UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
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 : 0-14857
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Virginia 04-2866287
(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>
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and March 31, 1996 (Unaudited)
(In thousands)
ASSETS
September 30 March 31
------------ --------
Operating investment properties:
Land $ 3,962 $ 3,962
Buildings and improvements 28,291 27,771
---------- ----------
32,253 31,733
Less accumulated depreciation (10,104) (9,499)
---------- ----------
22,149 22,234
Investments in unconsolidated joint ventures 23,111 23,728
Cash and cash equivalents 4,024 4,042
Prepaid expenses - 13
Accounts receivable, net 351 81
Accounts receivable - affiliates 249 255
Deferred rent receivable - 185
Deferred expenses, net 668 717
---------- ----------
$ 50,552 $ 51,255
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 463 $ 373
Interest payable 60 60
Bonds payable 1,563 1,576
Mortgage notes payable 9,716 9,780
Co-venturer's share of net assets of
consolidated joint venture 187 187
Partners' capital 38,563 39,279
---------- ----------
$ 50,552 $ 51,255
========== ==========
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the six months ended September 30, 1996 and 1995 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at March 31, 1995 $ (912) $42,464
Net loss (5) (454)
Cash distributions (5) (500)
------ -------
Balance at September 30, 1995 $ (922) $41,510
====== =======
Balance at March 31, 1996 $ (936) $40,215
Net loss (2) (209)
Cash distributions (5) (500)
------ -------
Balance at September 30, 1996 $ (943) $39,506
====== =======
See accompanying notes
<PAGE>
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended September 30, 1996 and 1995 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rental income and expense
reimbursements $ 680 $ 566 $1,324 $1,010
Interest and other income 59 69 115 154
----- ----- ------ ------
739 635 1,439 1,164
Expenses:
Property operating expenses 371 306 744 577
Depreciation and amortization 317 258 693 508
Interest expense 254 267 508 527
General and administrative 70 151 160 277
Bad debt expense 3 - 30 27
------ ------ ------- ------
1,015 982 2,135 1,916
------ ------ ------- ------
Operating loss (276) (347) (696) (752)
Investment income:
Interest income on notes
receivable from
unconsolidated ventures 200 200 400 400
Partnership's share of
unconsolidated ventures'
income (losses) 89 2 85 (107)
------- ------- ------- -------
Net income (loss) $ 13 $ (145) $ (211) $ (459)
======= ======= ====== =======
Net income (loss) per Limited
Partnership Unit $ 0.01 $ (0.07) $ (0.10) $ (0.23)
====== ======== ======== ========
Cash distributions per Limited
Partnership Unit $ 0.12 $ 0.12 $ 0.25 $ 0.25
====== ========= ======= ========
The above net income (loss) and cash distributions per Limited Partnership
Unit are based upon the 2,000,000 Limited Partnership Units outstanding during
each period.
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended September 30, 1996 and 1995 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ (211) $ (459)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Partnership's share of unconsolidated
ventures' income (losses) (85) 107
Depreciation and amortization 693 508
Amortization of deferred financing costs 10 10
Changes in assets and liabilities:
Escrowed cash - (111)
Prepaid expenses 13 (291)
Accounts receivable (270) (175)
Accounts receivable - affiliates 6 (12)
Deferred rent receivable 185 29
Deferred expenses (49) (49)
Accounts payable and accrued expenses 90 252
--------- --------
Total adjustments 593 268
--------- --------
Net cash provided by (used in)
operating activities 382 (191)
--------- --------
Cash flows from investing activities:
Distributions from unconsolidated joint ventures 1,077 729
Additions to operating investment properties (520) (1,346)
Additional investments in unconsolidated
joint ventures (375) (205)
---------- --------
Net cash provided by (used in)
investing activities 182 (822)
---------- --------
Cash flows from financing activities:
Repayment of principal on mortgage notes payable (64) (86)
District bond assessments (13) -
Distributions to partners (505) (505)
---------- ---------
Net cash used in financing activities (582) (591)
---------- ---------
Net decrease in cash and cash equivalents (18) (1,604)
Cash and cash equivalents, beginning of period 4,042 6,460
--------- ---------
Cash and cash equivalents, end of period $ 4,024 $ 4,856
========= =========
Cash paid during the period for interest $ 508 $ 517
========= =========
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS ONE 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 in the
Partnership's Annual Report for the year ended March 31, 1996.
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. Related Party Transactions
Accounts receivable - affiliates at both September 30, 1996 and March
31, 1996 includes $100,000 and $117,000, respectively, due from two joint
ventures for interest earned on permanent loans and $134,000 and $123,000,
respectively, of investor servicing fees due from several joint ventures for
reimbursement of certain expenses incurred in reporting Partnership
operations to the Limited Partners of the Partnership. Accounts receivable -
affiliates at both September 30, 1996 and March 31, 1996 also includes
$15,000 of expenses paid by the Partnership on behalf of the joint ventures
during fiscal 1993.
Included in general and administrative expenses for the six-month
periods ended September 30, 1996 and 1995 is $81,000 and $104,000,
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-month
periods ended September 30, 1996 and 1995 is $7,000 and $11,000,
respectively, representing fees earned by Mitchell Hutchins Institutional
Investors, Inc. for managing the Partnership's cash assets.
3. Investments in Unconsolidated Joint Venture Partnerships
As of September 30, 1996 and 1995, 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.
<PAGE>
Summarized operations of the unconsolidated joint ventures, for the
periods indicated, are as follows:
Condensed Combined Summary of Operations
For the three and six months ended June 30, 1996 and 1995
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rental revenues and expense
recoveries $ 2,737 $ 2,643 $5,507 $5,354
Interest and other income 79 71 113 95
-------- -------- ------ ------
2,816 2,714 5,620 5,449
Expenses:
Property operating expenses 876 897 1,924 1,804
Real estate taxes 572 601 1,067 1,259
Mortgage interest expense 219 213 439 436
Interest expense payable to partner 200 200 400 400
Depreciation and amortization 790 800 1,570 1,574
-------- -------- ------- -------
2,657 2,711 5,400 5,473
-------- -------- ------- -------
Net income (loss) $ 159 $ 3 $ 220 $ (24)
======== ======== ======= =======
Net income (loss):
Partnership's share
of combined income (loss) $ 100 $ 13 $ 108 $ (84)
Co-venturers' share of
combined incomes (loss) 59 (10) 112 60
-------- -------- ------- -------
$ 159 $ 3 $ 220 $ (24)
======= ======== ======= =======
Reconciliation of Partnership's Share of Operations
For the three and six months ended June 30, 1996 and 1995
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
Partnership's share of combined
income (loss), as shown above $ 100 $ 13 $ 108 $ (84)
Amortization of excess basis (11) (11) (23) (23)
------- -------- ------- ------
Partnership's share of
unconsolidated ventures'
income (losses) $ 89 $ 2 $ 85 $ (107)
======= ======== ======= ======
<PAGE>
4. Operating Investment Properties
At September 30, 1996 and March 31, 1996, 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 six months ended September 30, 1996 and 1995 (In thousands):
Three Months Ended Six Months Ended
September 30, September 30,
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
Property operating expenses:
Real estate taxes $ 36 $ 27 $ 115 $ 59
Repairs and maintenance 122 100 237 157
Utilities 47 43 88 79
Management fees 23 22 46 45
Administrative and other 143 114 258 237
------ ------ ------ ------
$ 371 $ 306 $ 744 $ 577
====== ===== ====== ======
5. Notes Payable
Notes payable at September 30, 1996 and March 31, 1996 consist of
the following (In thousands):
September 30 March 31
------------ --------
9.125% nonrecourse loan payable
to an insurance company, which is
secured by the 625 North Michigan
Avenue operating investment property
(see discussion below). The terms of
the note were modified effective May
31, 1994. Monthly payments, including
interest, of $55 are due beginning
July 1, 1994 through maturity on May
31, 1999. In addition, the loan
requires monthly deposits to a
capital improvement escrow. The fair
value of the mortgage note payable
approximated its carrying value at
September 30, 1996 and March 31,
1996. $ 6,321 $ 6,362
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 $28 are due beginning November 15,
1994 through maturity on September
19, 2001. The fair value of the
mortgage note payable approximated
its carrying value at September 30,
1996 and March 31, 1996. 3,395 3,418
--------- --------
$ 9,716 $ 9,780
========= ========
<PAGE>
In addition to the long-term mortgage debt described above, the
Partnership has indemnified Warner/Red Hill Associates, Crow/PaineWebber -
LaJolla, Ltd. and Lake Sammamish Limited Partnership, along with the related
co-venture partners, against all liabilities, claims and expenses associated
with certain outstanding secured borrowings of the unconsolidated joint
ventures. During the quarter ended December 31, 1993, the Partnership
negotiated and signed a letter of intent with the existing lender to modify
and extend the maturity of a zero coupon loan secured by the Warner/Red Hill
office building with an accreted principal balance of $5,763,000. The terms
of the extension and modification agreement, which was finalized in August
1994, provided 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, which is recorded on the books of the unconsolidated joint
venture, will bear interest at 2.875% per annum and monthly principal and
interest payments of $24,000 will be required. 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 Warner/Red Hill 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 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 (see description above) secured by the Crystal Tree Commerce
Center. The Chandler's Reach and Monterra nonrecourse loans, which are
recorded on the books of the unconsolidated joint ventures, 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 $29,000. This loan will have an outstanding balance of
$3,199,000 at maturity. The Monterra loan bears interest at a rate of 8.45%
and requires monthly principal and interest payments of $40,000. This loan
will have an outstanding balance of approximately $4,380,000 at maturity.
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 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.
7. Contingencies
As discussed in detail in the Partnership's Annual Report for the year
ended March 31, 1996, the Partnership is involved in certain legal actions.
At the present time, the Managing General Partner is unable to determine
what impact, if any, the resolution of these matters may have on the
Partnership's financial statements, taken as a whole.
<PAGE>
PAINEWEBBER EQUITY PARTNERS ONE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As discussed further in the Annual Report, quarterly distributions of
Partnership net cash flow were reinstated with the payment made on May 15, 1995
for the quarter ended March 31, 1995 at the rate of 1% per annum on original
invested capital. Current cash flow generated by the Partnership's seven
operating investment properties exceeds the level of these distributions. As a
result of the improvement in operations of the properties in the Partnership's
portfolio, particularly at Sunol Center, the Partnership expects to increase the
annual distribution rate. This proposed adjustment would be effective for the
quarter ending March 31, 1997, and would be paid on May 15, 1997. Management is
finalizing its review of the 1997 operating budgets and determining the capital
needs of the Partnership's properties. Once this review is complete, management
will determine the amount of the proposed increased distribution.
Sunol Center, in Pleasanton, California, remained 100% leased to three
tenants as of September 30, 1996. Subsequent to September 30, 1996, the
property's largest tenant took occupancy of the final 12,000 square feet of its
lease space, representing the remaining vacant space at the property. This
tenant now occupies 61,621 square feet, or approximately 52% of the property's
net rentable area. During the first six months of fiscal 1997, the Partnership
funded approximately $279,000 to the Sunol Center joint venture to pay for
tenant improvements and leasing commissions in connection with the final
build-out of the major tenant's space. Once all the required capital work is
completed, no further cash flow deficits are expected at Sunol Center for the
next several years. None of the current leases at Sunol Center expire before
October 2001.
Crystal Tree Commerce Center was 96% leased as of September 30, 1996, up
4% from the previous quarter. During the current fiscal quarter, four new leases
were signed with tenants that moved into a total of 8,509 square feet of space.
One tenant occupying 3,676 square feet moved out upon expiration of its lease.
In addition, two leases were renewed with tenants occupying a total of 1,407
square feet. Market conditions in the South Florida area remain very competitive
and continued tenant turnover is likely in the near term. Property improvements
during the first six months of fiscal 1997 were comprised mainly of the
replacement of brick on portions of the exterior wall of the office tower.
Future improvements planned for the remainder of the fiscal year include
re-surfacing the retail walkways and re-sealing and re-striping the parking lot.
The 64,000 square foot 1881 Worcester Road Office Building was 51% leased
as of September 30, 1996, reflecting the lease expiration of the building's
largest tenant during the prior quarter. In addition, another tenant occupying
19% of the net leasable area moved out of the building during the second
quarter, although its lease obligation continues until December 1998. A
settlement is currently being negotiated with this tenant whereby it may pay a
fixed sum to be released from its remaining lease obligations. The funds from
any such settlement would be used to cover most of the leasing expenses that
would be incurred to sign a new lease with a prospective tenant. The market for
office space in the suburban Boston area in which 1881 Worcester Road is located
has strengthened recently. Average vacancy levels at similar buildings in the
area have now declined below 10%. As a result, management is cautiously
optimistic that the majority of the vacant space at 1881 Worcester Road will be
re-leased within a relatively short period of time.
The 625 North Michigan office building remained 89% leased at September 30,
1996, unchanged from the prior quarter. One tenant occupying 1,023 square feet
vacated the building and another tenant reduced its space by 1,036 square feet.
These changes were offset by three leases that were signed with new tenants
during the current quarter, totaling 3,844 square feet. These new tenants will
be taking occupancy during the third quarter. Within the next twelve months,
leases with seven tenants at 625 North Michigan, totalling 27,353 square feet,
will expire. One of these tenants occupies 15,639 square feet under a lease that
expires in December 1996. Efforts are currently underway by the property's
leasing team to retain this tenant. However, management is aware that this
tenant is considering other locations and may not renew its lease at 625 North
Michigan. Renovations to the building's facade have now been completed. The
modernization of the elevator controls is set to begin in the third quarter and
this work will continue for approximately one year at an estimated total cost of
approximately $700,000.
The leasing level at Warner/Red Hill was 85% as of September 30, 1996, up
from 82% at the end of the previous quarter. This improvement is the result of a
five-year lease signed during the quarter with a new tenant which now occupies
2,598 square feet. During the second quarter, the property's leasing team
renewed leases with two tenants and finalized terms with another tenant that is
expected to renew its lease in the third quarter. Leases with three tenants
occupying 7,033 square feet are scheduled to expire over the next twelve months.
The Partnership elected early application of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121) in fiscal 1995.
In accordance with SFAS 121, an impairment loss with respect to an operating
investment property is recognized when the sum of the expected future net cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the asset. An impairment loss is measured as the amount by which the
carrying amount of the asset exceeds its fair value, where fair value is defined
as the amount at which the asset could be bought or sold in a current
transaction between willing parties, that is other than a forced or liquidation
sale. The effect of such application was the recognition of impairment losses on
the operating investment properties owned by Warner/Red Hill Associates and
Framingham 1881 - Associates. In fiscal 1995, Warner/Red Hill Associates
recognized an impairment loss of $6,784,000 to write down the operating
investment property to its estimated fair value of $3,600,000 as of December 31,
1994. Also in fiscal 1995, Framingham 1881 - Associates recognized an impairment
loss of $2,983,000 to write down the operating investment property to its
estimated fair value of $2,200,000 as of December 31, 1994. Based on
management's analysis in the fourth quarter of fiscal 1996, the estimated fair
values of the Sunol Center, 625 North Michigan and Crystal Tree properties were
below their net carrying amounts as of December 31, 1995. Management's estimates
of undiscounted cash flows for all three properties indicated that such carrying
amounts were expected to be recovered, but, in the case of 625 North Michigan
and Crystal Tree, the reversion values could be less than the carrying amounts
at the time of disposition. As a result of such assessment, the 625 North
Michigan joint venture commenced recording an additional annual depreciation
charge of $350,000 in calendar 1995, and the Partnership commenced recording an
additional annual depreciation charge of $65,000 on the Crystal Tree property in
fiscal 1996. Both adjustments were reflected in the Partnership's consolidated
financial statements effective for the fourth quarter of fiscal 1996. Such
annual charges will continue to be recorded in future periods. Based on
management's analysis, no change to the depreciation on Sunol Center was
required.
At September 30, 1996, the Partnership and its consolidated joint venture
had available cash and cash equivalents of approximately $4,024,000. 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, the funding of capital enhancements and
potential leasing costs for the commercial property investments, and for
distributions to the partners. The source of future liquidity and distributions
to the partners is expected to be from the sales or refinancings of the
operating investment properties. Such sources of liquidity are expected to be
sufficient to meet the Partnership's needs on both a short-term and long-term
basis.
Results of Operations
Three Months Ended September 30, 1996
The Partnership reported net income of $13,000 for the three months ended
September 30, 1996, as compared to a net loss of $145,000 for the same period in
the prior year. This favorable change in net operating results is attributable
to an increase in the Partnership's share of unconsolidated ventures' income of
$87,000 and a decrease in the Partnership's operating loss of $71,000. The
increase in the Partnership's share of unconsolidated ventures' income is
primarily due to a decrease in the net loss of the Monterra and 625 North
Michigan joint ventures. Net loss at Monterra decreased largely due to an
increase in rental income, resulting from rental rate increases implemented over
the past year. Net loss at 625 North Michigan decreased primarily as a result of
a reassessment of the property which resulted in a lower valuation and a
decrease in real estate tax expense during the current three-month period.
The Partnership's operating loss, which includes the operating results of
the wholly-owned Crystal Tree Commerce Center and the consolidated Sunol Center
joint venture, decreased by $71,000 for the three months ended September 30,
1996, mainly due to an increase in rental income and a decrease in general and
administrative expenses. The increase in rental income was the result of an
increase in occupancy at Sunol Center over the past year. General and
administrative expenses decreased mainly due to a decrease in certain required
professional services. The increase in rental income and the decrease in general
and administrative expenses were partially offset by increases in depreciation
and property operating expenses. Depreciation expense of the Sunol Center joint
venture increased due to the substantial tenant improvement work which has
occurred at the property over the past year, as discussed above. In addition,
depreciation expense on the Crystal Tree Commerce Center is higher in the
current period as a result of the depreciation adjustment discussed further
above. Property operating expenses increased mainly due to an increase in
repairs and maintenance expense at the Sunol Center joint venture.
Six Months Ended September 30, 1996
The Partnership's net loss decreased by $248,000 for the six months ended
September 30, 1996, when compared to the same period in the prior year. This
decrease in net loss is largely attributable to a favorable change of $192,000
in the Partnership's share of unconsolidated ventures' operations. The
improvement in the Partnership's share of unconsolidated ventures' operations
for the six months ended September 30,1996 is primarily due to a decrease in the
net loss of the Monterra joint venture and an increase in the net income of the
Warner/Red Hill joint venture. Net loss at Monterra decreased largely due to an
increase in rental income, resulting from rental rate increases implemented over
the past year. Net income at Warner/Red Hill increased mainly due to the receipt
of a real estate tax refund during the current period, which related to calendar
1995 taxes, and a small increase in rental income.
The Partnership's operating loss, which includes the operating results of
the wholly-owned Crystal Tree Commerce Center and the consolidated Sunol Center
joint venture, decreased by $56,000 for the six months ended September 30, 1996,
mainly due to an increase in rental income and a decrease in general and
administrative expenses. The increase in rental income was the result of an
increase in occupancy at Sunol Center over the past year. General and
administrative expenses decreased mainly due to a decrease in certain required
professional services. The increase in rental income and the decrease in general
and administrative expenses were partially offset by increases in depreciation
and property operating expenses. Depreciation expense of the Sunol Center joint
venture increased due to the substantial tenant improvement work which has
occurred at the property over the past year, as discussed above. In addition,
depreciation expense on the Crystal Tree Commerce Center is slightly higher in
the current period as a result of the depreciation adjustment discussed further
above. Property operating expenses increased mainly due to an increase in
repairs and maintenance expense at the Sunol Center joint venture.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As discussed in prior quarterly and annual reports, in November 1994 a
series of purported class actions (the "New York Limited Partnership Actions")
were filed in the United States District Court for the Southern District of New
York concerning PaineWebber Incorporated's sale and sponsorship of 70 limited
partnership investments, including those offered by the Partnership. The
lawsuits were brought against PaineWebber Incorporated and Paine Webber Group
Inc. (together "PaineWebber"), among others, by allegedly dissatisfied
partnership investors. In March 1995, after the actions were consolidated under
the title In re PaineWebber Limited Partnership Litigation, the plaintiffs
amended their complaint to assert claims against a variety of other defendants,
including First Equity Partners, Inc. and Properties Associates 1985, L.P.
("PA1985"), which are the General Partners of the Partnership and affiliates of
PaineWebber. On May 30, 1995, the court certified class action treatment of the
claims asserted in the litigation.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the New York Limited Partnership Actions outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which has been preliminarily approved by the court and provides for the complete
resolution of the class action litigation, including releases in favor of the
Partnership and the General Partners, and the allocation of the $125 million
settlement fund among investors in the various partnerships at issue in the
case. As part of the settlement, PaineWebber also agreed to provide class
members with certain financial guarantees relating to some of the partnerships.
The details of the settlement are described in a notice mailed directly to class
members at the direction of the court. A final hearing on the fairness of the
proposed settlement is scheduled to continue in November 1996.
With regard to the Abbate action described in the Annual Report on Form
10-K for the year ended March 31, 1996, in September 1996 the court dismissed
many of the plaintiffs' claims as barred by the applicable statutes of
limitations. The eventual outcome of this litigation and the potential impact,
if any, on the Partnership's unitholders remains undeterminable at the present
time.
The status of the other litigation involving the Partnership and its
General Partners remains unchanged from the description provided in the
Partnership's Annual Report on Form 10-K for the year ended March 31, 1996.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber affiliates could be entitled to
indemnification for expenses and liabilities in connection with the litigation
discussed above. However, PaineWebber has agreed not to seek indemnificaiton for
any amounts it is required to pay in connection with the settlement of the New
York Limited Partnership Actions. At the present time, the General Partners
cannot estimate the impact, if any, of the potential indemnification claims on
the Partnership's financial statements, taken as a whole. Accordingly, no
provision for any liability which could result from the eventual outcome of
these matters has been made in the accompanying financial statements of the
Partnership.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
<PAGE>
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: November 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the six months ended September
30, 1996 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> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 4,024
<SECURITIES> 0
<RECEIVABLES> 601
<ALLOWANCES> 1
<INVENTORY> 0
<CURRENT-ASSETS> 4,624
<PP&E> 55,364
<DEPRECIATION> 10,104
<TOTAL-ASSETS> 50,552
<CURRENT-LIABILITIES> 523
<BONDS> 11,279
0
0
<COMMON> 0
<OTHER-SE> 38,563
<TOTAL-LIABILITY-AND-EQUITY> 50,552
<SALES> 0
<TOTAL-REVENUES> 1,924
<CGS> 0
<TOTAL-COSTS> 1,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 508
<INCOME-PRETAX> (211)
<INCOME-TAX> 0
<INCOME-CONTINUING> (211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (211)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
