the bonds. The bonds for which the operating investment
property is subject to assessment bear interest at rates ranging from 5% to
7.87%, with an average rate of approximately 7.2%. Principal and interest
are payable in semi-annual installments. In the event the operating
investment property is sold, Sunol Center Associates will no longer be liable
for the bond assessments.
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As previously reported, effective for the quarter ended December 31, 1992,
the Managing General Partner suspended the Partnership's regular quarterly
distributions until further notice as part of an overall strategy to accelerate
the timetable for repayment of the zero coupon loans secured by the Warner/Red
Hill, Monterra, Chandler's Reach and 625 North Michigan properties. The
Partnership originally borrowed $17,000,000 in zero coupon loans to finance its
offering costs and related acquisition expenses in order to invest a greater
portion of the initial offering proceeds in real estate assets. The four
outstanding loans were with three different financial institutions, the first of
which issued loans secured by the Warner/Red Hill and Monterra properties in the
initial principal amounts of $3,000,000 and $4,500,000, respectively, the second
of which issued a loan in the initial amount of $1,886,473 which was secured by
the Chandler's Reach Apartments, and the third of which issued a loan secured by
the 625 North Michigan Office Building in the initial principal amount of
$4,000,000. Due to declines in the market values of the Warner/Red Hill and 625
North Michigan properties over the past several years, management's efforts were
directed toward negotiating modification and extension agreements with the
existing lenders on these loans. Such declines in value have mirrored the state
of commercial office buildings nationwide, and particularly in major
metropolitan areas such as Chicago. Limited sources for the financing of
commercial office buildings in general and the stringent loan-to-value
requirements for such loans would have made refinancing the Warner/Red Hill and
625 North Michigan properties by conventional means very difficult.
Throughout fiscal 1994, management was engaged in negotiations with the 625
North Michigan lender. The terms of the original loan agreement required that
if the loan ratio, as defined, exceeded 80%, then the Partnership would be
required to deposit additional collateral in an amount sufficient to reduce the
loan ratio to 80%. During fiscal 1994, the lender informed the Partnership that
based on an interim property appraisal, the loan ratio exceeded 80% and that a
deposit of additional collateral was required. Subsequently, the Partnership
submitted an appraisal which demonstrated that the loan ratio exceeded 80% by an
amount less than previously demanded by the lender. In December 1993, the
Partnership deposited additional collateral of approximately $144,000 in
accordance with the higher appraised value. The lender accepted the
Partnership's deposit of additional collateral but disputed whether the
Partnership had complied with the terms of the loan agreement regarding the 80%
loan ratio. During the quarter ended June 30, 1994, an agreement was reached
with the lender on a proposal to refinance the loan and resolve the outstanding
disputes. The terms of the agreement called for the Partnership to make a
principal paydown on the loan of approximately $541,000, including the
application of the additional collateral referred to above. The new loan has an
initial principal balance of approximately $6.5 million and a scheduled maturity
date of May 1999. From the date of the formal closing of the modification and
extension agreement to the new maturity date of the loan, the loan will bear
interest at a rate of 9.125% per annum and will require monthly payments of
principal and interest aggregating approximately $55,000. The terms of the loan
agreement also required the establishment of an escrow account for real estate
taxes, as well as a capital improvement escrow which is to be funded with
monthly deposits from the Partnership aggregating approximately $700,000 through
the scheduled maturity date. Formal closing of the modification and extension
agreement occurred on May 31, 1994.
On August 2, 1994, the Partnership executed an agreement with the lender
regarding an extension and modification of the note payable secured by the
Warner/Red Hill Business Center which had an accreted balance at maturity of
approximately $5,763,000. The terms of the extension and modification agreement
provide for a 10-year extension of the note effective as of the original
maturity date of August 15, 1993. During the term of the agreement, the loan
will bear interest at 2.875% per annum and monthly principal and interest
payments of $23,906 will be required. The Partnership made principal and
interest payments on behalf of the venture totalling approximately $246,000 for
the period from August 15, 1993 through June 30, 1994 in conjunction with the
closing of the modification agreement. In addition, the lender required a
participation in the proceeds of a future sale or debt refinancing in order to
enter into this agreement. Accordingly, upon the sale or refinancing of the
property, the lender will receive 40% of the residual value of the property, as
defined, after the payment of the outstanding balance of the loan. The
extension and modification agreement also required the Partnership to establish
an escrow account in the name of the joint venture and to fund such escrow with
an equity contribution of $350,000. The escrowed funds are to be used solely
for the payment of capital and tenant improvements, leasing commissions and real
estate taxes related to the Warner/Red Hill property. The balance in the escrow
account is to be maintained at a minimum level of $150,000. In the event that
the escrow balance falls below $150,000, all net cash flow from the property is
to be deposited into the escrow until the minimum balance is re-established.
The Warner/Red Hill loan modification was structured with a below market
interest rate and an equity participation due to the extremely high loan-to-
value ratio. Based on current cash flow levels, the Partnership would not
expect the value of the Warner/Red Hill property to generate any significant
proceeds above the level of this current debt obligation if the property were to
be sold in the near-term. However, the property should generate sufficient cash
flow to cover its current debt service requirements and may provide some excess
cash flow to support Partnership operations if further gains in occupancy can be
achieved and market rental rates remain stable or increase.
The nonrecourse zero coupon loans secured by the Chandler's Reach and
Monterra apartment properties matured on August 1, 1994 and September 1, 1994
with outstanding balances of approximately $3,462,000 and $8,645,000,
respectively. During September 1994, the Partnership obtained three new
nonrecourse, current-pay mortgage loans and used the proceeds to pay off these
two outstanding zero coupon loans. The three new loans are in the amounts of
$3,600,000 secured by the Chandler's Reach Apartments, $4,920,000 secured by the
Monterra Apartments and $3,480,000 secured by the Crystal Tree Commerce Center.
The legal liability for the loans secured by the Chandler's Reach Apartments and
the Monterra Apartments rests with the related joint ventures and, accordingly,
these amounts are recorded on the books of the joint ventures. The additional
proceeds required to pay off the Monterra zero coupon loan obligation were
contributed to the venture by the Partnership. The proceeds from the new
Chandler's Reach loan were recorded as a distribution by the joint venture to
the Partnership. The Partnership has indemnified the Monterra and Chandler's
Reach joint ventures, along with the related co-venture partners, against all
liabilities, claims and expenses associated with the new borrowings. The three
new nonrecourse loans have terms of seven years and mature in September of 2001.
The Chandler's Reach loan bears interest at a rate of 8.33% and requires monthly
principal and interest payments of approximately $28,600. This loan will have an
outstanding balance of approximately $3,193,000 at maturity. The Monterra loan
bears interest at a rate of 8.45% and requires monthly principal and interest
payments of approximately $39,500. This loan will have an outstanding balance
of approximately $4,372,000 at maturity. The Crystal Tree loan bears interest
at a rate of 8.39% and requires monthly principal and interest payments of
approximately $27,800. This loan will have an outstanding balance of
approximately $3,089,000 at maturity. In order to close the above refinancings,
the Partnership was required to contribute capital of approximately $583,000
from its existing cash reserves. This amount consisted of approximately
$348,000 for closing costs, approximately $128,000 for interest payments due for
August and September on the matured Monterra note balance and a partial pay down
of outstanding principal of approximately $107,000.
With the exception of the Sunol Center property, occupancy levels at the
Partnership's commercial office buildings and rental properties have increased
over the past year. As of December 31, 1993, the 625 North Michigan Office
Building was 81% occupied. The building's occupancy stood at 85% as of December
31, 1994. Occupancy at the Warner/Red Hill Business Center had increased from
85% to 86% over the same period. Likewise, occupancy at the Crystal Tree
Commerce Center was up slightly, from 97% as of December 31, 1993 to 100% at
December 31, 1994. More significant occupancy gains were achieved at 1881
Worcester Road, which was 79% occupied as of December 31, 1994, as compared to
62% at December 31, 1993. Subsequent to the end of the current quarter, the
Partnership received an offer to purchase the 1881 Worcester Road property. The
proposed purchase price, while in excess of the Partnership's more recent
independent appraised value for the property, is substantially below the amount
of the Partnership's original investment. Management intends to market the
property and solicit other offers in order to determine whether, in light of the
property's future appreciation potential, a current sale might represent the
best potential return to the Limited Partners from this investment. At Sunol
Center, occupancy remained unchanged at 18% as of December 31, 1994. However,
subsequent to the quarter-end, the Partnership's leasing agent finalized
negotiations with a tenant that will occupy 16,400 square feet for a 7-year
term. In addition, negotiations were ongoing with a potential 40,000 square
foot tenant, which, if completed, could bring the property's occupancy level up
to 66%. While rental rates in the Pleasanton, California market remain
depressed, these represent the first positive leasing developments at Sunol
Center in over four years.
At December 31, 1994, the Partnership and its consolidated joint venture had
available cash and cash equivalents of approximately $6,298,000. These funds,
along with the future cash flow distributions from the operating properties,
will be utilized for the working capital requirements of the Partnership,
monthly loan payments, and for the funding of capital enhancements, potential
leasing costs for its commercial property investments, and operating deficits
for the operating investment properties. Now that the refinancing of the
Partnership's zero coupon loans have been completed, and in light of the
positive leasing developments at the Partnership's commercial office and retail
properties, management now believes that the Partnership has sufficient cash
reserves to meet its near-term and long-term capital needs. Also, it is
expected that the properties will generate excess cash flow in the aggregate
after the payment of their operating expenses and new debt service obligations.
The Partnership's share of such excess cash flow is expected to be more than
sufficient to cover the Partnership's operating costs. Accordingly, it is
likely that the Partnership will be able to reinstate small quarterly
distributions during calendar 1995. The payment is expected to be reinstated by
mid calendar year 1995. Once management completes its review of the 1995
operating budgets and capital needs of the Partnership's investments, the amount
of the reinstated distribution will be determined.
RESULTS OF OPERATIONS
The Partnership's net loss decreased by approximately $609,000 for the nine
months ended December 31, 1994, when compared to the same period in the prior
year, due to a decrease in the Partnership's operating loss and an improvement
in the Partnership's recorded share of unconsolidated joint ventures'
operations. The Partnership's operating loss decreased by approximately
$317,000 primarily due to an increase in revenues of approximately $177,000, a
decrease in bad debt expense from the Crystal Tree Commerce Center of
approximately $69,000, a decrease in property operating expenses of
approximately $24,000 and a decrease in interest expense of approximately
$79,000. The increase in revenues was primarily the result of increased rental
income from the Crystal Tree Commerce Center due to a reduction in rental
concessions offered to the property's retail tenants. The occupancy level at
Crystal Tree has remained stable in the high 90's over the past two years.
However, the Partnership has used rental concessions as necessary to maintain
high occupancy levels despite the generally sluggish South Florida economy. In
addition, interest income increased as a result of an increase in the average
invested balances of the Partnership's cash reserves, along with an increase in
short-term interest rates. Property operating expenses decreased primarily due
to a decline in real estate taxes at both the Crystal Tree and Sunol Center
properties. The decrease in interest expense can be attributed to the
modification and principal paydown described above for the loan secured by the
625 North Michigan property, which occurred in May 1994.
A favorable improvement in the Partnership's share of unconsolidated
ventures' operations also contributed to the decrease in net loss for the
current period. For the nine months ended December 31, 1994, the Partnership's
share of unconsolidated ventures' losses decreased by approximately $293,000, as
compared to the prior period. This favorable change is primarily due to a
significant increase in rental income and a substantial decline in interest
expense at the Warner/Red Hill joint venture, in addition to a decrease in
property operating expenses, most notably at 625 North Michigan. Rental income
from Warner/Red Hill increased by approximately $332,000 over the prior period
almost entirely as a result of the significant increase in occupancy achieved
during fiscal 1994. Effective rental rates for office/R&D space, in the
Southern California market in particular, remain depressed due to the
significant existing oversupply of competing space. In addition, the venture's
interest expense declined by approximately $266,000 as a result of the
modification of the zero coupon loan secured by the Warner/Red Hill property, as
discussed further above. The improved net operating results of the Warner/Red
Hill joint venture were partially offset by an increase in the net loss of the
Monterra Apartments joint venture. The joint venture's net loss increased
primarily due to an increase in interest expense as a result of the compounding
of interest on Monterra's zero coupon loan prior to its refinancing.
PAINEWEBBER EQUITY PARTNERS ONE 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.
PAINEWEBBER EQUITY PARTNERS ONE
LIMITED PARTNERSHIP
By: First Equity Partners, Inc.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Dated: February 13, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's interim financial statements for the nine months ended December
31, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1994
<CASH> 6478739
<SECURITIES> 0
<RECEIVABLES> 357197
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6835936
<PP&E> 64085650
<DEPRECIATION> (7921462)
<TOTAL-ASSETS> 63272746
<CURRENT-LIABILITIES> 549342
<BONDS> 11791590
<COMMON> 0
0
0
<OTHER-SE> 50744431
<TOTAL-LIABILITY-AND-EQUITY> 63272746
<SALES> 0
<TOTAL-REVENUES> 2188047
<CGS> 0
<TOTAL-COSTS> 2197977
<OTHER-EXPENSES> 341026
<LOSS-PROVISION> 3293
<INTEREST-EXPENSE> 707652
<INCOME-PRETAX> (1061901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1061901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1061901)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
