UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: MARCH 31, 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: 0-15035
PAINE WEBBER GROWTH PARTNERS THREE L.P.
Delaware 04-2882258
(State of organization) (I.R.S.Employer
Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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 ___
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
Prospectus of registrant dated Part IV
September 3, 1985, as supplemented
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L. P.
1996 FORM 10-K
TABLE OF CONTENTS
Part I Page
Item 1 Business I-1
Item 2 Properties I-2
Item 3 Legal Proceedings I-3
Item 4 Submission of Matters to a Vote of Security Holders I-4
Part II
Item 5 Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters II-1
Item 6 Selected Financial Data II-1
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations II-2
Item 8 Financial Statements and Supplementary Data II-6
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure II-6
Part III
Item 10 Directors and Executive Officers of the Partnership III-1
Item 11 Executive Compensation III-3
Item 12 Security Ownership of Certain Beneficial
Owners and Management III-3
Item 13 Certain Relationships and Related Transactions III-3
Part IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K IV-1
Signatures IV-2
Index to Exhibits IV-3
Financial Statements and Supplementary Data F-1 to F-26
<PAGE>
PART I
Item 1. Business
PaineWebber Growth Partners Three L.P. (the "Partnership") is a limited
partnership formed in May 1985 under the Uniform Limited Partnership Act of the
State of Delaware for the purpose of investing in a portfolio of rental
apartments or commercial properties which had potential for capital
appreciation. The Partnership originally had interests in three properties: two
apartment complexes and a hotel. As discussed further below, the Partnership's
hotel property was foreclosed on by the mortgage lender on April 21, 1992. The
Partnership authorized the issuance of a maximum of 60,000 Partnership Units, at
$1,000 per Unit, of which 25,657 were subscribed and issued between September 3,
1985 and July 31, 1986. Limited Partners will not be required to make any
additional capital contributions.
As of March 31, 1996, the Partnership owned, through joint venture
partnerships, interests in the operating properties referred to below:
Name of Joint Venture Date of
Name and Type of Property Acquisition Type of
Location Size of Interest Ownership (1)
Tara Associates, Ltd. 208 units 10/8/85 Fee ownership of
Summerwind Apartments land and improvements
Jonesboro, Georgia (through joint
venture)
St. Louis Woodchase 186 units 12/31/85 Fee ownership of
Associates land and improvements
Woodchase Apartments (through joint
St. Louis, Missouri venture)
(1) See Notes to the Financial Statements filed in Item 14(a)(1) of this Annual
Report for a description of the mortgage indebtedness secured by the
Partnership's operating property investments and for a description of the
agreements through which the Partnership has acquired these real estate
investments.
On April 21, 1992, the holder of the mortgage debt secured by the LaJolla
Marriott hotel, which represented approximately 74% of the Partnership's
original investment portfolio, foreclosed on the operating property due to the
Partnership's inability to meet the required debt service payments under the
modified terms of the loan agreement. The efforts by the Managing General
Partner to recapitalize, sell or refinance the property were unsuccessful. As a
result, the Partnership no longer has any ownership interest in this property.
The Partnership's original investment objectives were to invest the net cash
proceeds from the offering of limited partnership units in rental apartment and
commercial properties with the goals of obtaining:
(1) capital appreciation;
(2) tax losses during the early years of operations from deductions generated
by investments;
(3) equity build-up through principal repayments of mortgage loans on
Partnership properties; and
(4) cash distributions from rental income.
As a result of the foreclosure of the La Jolla Marriott Hotel referred to
above, the Partnership will be unable to achieve most of its original
objectives. The Partnership has generated tax losses from operations since
inception. However, the benefits of such losses to investors have been
significantly reduced by changes in federal income tax law subsequent to the
organization of the Partnership. Furthermore, the Partnership's investment
properties have not produced sufficient cash flow from operations to provide the
limited partners with cash distributions to date. As noted above, the hotel
represented approximately 74% of the Partnership's original invested capital.
Additionally, at the present time, the estimated values of the Partnership's two
remaining residential properties are below their acquisition prices due to the
unprecedented level of overbuilding which characterized the latter half of the
1980's. Such overbuilding put considerable downward pressure on occupancies and
rental rates, which was a trend which continued through the early 1990's. Over
the past several years this trend has been reversed due to the lack of
significant new construction of multi-family properties in most markets.
However, it is unlikely that this current market cycle will result in peak
property values which equal or exceed the values in effect at the time of the
Partnership's inception. As a result, management does not expect that the
Partnership will recover the full amounts of its initial investments in the
Summerwind and Woodchase apartment complexes. The amount of such investments
which will be recovered, if any, will depend upon the ultimate selling prices
obtained for the properties at the time of their final dispositions, which
cannot presently be determined.
The Partnership's two joint venture apartment property investments are
located in real estate markets in which they face significant competition for
the revenues they generate. The apartment complexes compete with numerous
projects of similar type, generally on the basis of price and amenities.
Apartment properties in all markets also compete with the single family home
market for prospective tenants. The continued availability of low interest rates
on home mortgage loans has increased the level of this competition over the past
few years. However, the impact of the competition from the single-family home
market has been offset by the lack of significant new construction activity in
the multi-family apartment market over this period.
The Partnership has no real property investments located outside the United
States. The Partnership is engaged solely in the business of real estate
investment; therefore, a presentation of information about industry segments is
not applicable.
The Partnership has no salaried employees; it has, however, entered into an
Advisory Contract with PaineWebber Properties Incorporated (the "Adviser"),
which is responsible for the day-to-day operations of the Partnership. The
Adviser is a wholly-owned subsidiary of PaineWebber Incorporated ("PWI"), a
wholly-owned subsidiary of Paine Webber Group Inc.
("PaineWebber").
The general partners of the Partnership (the "General Partners") are Third
PW Growth Properties, Inc. and Properties Associates 1985, L.P. Third PW Growth
Properties, Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber, is the managing general partner of the Partnership. The associate
general partner is Properties Associates 1985, L.P. (the "Associate General
Partner"), a Virginia limited partnership, certain limited partners of which are
also officers of the Adviser and the Managing General Partner.
The terms of transactions between the Partnership and affiliates of the
Managing General Partner of the Partnership are set forth in Items 11 and 13
below to which reference is hereby made for a description of such terms and
transactions.
Item 2. Properties
The Partnership owns through joint venture partnerships interests in the two
properties referred to under Item 1 above to which reference is made for the
name, location, and description of each property.
Occupancy figures for each fiscal quarter during fiscal 1996, along with an
average for the year, are presented below for each property:
Percent Occupied At
----------------------------------------------------
Fiscal 1996
6/30/95 9/30/95 12/31/95 3/31/96 Average
------- ------- -------- ------- -------
Summerwind Apartments 98% 97% 96% 96% 97%
Woodchase Apartments 93% 97% 97% 91% 95%
<PAGE>
Item 3. Legal Proceedings
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 various 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 Third PW Growth Properties, 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.
The amended complaint in the New York Limited Partnership Actions alleges
that, in connection with the sale of interests in PaineWebber Growth Partners
Three L.P., PaineWebber, Third PW Growth Properties, Inc. and PA1985 (1) failed
to provide adequate disclosure of the risks involved; (2) made false and
misleading representations about the safety of the investments and the
Partnership's anticipated performance; and (3) marketed the Partnership to
investors for whom such investments were not suitable. The plaintiffs, who
purport to be suing on behalf of all persons who invested in PaineWebber Growth
Partners Three, L.P., also allege that following the sale of the partnership
interests, PaineWebber, Third PW Growth Properties, Inc. and PA1985
misrepresented financial information about the Partnership's value and
performance. The amended complaint alleges that PaineWebber, Third PW Growth
Properties, Inc. and PA1985 violated the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and the federal securities laws. The plaintiffs seek
unspecified damages, including reimbursement for all sums invested by them in
the partnerships, as well as disgorgement of all fees and other income derived
by PaineWebber from the limited partnerships. In addition, the plaintiffs also
seek treble damages under RICO.
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 which the parties expect
to submit to the court for its consideration and approval within the next
several months. Until a definitive settlement and plan of allocation is approved
by the court, there can be no assurance what, if any, payment or non-monetary
benefits will be made available to investors in PaineWebber Growth Partners
Three, L.P.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including those
offered by the Partnership. The complaint alleges, among other things, that
PaineWebber and its related entities committed fraud and misrepresentation and
breached fiduciary duties allegedly owed to the plaintiffs by selling or
promoting limited partnership investments that were unsuitable for the
plaintiffs and by overstating the benefits, understating the risks and failing
to state material facts concerning the investments. The complaint seeks
compensatory damages of $15 million plus punitive damages against PaineWebber.
The eventual outcome of this litigation and the potential impact, if any, on the
Partnership's unitholders cannot be determined at the present time.
In June 1996, approximately 50 plaintiffs filed an action entitled
Bandrowski v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiff's purchases of various limited partnership interests, including those
offered by the Partnership. The complaint is substantially similar to the
complaint in the Abbate action described above, and seeks compensatory damages
of $3.4 million plus punitive damages.
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 this litigation.
At the present time, the Managing General Partner 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.
The Partnership is not subject to any other material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters
At March 31, 1996 there were 2,173 record holders of Units in the
Partnership. There is no public market for the resale of Units, and it is not
anticipated that a public market for the resale of Units will develop. The
Managing General Partner will not redeem or repurchase Units.
Item 6. Selected Financial Data
PaineWebber Growth Partners Three L.P.
For the years ended March 31, 1996, 1995, 1994, 1993 and 1992
(in thousands, except for per Unit data)
1996 1995 1994 1993 (1) 1992
Revenues $ 1,460 $1,394 $1,341 $ 2,521 $ 18,382
Operating loss $ (429) $ (376) $ (439)$ (3,654)$ (5,434)
Partnership's share of
unconsolidated
venture's loss $ (181) $ (236) $ (233)$ (245)$ (249)
Loss before extraordinary gain $ (610) $ (612) $ (672)$ (3,899) $ (5,683)
Extraordinary gain - - - $ 11,532 -
Net income (loss) $ (610)$ (612)$ (672)$ 7,633$ (5,683)
Total assets $7,024 $ 7,402 $ 7,815$ 8,345 $ 49,372
Note payable $ 8,330 $ 8,330 $ 8,330$ 8,330 $ 8,330
Per Limited Partnership Unit:
Loss before extraordinary gain$ (22.61)$ (22.64)$(24.87)$(129.37) $(210.44)
Extraordinary gain - - - $ 367.93 -
Net income (loss) $(22.61)$ (22.64)$ (24.87)$ 238.56 $(210.44)
(1) On April 21, 1992, the mortgage lender took title to the La Jolla Marriott
Hotel through foreclosure proceedings. As a result, the Partnership's fiscal
1993 net operating results reflect an extraordinary gain from the settlement
of the debt obligation of $11.5 million and a loss on transfer of assets at
foreclosure of $2.9 million (included in operating loss).
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Annual
Report.
The above per Limited Partnership Unit information is based upon the 25,657
Limited Partnership Units outstanding during each year.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership offered limited partnership interests to the public from
September 3, 1985 to July 31, 1986 pursuant to a Registration Statement filed
under the Securities Act of 1933. Gross proceeds of $25,657,000 were received by
the Partnership and, after deducting selling expenses and offering costs,
approximately $17,085,000 was originally invested directly or through joint
venture interests in three operating investment properties. As previously
reported, the Partnership's investment in the LaJolla Marriott Hotel, which
represented 74% of the original investment portfolio, was lost through
foreclosure proceedings in April 1992, after a protracted period of negotiations
failed to produce a mutually acceptable restructuring, refinancing, or sale
agreement.
Despite generally improving conditions in the markets for multi-family
apartment properties across the country, the estimated values of the
Partnership's two investment properties, the Summerwind and Woodchase apartment
complexes, remain below their acquisition prices at the present time as a result
of the impact on real estate values caused by the unprecedented level of
overbuilding which characterized the latter half of the 1980's. Such
overbuilding put considerable downward pressure on occupancy levels and
effective rental rates, which was a trend that continued through the early
1990's. Over the past several years, this trend has been reversed due to the
lack of significant new construction of multi-family properties in most markets.
However, management believes it is unlikely that this current market cycle will
result in peak property values which equal or exceed the values in effect at the
time of the Partnership's inception. As a result, management does not expect
that the Partnership will recover the full amounts of its initial investments in
the Summerwind and Woodchase apartment complexes. The portion of such
investments which will be recovered, if any, will depend upon the ultimate
selling prices obtained for the properties at the time of their final
dispositions, which cannot presently be determined.
The Summerwind joint venture is currently generating excess cash flow from
operations as a result of the low level of the variable interest rate on the
venture's first mortgage loan. Such excess cash flow is being used to pay
Partnership operating expenses, except for Partnership management fees, the
payment of which has been deferred since September of 1986. The debt secured by
the Summerwind property, which requires interest-only payments until maturity in
March 1997, was provided by tax-exempt revenue bonds issued by a local housing
authority. During fiscal 1996, the interest rate on such debt, which is tied to
comparable tax-exempt bond obligations, fluctuated at between approximately 4%
and 6% per annum on the venture's $8.3 million debt obligation. Cash flow from
the venture's operations for calendar 1995 would have been sufficient to cover
interest-only payments at an average rate of approximately 8%. Nonetheless, such
cash flow would not be sufficient to support conventional financing, including
monthly principal amortization, at current market interest rates. Furthermore,
due to the rates of return demanded by potential buyers of multi-family
residential properties at the present time, an analysis of the venture's cash
flow before debt service implies a market value which would not yield any
significant proceeds above the current debt obligation. It appears unlikely that
market conditions will improve sufficiently in the near-to-intermediate term to
increase this value substantially. The revenue bonds which are secured by the
mortgage loan encumbering the Summerwind property are also secured by an
irrevocable letter of credit agreement between the lender and the Housing
Authority of Clayton County. The letter of credit, which will expire on March
16, 1997, is an irrevocable obligation of the lender up to an amount sufficient
to pay the then outstanding principal of the bonds plus 45 days interest
calculated at 15% per annum. The mortgage loan secured by the Summerwind
Apartments is subject to various prepayment provisions including a mandatory
redemption on March 16, 1997, the first scheduled remarketing date, as defined,
which coincides with the expiration of the letter of credit agreement referred
to above. Unless the letter of credit is replaced or extended, the venture's
mortgage loan will become immediately due and payable upon this scheduled
expiration date. Management is currently assessing the available alternatives
with respect to the pending expiration of the letter of credit, which include
selling the property and repaying the mortgage indebtedness prior to March of
1997, refinancing the bonds with conventional mortgage financing or negotiating
a new letter of credit agreement. Management will pursue the course of action
which it believes will result in the maximum overall return to the Limited
Partners. However, there are no assurances that any of these alternatives are
achievable. As discussed above, management believes that selling the property
would not generate any significant proceeds after the repayment of the
outstanding indebtedness. In addition, because the venture's cash flow will not
support the required debt service payments under conventional financing of the
outstanding principal balance, the current mortgage lender would have to accept
a discounted payoff in order to accomplish a refinancing transaction.
Furthermore, it may not be possible to obtain a replacement or extended letter
of credit due to the extremely high loan-to-value ratio of the underlying
mortgage loan. Nonetheless, management will continue to make every fiscally
responsible effort to recover some portion of the Partnership's original
investment in Summerwind. Management intends to continue to operate the property
to maximize cash flow in the near term. No significant capital improvements were
made during the current year and none are planned for next year.
On September 13, 1995, the Partnership, along with its co-venture partner,
refinanced the mortgage debt secured by the Woodchase Apartments with a new
lender. The new non-recourse mortgage loan is in the initial principal amount of
$8,200,000 and bears interest at a rate of 7.5% per annum. The new loan requires
monthly principal and interest payments of $57,000 and matures on October 1,
2002. The proceeds of the new loan were used to repay the existing $8 million
debt as well as cover a portion of the refinancing costs. The Partnership
advanced $164,000 to the venture to cover the remaining transaction costs.
Although the principal amount of the new loan increased slightly, the venture's
annual debt service payments have been reduced by $112,000 due to the reduction
in the interest rate, resulting in positive cash flow for the joint venture.
During the quarter ended December 31, 1995, the Partnership received a
distribution of $164,000 from the joint venture in repayment of the advances
referred to above which were made in connection with the September 1995
refinancing transaction.
In refinancing the Woodchase debt obligation, management obtained assumable
financing which reduces debt service costs, results in net cash flow to the
Partnership and enhances the marketability of the property for a possible sale.
An analysis of the estimated value of the Woodchase property places the
potential sale price above the level of the current debt by between $2 million
to $3 million. Depending on management's view of the relevant market factors
affecting the property's long-term appreciation potential, management could
determine that a sale of the Woodchase property in the near-term would be in the
Partnership's best interests. A program of significant property repairs and
improvements was initiated at Woodchase during calendar 1994 and continued
throughout calendar 1995. Such improvements include repairing exterior wood
siding and apartment balconies, painting the exterior of the buildings,
replacing some of the roofs and redecorating the clubhouse. The work on the
exterior siding and the balconies has been completed and was paid for out of
cash flow from property operations. Additional planned improvements will be
worked on in calendar 1996 as cash flow is available. If the Partnership's
interest in Woodchase were sold, a liquidation of the Partnership would likely
be initiated, and, if the Partnership's interest in Summerwind has not been
sold, restructured or foreclosed on at that time, it would be sold or assigned,
most likely only for a nominal amount. In any event, management must weigh the
costs of continued operations against the realistic hopes for any future
additional recoveries of the Partnership's original investments in Woodchase and
Summerwind. Management continues to evaluate the Partnership's possible future
operating strategies in light of these circumstances.
Upon the sale or disposition of the Partnership's investments, the taxable
gain or loss incurred will be allocated among the partners. In the case where a
taxable gain would be incurred, gain would first be allocated to the General
Partners in an amount at least sufficient to eliminate their deficit capital
balance. Any remaining gain would then be allocated to the Limited Partners. In
certain cases, the Limited Partners could be allocated taxable income in excess
of any liquidation proceeds that they may receive. Additionally, in cases where
the disposition of any investment involves a foreclosure by, or voluntary
conveyance to, the mortgage lender, taxable income could occur without
distribution of cash. Income from the sale or disposition of the Partnership's
investments would represent passive income to the partners which could be offset
by each partners' existing passive losses, including any carryovers from prior
years.
At March 31, 1996, the Partnership and its consolidated joint venture had
available cash and cash equivalents of approximately $801,000. As discussed
further above, the consolidated Summerwind joint venture currently generates
positive cash flow because the variable interest rate on the venture's
outstanding mortgage indebtedness is presently at a fairly low level. As long as
this variable rate remains low, the venture should provide excess cash flow
sufficient to cover the Partnership's operating expenses (excluding Partnership
management fees which have been deferred since September of 1986). In the event
that this interest rate rises significantly in the near future, this cash flow
may be impaired. The balance of cash and cash equivalents will be used for the
working capital needs of the Partnership and its consolidated joint venture. The
source of future liquidity and distributions to the partners is expected to be
through proceeds, if any, received from the sale or refinancing of the two
remaining investment properties.
Results of Operations
1996 Compared to 1995
The Partnership's net loss decreased by $2,000 in fiscal 1996 when
compared to the prior year. This decrease in the Partnership's net loss was the
result of a decrease of $55,000 in the Partnership's share of unconsolidated
venture's loss, which represents the allocable net loss from the Woodchase joint
venture, offset by an increase in the Partnership's operating loss of $53,000.
The decrease in the Partnership's share of unconsolidated venture's loss
was mainly a result of an increase in rental income at Woodchase for the current
year. The increase in rental income, of $75,000, was primarily attributable to
rental rate increases implemented as a result of the fairly strong market
conditions existing in the suburban St. Louis market and the capital improvement
program implemented at the property over the past two years. The average
occupancy level at Woodchase increased from 93% for calendar 1994 to 94% for
calendar 1995, which also contributed to the 5% increase in rental income.
Slight increases in the venture's property operating expenses and depreciation
charges partially offset the increase in rental income for the current year.
The Partnership's operating loss increased primarily due to an increase in
interest expense of $89,000. Interest expense increased as a result of an
increase in the average interest rate paid during the year on the variable rate
mortgage loan secured by the consolidated Summerwind Apartments. The increase in
interest expense was partially offset by an increase in rental income at
Summerwind of $65,000. Rental income increased as a result of an increase in
rental rates from the prior year, along with an increase in the average
occupancy from 95% for calendar 1994 to 97% for calendar 1995. Small increases
in repairs and maintenance expenses at Summerwind and Partnership general
administrative expenses also contributed to the increase in the Partnership's
operating loss for fiscal 1996. Partnership general and administrative expenses
increased by $15,000 for the current fiscal year mainly due to an increase in
certain required professional services.
1995 Compared to 1994
The Partnership's net loss decreased by $60,000 in fiscal 1995 when compared
to the prior year. The primary reasons for the decrease in net loss were an
increase in rental income at the Summerwind Apartments of $36,000, an increase
in interest income earned on cash and cash equivalents of $17,000 and decreases
in property operating expenses and general and administrative expenses of
$47,000 and $8,000, respectively. The increase in rental income at the
Summerwind Apartments was the result of an increase in rental rates, as
occupancy actually declined slightly during the year from an average of 99% for
calendar 1993 to an average of 95% for calendar 1994. Interest income earned on
cash and cash equivalents increased as a result of an increase in the average
outstanding balance of cash and cash equivalents and an increase in interest
rates earned during fiscal 1995. Property operating expenses at the Summerwind
Apartments decreased due to a large decrease in repairs and maintenance
expenses. Repairs and maintenance expenses decreased mainly as a result of the
completion of the painting of all building exteriors during fiscal 1995. General
and administrative expenses decreased as a result of a decrease in legal fees
during fiscal 1995. The Partnership incurred additional legal fees in fiscal
1994 as a result of the refinancing of the debt secured by the Woodchase
Apartments. The positive effect of the above items on net loss was partially
offset by an increase in interest expense of $44,000. The higher interest
expense reflected an increase in the variable interest rate on the Summerwind
mortgage loan. In addition, the Partnership's share of unconsolidated venture's
loss, which represents the allocable net loss from the Woodchase joint venture,
increased by $3,000 due to an increase in interest expense. This increase in
interest expense was a result of the terms of the mortgage loan secured by the
Woodchase Apartments which provide for the compounding of interest on deferred
amounts owed to the lender.
<PAGE>
1994 Compared to 1993
The Partnership had a net loss of $672,000 for fiscal 1994, as compared to
net income of $7,633,000 in the prior year. The prior year net income resulted
from the foreclosure of the LaJolla Marriott Hotel which, as explained below,
resulted in an extraordinary gain from settlement of debt obligation of
$11,532,000. The extraordinary gain was partially offset by a loss on transfer
of assets at foreclosure of $2,928,000. The transfer of the Hotel's title to the
lender through foreclosure proceedings was accounted for as a troubled debt
restructuring in accordance with Statement of Financial Accounting Standards No.
15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring." The
extraordinary gain arose due to the fact that the balance of the mortgage loan
and related accrued interest exceeded the estimated fair value of the Hotel
investment and other assets transferred to the lender at the time of the
foreclosure. The loss on transfer of assets resulted from the fact that the net
carrying value of the Hotel exceeded the Hotel's estimated fair value at the
time of foreclosure. Net loss prior to the extraordinary gain and the loss on
foreclosure recognized in fiscal 1993 totalled $971,000.
Net loss also includes operating loss and the Partnership's share of
unconsolidated venture's loss. Operating loss decreased by approximately 40%
during fiscal 1994 primarily due to the foreclosure of the Hotel, which had been
generating significant losses from operations prior to its foreclosure. In
addition, there was a small decrease in the net operating loss from the
Summerwind joint venture primarily due to an increase in rental income and a
decrease in the interest expense on the venture's floating rate long-term debt.
Occupancy at the Summerwind Apartments remained stable, in the high 90's,
throughout fiscal 1993 and 1994. The increase in revenues was due to the gradual
increase in rental rates made possible by generally improving market conditions.
The increase in rental income and decrease in interest expense exceeded an
increase in property operating expenses which resulted from an increase in
repairs and maintenance expenses. Partnership general and administrative
expenses and management fees remained stable, but increased as a percentage of
revenues due to the fiscal 1993 Hotel foreclosure. General and administrative
expenses did not decline with the loss of the Hotel property to foreclosure
because there is a large fixed component to the costs associated with the
Partnership's operations, which include accounting, auditing, investor
communications and regulatory compliance expenses. Partnership management fees,
which have been accrued but unpaid since September 1986, are equal to 1/2 of 1%
of the Partnership's original gross offering proceeds. The Partnership's share
of unconsolidated venture's loss, which represents the operating results of the
Woodchase joint venture, decreased due to a small increase in rental income and
a large decrease in real estate taxes, which were offset in part by an increase
in repairs and maintenance expense and higher interest expense in fiscal 1994.
Interest expense increased due to an increase in the interest rate on the
venture's debt as part of the refinancing transaction completed during fiscal
1994. The increase in rental revenues at both the Summerwind and Woodchase
properties in fiscal 1994 was reflective of the gradually improving market
conditions discussed further above. Higher repairs and maintenance expenses were
also a trend which reflected the increasing age of the properties.
Inflation
The Partnership commenced operations in 1985 and completed its tenth full
year of operations in the current fiscal year. The effects of inflation and
changes in prices on the Partnership's operating results to date have not been
significant.
Inflation in future periods may increase revenues as well as operating
expenses at the Partnership's operating investment properties. Tenants at the
Partnership's apartment properties have short-term leases, generally of one year
or less in duration. Rental rates at these properties can be adjusted to keep
pace with inflation, to the extent market conditions allow, as the leases are
renewed or turned over. Such increases in rental income would be expected to at
least partially offset the corresponding increases in Partnership and property
operating expenses.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are included under Item 14
of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership
The Managing General Partner of the Partnership is Third PW Growth
Properties, Inc. a Delaware corporation, which is a wholly-owned subsidiary of
PaineWebber. The Associate General Partner of the Partnership is Properties
Associates 1985, L.P., a Virginia limited partnership, certain limited partners
of which are also officers of the Adviser and the Managing General Partner. The
Managing General Partner has overall authority and responsibility for the
Partnership's operation, however, the day-to-day business of the Partnership is
managed by the Adviser pursuant to an advisory contract.
(a) and (b) The names and ages of the directors and principal executive
officers of the Managing General Partner of the Partnership are as follows:
Date elected
Name Office Age to Office
Lawrence A. Cohen President and Chief
Executive Officer 42 5/15/91
Albert Pratt Director 85 5/22/85 *
J. Richard Sipes Director 49 6/9/94
Walter V. Arnold Senior Vice President and
Chief Financial Officer 48 10/29/85
James A. Snyder Senior Vice President 50 7/6/92
John B. Watts III Senior Vice President 43 6/6/88
David F. Brooks First Vice President and Assistant
Treasurer 53 5/22/85 *
Timothy J. Medlock Vice President and Treasurer 35 6/1/88
Thomas W. Boland Vice President 33 12/1/91
* The date of incorporation of the Managing General Partner
(c) There are no other significant employees in addition to the directors
and executive officers mentioned above.
(d) There is no family relationship among any of the foregoing directors and
executive officers of the Managing General Partner of the Partnership. All of
the foregoing directors and executive officers have been elected to serve until
the annual meeting of the Managing General Partner.
(e) All of the directors and officers of the Managing General Partner hold
similar positions in affiliates of the Managing General Partner, which are the
corporate general partners of other real estate limited partnerships sponsored
by PWI, and for which PaineWebber Properties Incorporated ("PWPI") serves as the
investment adviser. The business experience of each of the directors and
principal executive officers of the Managing General Partner is as follows:
Lawrence A. Cohen is President and Chief Executive Officer of the Managing
General Partner and President and Chief Executive Officer of the Adviser which
he joined in January 1989. He is also a member of the Board of Directors and the
Investment Committee of the Adviser. From 1984 to 1988, Mr. Cohen was First Vice
President of VMS Realty Partners where he was responsible for origination and
structuring of real estate investment programs and for managing national
broker-dealer relationships. He is a member of the New York Bar and is a
Certified Public Accountant.
<PAGE>
Albert Pratt is a Director of the Managing General Partner, a Consultant of
PWI, and a limited partner of the Associate General Partner. Mr. Pratt joined
PWI as Counsel in 1946 and since that time has held a number of positions
including Director of both the Investment Banking Division and the International
Division, Senior Vice President and Vice Chairman of PWI and Chairman of
PaineWebber International, Inc.
J. Richard Sipes is a Director of the Managing General Partner and a
Director of the Adviser. Mr. Sipes is an Executive Vice President at
PaineWebber. He joined the firm in 1978 and has served in various capacities
within the Retail Sales and Marketing Division. Before assuming his current
position as Director of Retail Underwriting and Trading in 1990, he was a
Branch Manager, Regional Manager, Branch System and Marketing Manager for a
PaineWebber subsidiary, Manager of Branch Administration and Director of
Retail Products and Trading. Mr. Sipes holds a B.S. in Psychology from
Memphis State University.
Walter V. Arnold is a Senior Vice President and Chief Financial Officer of
the Managing General Partner and a Senior Vice President and Chief Financial
Officer of the Adviser which he joined in October 1985. Mr. Arnold joined PWI in
1983 with the acquisition of Rotan Mosle, Inc. where he had been First Vice
President and Controller since 1978, and where he continued until joining PWPI.
Mr. Arnold is a Certified Public Accountant licensed in the state of Texas.
James A. Snyder is a Senior Vice President of the Managing General Partner
and a Senior Vice President and Member of the Investment Committee of the
Adviser. Mr. Snyder re-joined the Adviser in July 1992 having served previously
as an officer of PWPI from July 1980 to August 1987. From January 1991 to July
1992, Mr. Snyder was with the Resolution Trust Corporation where he served as
the Vice President of Asset Sales prior to re-joining PWPI. From February 1989
to October 1990, he was President of Kan Am Investors, Inc., a real estate
investment company. During the period August 1987 to February 1989, Mr. Snyder
was Executive Vice President and Chief Financial Officer of Southeast Regional
Management Inc., a real estate development company.
John B. Watts III is a Senior Vice President of the Managing General Partner
and a Senior Vice President of the Adviser which he joined in June 1988. Mr.
Watts has had over 17 years of experience in acquisitions, dispositions and
financing of real estate. He received degrees of Bachelor of Architecture,
Bachelor of Arts and Master of Business Administration from the University of
Arkansas.
David F. Brooks is a First Vice President and Assistant Treasurer of the
Managing General Partner, a limited partner of the Associate General Partner,
and a First Vice President and Assistant Treasurer of the Adviser which he
joined in March 1980. From 1972 to 1980, Mr. Brooks was an Assistant Treasurer
of Property Capital Advisors, Inc. and also, from March 1974 to February 1980,
the Assistant Treasurer of Capital for Real Estate, which provided real estate
investment, asset management and consulting services.
Timothy J. Medlock is a Vice President and Treasurer of the Managing General
Partner and a Vice President and Treasurer of the Adviser which he joined in
1986. From June 1988 to August 1989, Mr. Medlock served as the Controller of the
Managing General Partner and PWPI. From 1983 to 1986, Mr. Medlock was associated
with Deloitte Haskins & Sells. Mr. Medlock graduated from Colgate University in
1983 and received his Masters in Accounting from New York University in 1985.
Thomas W. Boland is a Vice President of the Managing General Partner and a
Vice President and Manager of Financial Reporting of the Adviser which he
joined in 1988. From 1984 to 1987, Mr. Boland was associated with Arthur
Young & Company. Mr. Boland is a Certified Public Accountant licensed in the
state of Massachusetts. He holds a B.S. in Accounting from Merrimack College
and an M.B.A. from Boston University.
(f) None of the directors and officers were involved in legal proceedings
which are material to an evaluation of his or her ability or integrity as a
director or officer.
(g) Compliance With Exchange Act Filing Requirements: The Securities
Exchange Act of 1934 requires the officers and directors of the Managing General
Partner, and persons who own more than ten percent of the Partnership's limited
partnership units, to file certain reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and ten-percent
beneficial holders are required by SEC regulations to furnish the Partnership
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Partnership believes that, during the year ended March 31, 1996, all filing
requirements applicable to the officers and directors of the Managing General
Partner and ten-percent beneficial holders were complied with.
Item 11. Executive Compensation
The directors and officers of the Partnership's Managing General Partner
receive no current or proposed remuneration from the Partnership.
The Partnership is required to pay certain fees to the Adviser and the
General Partners are entitled to receive a share of Partnership cash
distributions and a share of profits and losses. These items are described in
Item 13.
The Partnership has never paid regular quarterly distributions of excess
cash flow. Furthermore, the Partnership's Limited Partnership Units are not
actively traded on any organized exchange, and no efficient secondary market
exists. Accordingly, no accurate price information is available for these Units.
Therefore, a presentation of historical Unitholder total returns would not be
meaningful.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership issuing Units of limited
partnership interest, not voting securities. All the outstanding stock of the
Managing General Partner, Third PW Growth Properties, Inc., is owned by
PaineWebber. Properties Associates 1985, L.P., the Associate General Partner, is
a Virginia limited partnership, certain limited partners of which are also
officers of the Adviser and the Managing General Partner. No limited partner is
known by the Partnership to own beneficially more than 5% of the outstanding
interests of the Partnership.
(b) Neither the officers and directors of the Managing General Partner nor
the limited partners of the Associate General Partner, individually, own any
Units of limited partnership interest of the Partnership. No officer or director
of the Managing General Partner, nor any limited partner of the Associate
General Partner, possesses a right to acquire beneficial ownership of Units of
limited partnership interest of the Partnership.
(c) There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
Subject to the Managing General Partner's overall authority, the business of
the Partnership is managed by PWPI pursuant to an advisory contract. The General
Partners, PWPI and other affiliates receive fees and compensation, determined on
an agreed upon basis, in consideration of various services performed in
connection with the sale of the Units, the management of the Partnership and the
acquisition, management, financing and disposition of Partnership investments.
In addition, the General Partners and their affiliates are reimbursed for their
direct expenses relating to the offering of units, the administration of the
Partnership and the operations of the Partnership's real property investments.
Selling commissions paid by the Partnership to PaineWebber Incorporated, a
wholly-owned subsidiary of PaineWebber, for the sale of Limited Partnership
interests aggregated $2,181,000 through the conclusion of the offering period.
In connection with investing Partnership capital in investment properties, PWPI
was paid acquisition fees of $1,283,000, equal to 5% of the gross proceeds of
the offering.
All distributable cash, as defined, for each fiscal year will be distributed
annually in the ratio of 95% to the Limited Partners and 5% to the General
Partners. All sale or refinancing proceeds shall be distributed in varying
proportions to the Limited and General Partners, as specified in the Partnership
Agreement.
Pursuant to the terms of the Partnership Agreement, taxable income and tax
losses of the Partnership from both current operations and capital transactions
generally will be allocated 95% to the Limited Partners and 5% to the General
Partners, except that the General Partners shall be allocated an amount of
taxable income from a capital transaction at least sufficient to eliminate their
deficit capital account balance. Allocations of the Partnership's operations
between the General Partners and the Limited Partners for financial accounting
purposes have been made in conformity with the allocations of taxable income or
tax loss.
Under the advisory contract, PWPI has specific management responsibilities:
to administer the day-to-day operations of the Partnership, and to report
periodically the performance of the Partnership to the Managing General Partner.
PWPI earns an annual management fee of up to 1/2 of 1% of the gross offering
proceeds. PWPI earned management fees of $128,000 for the year ended March 31,
1996. PWPI has deferred payment of its management fee since September of 1986
pending the generation of cash flow from the Partnership's investment
properties. Through September of 1986, PWPI received cash payments for
management fees totalling $16,000. Deferred management fees at March 31, 1996
consists of $1,243,000 due to PWPI. The advisory contract also provides that the
cumulative management fees payable to the Adviser shall not exceed $1,282,850
(5% of gross offering proceeds) plus 5% of distributable cash generated by the
Partnership. Unless the Partnership generates distributable cash from
operations, this cumulative limitation will be reached in the first quarter of
fiscal 1997.
An affiliate of the Managing General Partner performs certain accounting,
tax preparation, securities law compliance and investor communications and
relations services for the Partnership. The total costs incurred by this
affiliate in providing such services are allocated among several entities,
including the Partnership. Included in general and administrative expenses for
the year ended March 31, 1996 is $46,000, representing reimbursements to this
affiliate of the Managing General Partner for providing such services to the
Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets. Mitchell
Hutchins is a subsidiary of Mitchell Hutchins Asset Management, Inc., an
independently operated subsidiary of PaineWebber. Mitchell Hutchins earned fees
of $2,000 (included in general and administrative expenses) for managing the
Partnership's cash assets during fiscal 1996. Fees charged by Mitchell Hutchins
are based on a percentage of invested cash reserves which varies based on the
total amount of invested cash which Mitchell Hutchins manages on behalf of the
Adviser.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) and (2) Financial Statements and Schedules:
The response to this portion of Item 14 is submitted as a
separate section of this Report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
(3) Exhibits:
The exhibits listed on the accompanying index to exhibits at
page IV-3 are filed as part of this Report.
(b) No Current Reports on Form 8-K have been filed during the last
quarter of fiscal 1996.
(c) Exhibits
See (a) (3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this Report. See Index to Financial
Statements and Financial Statement Schedules at page F-1.
<PAGE>
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 GROWTH PARTNERS THREE L. P.
By: Third PW Growth Properties, Inc.
Managing General Partner
By: /s/ Lawrence A. Cohen
Lawrence A. Cohen
President and
Chief Executive Officer
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
By: /s/ Thomas W. Boland
Thomas W. Boland
Vice President
Dated: June 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Partnership and
in the capacities and on the dates indicated.
By:/s/ Albert Pratt Date: June 28, 1996
Albert Pratt
Director
By:/s/ J. Richard Sipes Date: June 28, 1996
J. Richard Sipes
Director
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a)(3)
PAINE WEBBER GROWTH PARTNERS THREE L. P.
INDEX TO EXHIBITS
Page Number in the Report
Exhibit No. Description of Document Or Other Reference
- ----------- ------------------------ -------------------------
(3) and (4) Prospectus of the Partnership Filed with the Commission
dated September 3, 1985, as pursuant to Rule 424(c)
supplemented, with particular and incorporated
reference to the Restated herein by reference.
Certificate and Agreement of
Limited Partnership
(10) Material contracts previously Filed with the Commission
filed as exhibits to registration pursuant to Section 13 or
statements and amendments thereto 15(d) of the Securities
of the registrant together with all Act of 1934 and
such contracts filed as exhibits of incorported herein
previously filed Forms 8-K and by reference.
Forms 10-K are hereby incorporated
herein by reference.
(13) Annual Report to Limited Partners No Annual Report for the
fiscal year 1996 has been
sent to the Limited
Partners. An Annual Report
will be sent to the
Limited Partners
subsequent to this filing.
(22) List of subsidiaries Included in Item I of
Part I of this Report Page
I-1, to which reference is
hereby made.
(27) Financial Data Schedule Filed as the last page
of EDGAR submission
following the Financial
Statements and Financial
Statement Schedule required
by Item 14.
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 14(a)(1) and (2) and Item 14(d)
PAINEWEBBER GROWTH PARTNERS THREE L. P.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Reference
PaineWebber Growth Partners Three L. P.:
Report of independent auditors F-2
Consolidated balance sheets as of March 31, 1996 and 1995 F-3
Consolidated statements of operations for the years ended
March 31, 1996, 1995 and 1994 F-4
Consolidated statements of changes in partners' deficit
for the years ended March 31, 1996, 1995 and 1994 F-5
Consolidated statements of cash flows for the years ended
March 31, 1996, 1995 and 1994 F-6
Notes to consolidated financial statements F-7
Schedule III - Real Estate and Accumulated Depreciation F-17
St. Louis Woodchase Associates:
Report of independent auditors F-18
Balance sheets as of December 31, 1995 and 1994 F-18
Statements of operations and changes in venturers' capital
(deficit) for the years ended December 31, 1995, 1994 and 1993 F-20
Statements of cash flows for the years ended December 31, 1995,
1994 and 1993 F-21
Notes to financial statements F-22
Schedule III - Real Estate and Accumulated Depreciation F-26
Other financial statement schedules have been omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the financial statements, including the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
PaineWebber Growth Partners Three L.P.:
We have audited the accompanying consolidated balance sheets of PaineWebber
Growth Partners Three L.P. as of March 31, 1996 and 1995, and the related
consolidated statements of operations, changes in partners' deficit, and cash
flows for each of the three years in the period ended March 31, 1996. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PaineWebber
Growth Partners Three L.P. at March 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
June 19, 1996
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L.P.
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1995
(In thousands, except for per Unit data)
ASSETS
1996 1995
Operating investment property, at cost:
Land $ 670 $ 670
Buildings 7,932 7,932
Equipment and improvements 572 541
--------- ---------
9,174 9,143
Less accumulated depreciation (3,336) (3,065)
--------- ---------
5,838 6,078
Investment in unconsolidated joint venture, at equity 73 254
Cash and cash equivalents 801 704
Accounts receivable 2 2
Prepaid expenses 16 15
Deferred expenses, net of accumulated amortization
of $320 ($265 in 1995) 67 122
Other assets 227 227
--------- ---------
$ 7,024 $ 7,402
========= ========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued expenses $ 107 $ 96
Accrued interest payable 231 196
Loans payable to affiliates 357 357
Advances from consolidated venture 95 37
Deferred management fees payable to affiliate 1,243 1,115
Note payable 8,330 8,330
--------- ---------
Total liabilities 10,363 10,131
Partners' deficit:
General Partners:
Capital contribution 1 1
Cumulative net loss (144) (114)
Limited Partners ($1,000 per Unit, 25,657
units outstanding at March 31, 1996 and 1995):
Capital contributions, net of offering costs
of $3,19322,464 22,464
Cumulative net loss (25,359) (24,779)
Cumulative cash distributions (301) (301)
--------- ---------
Total partners' deficit (3,339) (2,729)
--------- ---------
$ 7,024 $ 7,402
========= =========
See accompanying notes.
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1996, 1995 and 1994
(In thousands, except for per Unit data)
1996 1995 1994
Revenues:
Rental income $ 1,426 $ 1,361 $ 1,325
Interest income 34 33 16
-------- -------- --------
1,460 1,394 1,341
Expenses:
Interest expense and related fees 551 462 418
Depreciation expense 271 270 269
Property operating expenses 766 752 799
Partnership management fees 128 128 128
General and administrative 173 158 166
-------- -------- --------
1,889 1,770 1,780
-------- -------- --------
Operating loss (429) (376) (439)
Partnership's share of unconsolidated
venture's loss (181) (236) (233)
-------- -------- --------
Net loss $ (610) $ (612) $ (672)
======== ======== =========
Net loss per Limited Partnership Unit $ (22.61) $ (22.64) $ (24.87)
======== ======== =========
The above net loss per Limited Partnership Unit is based upon the 25,657 Limited
Partnership Units outstanding for each year.
See accompanying notes.
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the years ended March 31, 1996, 1995 and 1994
(In thousands)
General Limited
Partners Partners Total
Balance at March 31, 1993 $ (48) $ (1,397) $ (1,445)
Net loss (34) (638) (672)
---------- -------- ---------
Balance at March 31, 1994 (82) (2,035) (2,117)
Net loss (31) (581) (612)
---------- -------- ---------
Balance at March 31, 1995 (113) (2,616) (2,729)
Net loss (30) (580) (610)
---------- -------- ---------
Balance at March 31, 1996 $ (143) $ (3,196) $(3,339)
========== ======== =========
See accompanying notes.
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 1996, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1996 1995 1994
Cash flows from operating activities:
Net loss $ (610) $ (612) $ (672)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Partnership's share of unconsolidated
venture's loss 181 236 233
Depreciation expense 271 270 269
Amortization of deferred financing costs 55 55 55
Deferred management fees 128 128 128
Changes in assets and liabilities:
Accounts receivable - - 125
Prepaid expenses (1) 5 13
Accounts payable and accrued expenses 11 4 (8)
Accrued interest payable 35 29 25
Accounts payable - affiliates - - (2)
Advances from consolidated venture 58 37 -
------ ------ -------
Total adjustments 738 764 838
------ ------ -------
Net cash provided by operating
activities 128 152 166
Cash flows from investing activities:
Additions to operating investment property (31) (16) (1)
------ ------ -------
Net cash used in investing activities (31) (16) (1)
Cash flows from financing activities:
Withdrawals from (deposits to)
restricted cash - 201 (4)
------ ------ -------
Net cash provided by (used in)
financing activities - 201 (4)
------ ----- -------
Net increase in cash and cash equivalents 97 337 161
Cash and cash equivalents, beginning
of year 704 367 206
------ ------ -------
Cash and cash equivalents, end of year $ 801 $ 704 $ 367
====== ======= =======
Cash paid during the year for interest $ 396 $ 252 $ 214
====== ======= =======
See accompanying notes.
<PAGE>
PAINEWEBBER GROWTH PARTNERS THREE L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
PaineWebber Growth Partners Three L.P. (the "Partnership") is a limited
partnership organized pursuant to the laws of the State of Delaware in May
1985 for the purpose of investing in a portfolio of rental apartments or
commercial properties which had potential for capital appreciation. The
Partnership authorized the issuance of units (the "Units") of limited
partnership interests (at $1,000 per Unit) of which 25,657 were subscribed
and issued between September 3, 1985 and July 31, 1986. The Partnership
originally invested the proceeds of the offering in three operating
properties. On April 21, 1992, the Partnership's largest asset, the LaJolla
Marriott Hotel, was foreclosed on by the mortgage lender after extensive
workout negotiations failed to produce an acceptable modification agreement.
2. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles which requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of March 31, 1996 and 1995 and revenues
and expenses for each of the three years in the period ended March 31, 1996.
Actual results could differ from the estimates and assumptions used.
The joint ventures in which the Partnership has invested are required
to maintain their accounting records on a calendar year basis for income tax
reporting purposes. As a result, the Partnership records its share of the
operations of the joint ventures based on financial information which is
three months in arrears to that of the Partnership.
The accompanying consolidated financial statements include the
Partnership's investments in two joint venture partnerships which own
operating properties. As further discussed in Note 4, the Partnership
acquired complete control of Tara Associates, Ltd. in fiscal 1990 as a
result of an amendment to the joint venture agreement. Accordingly, the
accompanying financial statements present the financial position and results
of operations of this joint venture on a consolidated basis. As discussed
above, the joint venture has a December 31 year-end and operations of the
venture continue to be reported on a three-month lag. All material
transactions between the Partnership and the joint venture have been
eliminated upon consolidation, except for lag period cash transfers which
are accounted for as advances to or from affiliate. The consolidated joint
venture's operating investment property (Summerwind Apartments) is carried
at the lower of cost, adjusted for certain guaranteed payments (see Note 4)
and accumulated depreciation, or net realizable value. The net realizable
value of a property held for long-term investment purposes is measured by
the recoverability of the Partnership's investment through expected future
cash flows on an undiscounted basis, which may exceed the property's current
market value. The net realizable value of a property held for sale
approximates its market value. The Partnership's investment in the
Summerwind Apartments was considered to be held for long-term investment
purposes as of March 31, 1996 and 1995.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of" ("Statement 121"), which requires
impairment losses to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. Statement 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. Statement 121 is effective for
financial statements for years beginning after December 15, 1995. The
Partnership will adopt Statement 121 in fiscal 1997 and, based on current
circumstances, does not believe the adoption will have a material effect on
results of operations or financial position.
Depreciation expense is computed using the straight-line method over an
estimated useful life of thirty years for buildings and five years for
equipment and improvements. Acquisition fees paid to PaineWebber Properties
Incorporated (PWPI) have been capitalized and are included in the cost of
the operating investment property.
The Partnership accounts for its other joint venture investment using
the equity method because the Partnership does not have majority voting
control. Under the equity method the investment in a joint venture is
carried at cost adjusted for the Partnership's share of the venture's
earnings and losses and distributions. See Note 5 for a description of this
joint venture partnership.
The consolidated joint venture leases apartment units under leases with
terms generally of one year or less. Rental income is recorded monthly as
earned.
Deferred expenses at March 31, 1996 and 1995 consist of loan fees of
Tara Associates, Ltd., the Partnership's consolidated joint venture, which
are being amortized on a straight-line basis over the remaining term of the
loan. The amortization of such fees is included in interest expense on the
accompanying statements of operations.
For purposes of reporting cash flows, the Partnership considers all
highly liquid investments with original maturities of 90 days or less to be
cash equivalents.
No provision for income taxes has been made as the liability for such
taxes is that of the individual partners rather than the Partnership. Upon
the sale or disposition of the Partnership's investments, the taxable gain
or loss incurred will be allocated among the partners. In the case where a
taxable gain would be incurred, gain would first be allocated to the General
Partners in an amount at least sufficient to eliminate their deficit capital
balance. Any remaining gain would then be allocated to the Limited Partners.
In certain cases, the Limited Partners could be allocated taxable income in
excess of any liquidation proceeds that they may receive. Additionally, in
cases where the disposition of any investment involves a foreclosure by, or
voluntary conveyance to, the mortgage lender, taxable income could occur
without distribution of cash. Income from the sale or disposition of the
Partnership's investments would represent passive income to the partners
which could be offset by each partners' existing passive losses, including
any carryovers from prior years.
The cash and cash equivalents, accounts receivable and all liabilities
appearing on the accompanying consolidated balance sheets represent
financial instruments for purposes of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments."
With the exception of loans payable to affiliates, deferred management fees
payable to affiliate and note payable, the carrying amount of these assets
and liabilities approximates their fair value as of March 31, 1996 due to
the short-term maturities of these instruments. It is not practicable for
management to estimate the fair value of loans payable to affiliates and
deferred management fees payable to affiliate without incurring excessive
costs due to the unique nature of such obligations. The fair value of note
payable is estimated using discounted cash flow analysis, based on the
current market rates for similar types of borrowing arrangements.
Certain fiscal 1995 and 1994 amounts have been reclassified to conform
to the fiscal 1996 presentation.
3. The Partnership Agreement and Related Party Transactions
The General Partners of the Partnership are Third PW Growth Properties,
Inc. (the "Managing General Partner"), a wholly-owned subsidiary of
PaineWebber Group Inc. ("PaineWebber") and Properties Associates 1985, L.P.
(the "Associate General Partner"), a Virginia limited partnership, certain
limited partners of which are also officers of PWPI and the Managing General
Partner. Subject to the Managing General Partner's overall authority, the
business of the Partnership is managed by PWPI pursuant to an advisory
contract. The General Partners, PWPI and other affiliates receive fees and
compensation, determined on an agreed upon basis, in consideration of
various services performed in connection with the sale of the Units, the
management of the Partnership, and the acquisition, management, financing
and disposition of Partnership investments. In addition, the General
Partners and their affiliates are reimbursed for their direct expenses
relating to the offering of units, the administration of the Partnership and
the operations of the Partnership's real property investments.
Selling commissions paid by the Partnership to PaineWebber
Incorporated, a wholly-owned subsidiary of PaineWebber, for the sale of
Limited Partnership interests aggregated $2,181,000 through the conclusion
of the offering period. In connection with investing Partnership capital in
investment properties, PWPI was paid acquisition fees of $1,283,000, equal
to 5% of the gross proceeds of the offering.
All distributable cash, as defined, for each fiscal year will be
distributed annually in the ratio of 95% to the Limited Partners and 5% to
the General Partners. All sale or refinancing proceeds shall be distributed
in varying proportions to the Limited and General Partners, as specified in
the Partnership Agreement.
Pursuant to the terms of the Partnership Agreement, taxable income and
tax losses of the Partnership from both current operations and capital
transactions generally will be allocated 95% to the Limited Partners and 5%
to the General Partners, except that the General Partners shall be allocated
an amount of taxable income from a capital transaction at least sufficient
to eliminate their deficit capital account balance. Allocations of the
Partnership's operations between the General Partners and the Limited
Partners for financial accounting purposes have been made in conformity with
the allocations of taxable income or tax loss.
Under the advisory contract, PWPI has specific management
responsibilities: to administer the day-to-day operations of the
Partnership, and to report periodically the performance of the Partnership
to the Managing General Partner. PWPI earns an annual management fee of up
to 1/2 of 1% of the gross offering proceeds. PWPI earned management fees of
$128,000 for each of the three years ended March 31, 1996, 1995 and 1994.
PWPI has deferred payment of its management fee since September of 1986
pending the generation of cash flow from the Partnership's investment
properties. Through September of 1986, PWPI received cash payments for
management fees totalling $16,000. Deferred management fees at March 31,
1996 and 1995 consist of $1,243,000 and $1,115,000, respectively, due to
PWPI. The advisory contract also provides that the cumulative management
fees payable to the Adviser shall not exceed $1,282,850 (5% of gross
offering proceeds) plus 5% of distributable cash generated by the
Partnership. Unless the Partnership generates distributable cash from
operations, this cumulative limitation will be reached in the first quarter
of fiscal 1997.
Included in general and administrative expenses for the years ended
March 31, 1996, 1995 and 1994 is $46,000, $48,000 and $45,000, respectively,
representing reimbursements to an affiliate of the Managing General Partner
for providing certain financial, accounting and investor communication
services to the Partnership.
The Partnership uses the services of Mitchell Hutchins Institutional
Investors, Inc. ("Mitchell Hutchins") for the managing of cash assets.
Mitchell Hutchins is a subsidiary of Mitchell Hutchins Asset Management,
Inc., an independently operated subsidiary of PaineWebber. Mitchell Hutchins
earned fees of $2,000, $2,000 and $0 (included in general and administrative
expenses) for managing the Partnership's cash assets during fiscal 1996,
1995 and 1994, respectively.
4. Operating Investment Property
As of March 31, 1996 and 1995, the Partnership's balance sheet includes
one consolidated operating investment property: the Summerwind Apartments,
owned by Tara Associates, Ltd., a majority owned and controlled joint
venture. Tara Associates, Ltd., a Georgia limited partnership (the "joint
venture") was organized on December 19, 1983 to acquire and operate a
208-unit apartment complex, Summerwind Apartments, located in Jonesboro,
Georgia. On October 8, 1985 the Partnership acquired a 70% general
partnership interest in the joint venture. The remaining 30% general and
limited partnership interests were owned by John Lie-Nielson (the
"co-venturer").
Effective February 23, 1990, the Tara Associates, Ltd. joint venture
agreement was amended to provide that the co-venturer's entire general
partnership interest be converted to a limited partnership interest. In
addition, the amended agreement specifies that the co-venturer shall have no
further liability for guaranty fees or mandatory loans, as discussed further
below. The conversion of the co-venturer's interest to that of a limited
partner effectively gave the Partnership complete control over the
investment property. As a result, the accompanying financial statements
present the financial position and results of operations of the joint
venture on a consolidated basis. As discussed in Note 2, the Partnership's
policy is to report the operations of the joint venture on a three-month
lag. The aforementioned amendment did not change the partners' ownership
percentages in the venture or any other terms of the original joint venture
agreement besides those referred to above.
The aggregate cash investment by the Partnership for its interest was
approximately $2,427,000 (including an acquisition fee of $141,000 paid to
the Adviser). The apartment complex was acquired subject to a mortgage loan
of $8,330,000 at the time of closing. On March 15, 1990, the mortgage loan
was refinanced, as discussed further in Note 6. The letter of credit
securing the bonds payable which encumber the venture's operating investment
property is due to expire in March 1997. Unless the letter of credit is
replaced or extended, the venture's mortgage loan will become immediately
due and payable as of the scheduled expiration date. Management's plans with
respect to these circumstances are discussed in Note 6.
The joint venture agreement provides that distributable funds will be
distributed as follows: 1) to repay interest and principal on optional
loans; 2) to repay interest and principal on mandatory loans; 3) to the
Partnership until it has received $180,800 per calendar year for the period
from the date of organization; and 4) any remainder 70% to the Partnership
and 30% to the co-venturer. Net proceeds from a sale or refinancing shall be
made in the same manner as (1) through (3) above; and then: (4) to the
Partnership until it shall have received cumulative distributions of
$2,599,000; and; (5) any remainder, 70% to the Partnership and 30% to the
co-venturer.
Losses shall be allocated 100% to the Partnership and income shall be
allocated in the same proportion as distributable funds. If no funds were
distributed, then income is to be allocated 100% to the Partnership.
The joint venture agreement provides that if additional cash was
required to fund negative cash flow for a period of 24 months ending in
October 1987 (the guaranty period), the co-venturer and an affiliate of the
co-venturer were obligated to fund any capital deficits, as defined, of the
joint venture. The joint venture received payments aggregating $647,485
through the end of the Guaranty Period. Such payments have been recorded as
a reduction in the basis of the operating investment property for financial
reporting purposes. For a period of twelve months following the guaranty
period, the co-venturer and an affiliate were obligated to make mandatory
loans to the joint venture to fund any negative cash flow. The mandatory
loans bear interest at the prime rate plus 1% of the lending institution. At
December 31, 1995 and 1994, the joint venture had mandatory loans payable to
the co-venturer and an affiliate of $357,000. Subsequent to October 1988, if
the joint venture requires additional cash, it may be provided by either
partner as optional loans. Optional loans bear interest at the prime rate
plus 1% per annum. The Partnership has optional loans receivable from the
venture totalling $726,000 and $801,000 at December 31, 1995 and 1994,
respectively. Outstanding accrued interest payable to the Partnership
totalled $18,000 and $4,000 as of December 31, 1995 and 1994, respectively.
The principal balance of these optional loans, along with the related
interest expense and accrued interest, are eliminated in consolidation.
The joint venture has entered into a property management contract with
an affiliate of the co-venturer, cancellable at the Partnership's option
upon the occurrence of certain events. The management fee is equal to 5% of
the gross receipts, as defined.
The following is a summary of property operating expenses for the years
ended December 31, 1995, 1994 and 1993 (in thousands):
1995 1994 1993
Property operating expenses:
Repairs and maintenance $ 232 $ 208 $ 288
Salaries and related expenses 162 153 132
Administrative and other 113 117 118
Property taxes 104 118 92
Utilities 84 88 102
Management fees 71 68 67
-------- -------- --------
$ 766 $ 752 $ 799
======== ======== ========
5. Investment in Unconsolidated Joint Venture
The Partnership has an investment in one unconsolidated joint venture,
St. Louis Woodchase Associates. The unconsolidated joint venture is
accounted for on the equity method in the Partnership's financial statements
based on financial information of the venture which is three months in
arrears to that of the Partnership.
Condensed financial statements of the unconsolidated joint venture, for
the periods indicated, are as follows:
Condensed Balance Sheets
December 31, 1995 and 1994
(in thousands)
Assets
1995 1994
Current assets $ 112 $ 96
Operating investment property, net 7,822 8,032
Deferred expenses, net 125 70
------- --------
$ 8,059 $ 8,198
======= ========
Liabilities and Venturers' Capital (Deficit)
Current portion of long-term mortgage debt $ 77 $ 93
Other current liabilities 80 276
Other liabilities 42 38
Loans from venturers and accrued interest 370 344
Long-term mortgage debt 8,111 7,809
Partnership's share of venturers' capital 64 245
Co-venturer's share of venturers' deficit (685) (607)
------- --------
$ 8,059 $ 8,198
======= ========
<PAGE>
Condensed Summary of Operations
For the years ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
Rental revenues $ 1,518 $ 1,443 $ 1,387
Interest income 1 1 3
Other income 54 32 35
-------- --------- -------
Total revenues 1,573 1,476 1,425
Property operating expenses 598 586 584
Interest expense 873 884 830
Depreciation and amortization 361 342 344
-------- --------- -------
Total expenses 1,832 1,812 1,758
-------- --------- -------
Net loss $ (259) $ (336) $ (333)
======== ========= =========
Net loss:
Partnership's share of
net loss $ (181) $ (236) $ (233)
Co-venturer's share of
net loss (78) (100) (100)
-------- --------- -------
$ (259) $ (336) $ (333)
======== ========= =========
Reconciliation of Partnership's Investment
March 31, 1996 and 1995
(in thousands)
1996 1995
Partnership's share of capital at
December 31, as shown above $ 64 $ 245
Partnership's share of venture's current
liabilities 9 9
--------- ------
Investment in unconsolidated joint venture,
at equity at March 31 $ 73 $ 254
========= =======
Investment in unconsolidated joint venture, at equity, at March 31, 1996
and 1995 is the Partnership's net investment in the Woodchase joint venture.
The joint venture is subject to a partnership agreement which determines the
distribution of available funds, the disposition of the venture's assets and
the rights of the partners, regardless of the Partnership's percentage
ownership interest in the venture. As a result, substantially all of the
Partnership's investment in this joint venture is restricted as to
distributions.
A description of the unconsolidated joint venture's property and the terms of
the joint venture agreement are summarized below:
St. Louis Woodchase Associates - St. Louis, Missouri
St. Louis Woodchase Associates, a Missouri general partnership (the "joint
venture") was organized on December 27, 1985 by PaineWebber Growth Partners
Three, L. P., a Delaware limited partnership (the "Partnership") and St.
Louis Woodchase Company, Ltd. (the "co-venturer") to acquire and operate
Woodchase Apartments, a 186-unit apartment complex in St. Louis, Missouri.
The co-venturer is an affiliate of The Paragon Group. The property was
purchased on December 31, 1985.
The aggregate cash investment by the Partnership for its interest was
approximately $2,465,000 (including an acquisition fee of $145,000 paid to
the Adviser). The apartment complex was encumbered by a mortgage loan of
$10,200,000 at the time of purchase. On June 7, 1988 the joint venture which
owns the Woodchase Apartments entered into an agreement with the original
mortgage holder which permitted the repayment of the mortgage on July 1,
1988 at a discount of more than $2 million. During fiscal 1994, the joint
venture refinanced its $8,000,000 nonrecourse mortgage notes payable secured
by the operating investment property with the existing lender. The new note
payable had an effective date of November 1, 1993 and formally closed on
March 1, 1994. The note bore interest at 9% and was payable in monthly
installments, including principal and interest of $66,667 through November
1, 1998. Additional interest at the rate of 1.75% accrued monthly on the
outstanding principal balance and 10.75% accrued on the unpaid interest
balance. Subject to the terms of the loan agreement, net cash flow from
operations, as defined and if available, was to be applied to fund the
additional interest quarterly. In addition, the joint venture was required
to submit monthly escrow deposits of $3,875 for a replacement reserve.
Amounts in the replacement reserve were pledged as additional collateral for
the operating investment property. The mortgage loan was fully prepayable
without penalty through September 1995, after which time a prepayment
penalty would be owed on any prepayment prior to maturity. On September 13,
1995, the Partnership, along with its co-venture partner, refinanced the
mortgage debt secured by the Woodchase Apartments with a new lender. The new
non-recourse mortgage loan is in the initial principal amount of $8,200,000
and bears interest at a rate of 7.5% per annum. The new loan requires
monthly principal and interest payments of $57,000 and matures on October 1,
2002. The proceeds of the new loan were used to repay the existing $8
million debt as well as cover a portion of the refinancing costs. The
Partnership advanced $164,000 to the venture to cover the remaining
transaction costs. Although the principal amount of the new loan increased
slightly, the venture's annual debt service payments have been reduced by
$112,000 due to the reduction in the interest rate, resulting in positive
cash flow for the joint venture. During the quarter ended December 31, 1995,
the Partnership received a distribution of $164,000 from the joint venture
in repayment of the advances referred to above which were made in connection
with the September 1995 refinancing transaction.
The joint venture agreement provides that the Partnership will receive from
available cash flow (after payment of any interest on operating loans by the
parties to the joint venture) an annual, cumulative preferred base return,
payable monthly, of 8% of the Partnership's net investment. Thereafter any
remaining cash flow shall be distributed 70% to the Partnership and 30% to
the co-venturer. The Partnership's cumulative preference return in arrears
totalled approximately $1,853,000 and $1,666,000 at December 31, 1995 and
1994, respectively.
After the end of each month during the year in which the Partnership has not
received its cumulative preference return, the co-venturer shall distribute
to the Partnership the lesser of (a) the excess, if any, of the
Partnership's cumulative preference return over the aggregate amount of net
cash flow previously distributed to the Partnership during the year or (b)
any net cash flow distributed to the co-venturer during the year.
Net income and net loss from operations shall be allocated in any year in
the same proportions as actual cash distributions, provided that the
co-venturer shall not be allocated less than 30% of the net income or net
loss after the Partnership has received cumulative losses equal to
$4,086,250. The Partnership was allocated cumulative losses equal to this
threshold during 1990. Additionally, the co-venturer shall not be allocated
net income in excess of cash distributions distributed to it during any
year.
Upon sale or refinancing, proceeds shall be distributed in the following
order of priority (after payment of mortgage debt and other indebtedness of
the joint venture): 1) the Partnership and the co-venturer shall receive any
amounts due for operating loans or additional cash contributions; 2) the
Partnership shall receive $2,685,250 plus certain closing costs incurred; 3)
the Partnership shall receive the aggregate amount of its cumulative annual
preference return not previously distributed; 4) the co-venturer shall
receive any accrued interest and principal of mandatory loans (as described
below); 5) the manager of the complex, an affiliate of the co-venturer,
shall receive any subordinated management fees. Any remaining proceeds shall
be distributed 70% to the Partnership and 30% to the co-venturer.
The co-venturer guaranteed payment of all operating expenses and debt
service plus a $3,000 annual return to the Partnership from the date of
closing through December 31, 1987 (the Guaranty Period). The joint venture
received payments aggregating $347,000 during the Guaranty Period. Such
amounts have been recorded as a reduction of the basis of the operating
property for financial reporting purposes. The co-venturer was required to
make mandatory loans to the joint venture to pay all operating expenses and
debt service plus a $3,000 annual return to the Partnership for the
twelve-month period following the Guaranty Period. Mandatory loans totalling
$130,000 have been made by the co-venturer. Such loans bear interest at 1%
above the prime lending rate. The co-venturer was paid a fee of $288,000 in
consideration for its agreement to provide the guaranty and make the
mandatory loans. After the mandatory loan period, if additional cash is
required in connection with the joint venture, it may be provided by the
Partnership and the co-venturer as loans (evidenced by operating notes) to
the joint venture. Such loans are to be provided 70% by the Partnership and
30% by the co-venturer. Outstanding operating loans totalling $87,000 have
been made 100% by the co-venturer through December 31, 1995. Interest
payable to the co-venturer on the mandatory and optional loans totalled
$153,000 and $127,000 at December 31, 1995 and 1994, respectively.
The joint venture has entered into a property management contract with an
affiliate of the co-venturer, cancellable at the option of the joint venture
upon the occurrence of certain events. The management fee is equal to 5% of
the gross receipts, as defined.
6. Note payable
Note payable at March 31, 1996 and 1995 consists of the following (in
thousands):
1996 1995
Mortgage loan payable which secures
Housing Authority of Clayton County
Collateralized Loan-to-Lender
Housing Revenue Bonds. The
nonrecourse mortgage loan is
secured by a deed to secure debt
and a security agreement covering
Tara Associates Ltd.'s real and
personal property. See discussions
below regarding refinancing in
calendar year 1990 and potential
maturity in March of 1997. The fair
value of this note payable
approximated its carrying value as
of December 31, 1995. $ 8,330 $ 8,330
======== =======
The Summerwind Apartments were originally financed with the proceeds of
a 10 7/8% mortgage loan which secured $8,330,000 1983 Series A Housing
Authority of Clayton County Collateralized Loan-to-Lender Housing Revenue
Bonds. On March 15, 1990, the original loan secured by the Summerwind
Apartments was refinanced through the issuance of $8,330,000 of 1989 Series
Housing Authority of Clayton County Collateralized Loan-to-Lender Revenue
Bonds. The refinancing changed the interest rate on the bond from a fixed
rate of 10-7/8% per annum to a floating rate. The floating rate is reset
weekly based on the market rate for tax exempt securities with similar
maturities, as determined by the bond underwriter (3.9% and 5.7% at December
31, 1995 and 1994, respectively). The maximum interest rate is 15%. During
the floating rate period, the Partnership may elect, with the written
consent of the lender and the Credit Facility obligor, as defined, to have
the floating rate converted to a fixed rate. If the floating rate is
converted to a fixed rate, the bonds would then be subject to a redemption
premium as specified in the Bond Agreement. Interest only is payable monthly
in arrears on the first day of each month and on the maturity date of the
loan.
The revenue bonds, which are secured by the mortgage loan, are also
secured by an irrevocable letter of credit agreement (the Agreement) between
the lender and the Housing Authority of Clayton County. The letter of
credit, which will expire on March 16, 1997, is an irrevocable obligation of
the lender up to an amount sufficient to pay the then outstanding principal
of the bonds plus 45 days interest calculated at 15% per annum. Under the
terms of the Agreement, the joint venture must pay a fee to the lender at an
annual rate of 1% of the mortgage loan. The fee is payable monthly in
arrears until termination of the Agreement. During 1995, 1994 and 1993, fees
incurred under the letter of credit were $83,300 in each year and have been
included in interest expense and related fees in the accompanying statements
of operations. The Summerwind mortgage loan agreement provides, among other
things, that at least 20% of the project units are to be set aside for "low
income housing", as defined. In addition, the loan has certain prepayment
penalties, as well as the mandatory repayment of the outstanding balance of
the loan upon a determination that interest on the underlying revenue bonds
is includable for Federal income tax purposes in income of the recipients.
The mortgage loan secured by the Summerwind Apartments is subject to
various prepayment provisions including a mandatory redemption on March 16,
1997, the first scheduled remarketing date, as defined, which coincides with
the expiration of the letter of credit agreement referred to above. Unless
the letter of credit is replaced or extended, the venture's mortgage loan
will become immediately due and payable upon this scheduled expiration date.
Management is currently assessing the available alternatives with respect to
the pending expiration of the letter of credit, which include selling the
property and repaying the mortgage indebtedness prior to March of 1997,
refinancing the bonds with conventional mortgage financing or negotiating a
new letter of credit agreement. Management will pursue the course of action
which it believes will result in the maximum overall return to the Limited
Partners. However, there are no assurances that any of these alternatives
are achievable. This situation raises substantial doubt about the ability of
Tara Associates, Ltd. to continue as a going concern. The accompanying
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and the classification of assets or the
amounts and classification of liabilities related to Tara Associates, Ltd.
which might result from the outcome of this uncertainty. The total assets,
total liabilities, gross revenues and total expenses of Tara Associates,
Ltd. as of and for the year ended December 31, 1995 which are included in
the accompanying fiscal 1996 consolidated financial statements totalled
$5,902,000, $9,749,391, $1,427,952 and $1,582,253, respectively. In
addition, net cash provided by operating activities of Tara Associates, Ltd.
for the year ended December 31, 1995 reflected in the accompanying fiscal
1996 consolidated statement of cash flows totalled $158,000.
7. Legal Proceedings
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 various 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 Third PW Growth Properties, 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.
The amended complaint in the New York Limited Partnership Actions
alleges that, in connection with the sale of interests in PaineWebber Growth
Partners Three L.P., PaineWebber, Third PW Growth Properties, Inc. and
PA1985 (1) failed to provide adequate disclosure of the risks involved; (2)
made false and misleading representations about the safety of the
investments and the Partnership's anticipated performance; and (3) marketed
the Partnership to investors for whom such investments were not suitable.
The plaintiffs, who purport to be suing on behalf of all persons who
invested in PaineWebber Growth Partners Three L.P., also allege that
following the sale of the partnership interests, PaineWebber, Third PW
Growth Properties, Inc. and PA1985 misrepresented financial information
about the Partnership's value and performance. The amended complaint alleges
that PaineWebber, Third PW Growth Properties, Inc. and PA1985 violated the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and the federal
securities laws. The plaintiffs seek unspecified damages, including
reimbursement for all sums invested by them in the partnerships, as well as
disgorgement of all fees and other income derived by PaineWebber from the
limited partnerships. In addition, the plaintiffs also seek treble damages
under RICO.
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 which the parties expect to submit to the court for its
consideration and approval within the next several months. Until a
definitive settlement and plan of allocation is approved by the court, there
can be no assurance what, if any, payment or non-monetary benefits will be
made available to investors in PaineWebber Growth Partners Three L.P.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiffs' purchases of various limited partnership interests, including
those offered by the Partnership. The complaint alleges, among other things,
that PaineWebber and its related entities committed fraud and
misrepresentation and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting limited partnership investments that were
unsuitable for the plaintiffs and by overstating the benefits, understating
the risks and failing to state material facts concerning the investments.
The complaint seeks compensatory damages of $15 million plus punitive
damages against PaineWebber. The eventual outcome of this litigation and the
potential impact, if any, on the Partnership's unitholders cannot be
determined at the present time.
In June 1996, approximately 50 plaintiffs filed an action entitled
Bandrowski v. PaineWebber Inc. in Sacramento, California Superior Court
against PaineWebber Incorporated and various affiliated entities concerning
the plaintiff's purchases of various limited partnership interests,
including those offered by the Partnership. The complaint is substantially
similar to the complaint in the Abbate action described above, and seeks
compensatory damages of $3.4 million plus punitive damages.
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
this litigation. At the present time, the Managing General Partner 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.
<PAGE>
<TABLE>
Schedule III - Real Estate and Accumulated Depreciation
PAINE WEBBER GROWTH PARTNERS THREE, L.P.
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
March 31, 1996
(In thousands)
<CAPTION>
Cost
Capitalized Life on Which
(Removed) Depreciation
Initial Cost to Subsequent to Gross Amount at Which Carried at in Latest
Partnership Acquisition End of Year Income
Buildings & Buildings & Buildings & Accumulated Date of Date Statement
Description Encumbrances Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summerwind
Apartments
Jonesboro,
GA $ 8,330 $ 720 $ 8,611 $ (157) $670 $8,504 $ 9,174 $ 3,336 1985 10/8/85 5 - 30 yrs
Notes
(A) The aggregate cost of real estate owned at March 31, 1996 for Federal income tax purposes is approximately $9,380.
(B) See Note 6 of Notes to Financial Statements for a description of the debt encumbering the property.
(C) Reconciliation of real estate owned:
1996 1995 1994
Balance at beginning of period $ 9,143 $ 9,127 $9,126
Acquisitions and improvements 31 16 1
-------- -------- ------
Balance at end of period $ 9,174 $ 9,143 $9,127
======== ======== ======
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 3,065 $ 2,795 $2,526
Depreciation expense 271 270 269
------- -------- ------
Balance at end of period $ 3,336 $ 3,065 $2,795
======== ======== ======
(E) Costs removed subsequent to acquisition represent guaranty payments from the co-venturer (See Note 4).
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners St. Louis Woodchase Associates:
We have audited the accompanying balance sheets of St. Louis Woodchase
Associates (the "Joint Venture") as of December 31, 1995 and 1994 and the
related statements of operations and changes in venturers' capital (deficit),
and cash flows for each of the three years in the period ended December 31,
1995. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Joint Venture's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of St. Louis Woodchase
Associates at December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
January 26, 1996
<PAGE>
ST. LOUIS WOODCHASE ASSOCIATES
BALANCE SHEETS
December 31, 1995 and 1994
(In thousands)
ASSETS
1995 1994
Current assets:
Cash and cash equivalents $ 81 $ 66
Escrow deposits 18 18
Rent receivable 3 2
Prepaid expenses 10 10
------ -------
Total current assets 112 96
Operating investment property, at cost:
Land 983 983
Building and improvements 10,114 10,039
Furniture and fixtures 838 762
------ -------
11,935 11,784
Less accumulated depreciation (4,113) (3,752)
------ -------
Net operating investment property 7,822 8,032
Deferred expenses, net of accumulated amortization
of $5 ($22 in 1994) 125 70
------ -------
$ 8,059 $ 8,198
======= ========
LIABILITIES AND VENTURERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 77 $ 93
Accounts payable and accrued expenses 27 26
Accrued interest 51 246
Payable to property manager 2 4
Total current liabilities 157 369
Tenant security deposits 33 29
Distribution payable to venturer 9 9
Venturer loans and accrued interest 370 344
Long-term debt 8,111 7,809
Venturers' deficit (621) (362)
------ -------
$ 8,059 $ 8,198
======= ========
See accompanying notes.
<PAGE>
ST. LOUIS WOODCHASE ASSOCIATES
STATEMENTS OF OPERATIONS AND CHANGES IN VENTURERS' CAPITAL (DEFICIT)
For the years ended December 31, 1995, 1994 and 1993
(In thousands)
1995 1994 1993
Revenues:
Rental income $ 1,518 $ 1,443 $ 1,387
Interest income 1 1 2
Other revenues 54 32 35
---------- --------- -------
1,573 1,476 1,424
Expenses:
Depreciation expense 361 342 343
Mortgage interest 873 884 830
Interest expense on partner loans 26 21 18
Repairs and maintenance 90 86 95
Salaries and related costs 114 117 130
Real estate taxes 85 105 103
Management fees 78 72 71
Utilities 75 63 52
General and administrative 89 82 75
Insurance 26 26 27
Professional fees 15 14 13
---------- --------- -------
1,832 1,812 1,757
Net loss (259) (336) (333)
Venturers' capital (deficit),
beginning of year (362) (26) 307
---------- --------- --------
Venturers' deficit, end of year $ (621) $ (362) $ (26)
========== ======== =========
See accompanying notes.
<PAGE>
ST. LOUIS WOODCHASE ASSOCIATES
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1995 1994 1993
Cash flows from operating activities:
Net loss $ (259) $ (336) $ (333)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 361 342 343
Amortization of deferred interest 75 19 16
Changes in assets and liabilities:
Escrow deposits - (17) -
Rents receivable (1) (2) -
Prepaid expenses - (1) (1)
Accounts payable and accrued expenses 1 (34) 30
Accrued interest (195) 151 28
Accrued interest on venturer loans 26 21 18
Tenant security deposits 4 3 (3)
Payable to property manager (2) 4 (2)
------ ------ ------
Total adjustments 269 486 429
------ ------ ------
Net cash provided by operating
activities 10 150 96
Cash flows from investing activities:
Additions to operating investment property (151) (54) (6)
Cash flows from financing activities:
Refund (payment) of refinancing deposit - 40 (40)
Increase in deferred expenses (130) (27) (65)
Payments of principal on long-term debt (7,914) (86) (13)
Proceeds from long-term debt 8,200 - -
------ ------ ------
Net cash provided by (used for)
financing activities 156 (73) (118)
Net increase (decrease) in cash
and cash equivalents 15 23 (28)
Cash at beginning of year 66 43 71
------ ------ ------
Cash and cash equivalents, end of year $ 81 $ 66 $ 43
======= ======= ========
Cash paid during the year for interest $ 993 $ 714 $ 787
======= ======= ========
See accompanying notes.
<PAGE>
ST. LOUIS WOODCHASE ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
General
St. Louis Woodchase Associates, a Missouri general partnership, (the "Joint
Venture") was organized on December 27,1985 in accordance with a Joint Venture
Agreement between PaineWebber Growth Partners Three Limited Partnership (the
"Partnership") and St. Louis Woodchase Company, Ltd. (the "Co-Venturer"). The
Joint Venture was organized to purchase and operate an apartment complex in St.
Louis County, Missouri.
Basis of Presentation
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles
which requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of December 31, 1995 and 1994 and revenues and expenses for
each of the three years in the period ended December 31, 1995. Actual results
could differ from the estimates and assumptions used.
Generally, the records of the joint venture are maintained on the accrual
basis of accounting used for federal income tax purposes and adjusted to
generally accepted accounting principles for financial reporting purposes,
principally for depreciation.
Operating investment property
The operating investment property is carried at the lower of cost, adjusted
for certain guaranteed payments and accumulated depreciation, or net realizable
value. The net realizable value of a property held for long-term investment
purposes is measured by the recoverability of the investment from expected
future cash flows on an undiscounted basis, which may exceed the property's
market value. The net realizable value of a property held for sale approximates
its current market value. The operating investment property was considered to be
held for long-term investment purposes as of December 31, 1995 and 1994.
Depreciation expense is computed using the straight-line method over an
estimated useful life of thirty years for buildings and improvements and five
years for furniture and fixtures. Acquisition fees have been capitalized and are
included in the cost of the operating investment properties.
Deferred expenses
Deferred expenses relate to costs associated with certain debt
refinancings. Deferred financing costs are amortized using the straight-line
method over the respective terms of the loans. The amortization of such fees is
included in interest expense on the accompanying statements of operations.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents includes
cash on hand, cash deposited with banks and certificates of deposit with
original maturities of three months or less.
Income tax matters
The Joint Venture is not a taxable entity and the results of its operations
are included in the tax returns of the partners. Accordingly, no income tax
provision is reflected in the accompanying financial statements.
<PAGE>
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, tenant receivables,
escrow deposits and current liabilities approximates their fair value due to the
short-term maturities of these instruments. The fair value of the Partnership's
long-term debt is estimated using a discounted cash flow analysis, based on the
current market rate of similar types of borrowing arrangements. It is not
practicable for management to estimate the fair value of Venturer loans without
incurring excessive costs due to the unique nature of such obligations.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The Partnership will adopt Statement 121
in 1996 and, based on current circumstances, does not believe the adoption will
have a material effect on results of operations or financial position.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. The Partnership Agreement
The joint venture agreement provides that the Partnership will receive from
available cash flow (after payment of any interest on operating loans by the
parties to the joint venture) an annual, cumulative preferred base return,
payable monthly, of 8% of the Partnership's net investment. Thereafter any
remaining cash flow shall be distributed 70% to the Partnership and 30% to the
Co-Venturer. The Partnership's cumulative preference returns in arrears were
approximately $1,853,000 and $1,666,000 at December 31, 1995 and 1994,
respectively.
After the end of each month during the year in which the Partnership has
not received its cumulative preference return, the Co-Venturer shall distribute
to the Partnership the lesser of (a) the excess, if any, of the Partnership's
cumulative preference return over the aggregate amount of net cash flow
previously distributed to the Partnership during the year or (b) any net cash
flow distributed to the Co-Venturer during the year.
Net income and net loss from operations shall be allocated in any year in
the same proportions as actual cash distributions, provided that the Co-Venturer
shall not be allocated less than 30% of the net income or net loss after the
Partnership has received cumulative losses equal to $4,086,250. The Partnership
was allocated cumulative losses equal to this threshold during 1990.
Additionally, the Co-Venturer shall not be allocated net income in excess of
cash distributions distributed to it during any year.
Upon sale or refinancing, proceeds shall be distributed in the following
order of priority (after payment of mortgage debt and other indebtedness of the
Joint Venture): 1) the Partnership and the Co-Venturer shall receive any amounts
due for operating loans or additional cash contributions; 2) the Partnership
shall receive $2,685,250 plus certain closing costs incurred; 3) the Partnership
shall receive the aggregate amount of its cumulative annual preference return
not previously distributed; 4) the Co-Venturer shall receive any accrued
interest and principal on mandatory loans (as described below); 5) the manager
of the complex, an affiliate of the Co-Venturer, shall receive any subordinated
management fees. Any remaining proceeds shall be distributed 70% to the
Partnership and 30% to the Co-Venturer.
The Co-Venturer guaranteed payment of all operating expenses and debt
service plus a $3,000 annual return to the Partnership from the date of closing
through December 31, 1987 (the Guaranty Period). The Joint Venture received
payments aggregating $347,290 during the Guaranty Period. Such amounts have been
recorded as a reduction of the basis of the operating property for financial
reporting purposes. The Co-Venturer was required to make mandatory loans to the
joint venture to pay all operating expenses and debt service plus a $3,000
annual return to the Partnership for the twelve-month period following the
Guaranty Period. Mandatory loans totalling $130,211 have been made by the
Co-Venturer. Such loans bear interest at 1% above the prime lending rate. The
Co-Venturer was paid a fee of $288,000 in consideration for its agreement to
provide the guaranty and make the mandatory loans. After the mandatory loan
period, if additional cash is required in connection with the Joint Venture, it
may be provided by the Partnership and the Co-Venturer as loans (evidenced by
operating notes) to the Joint Venture. Such loans are to be provided 70% by the
Partnership and 30% by the Co-Venturer and would bear interest at the prime
rate. In the event that a partner fails to make its respective share of a loan,
the other partner may make the loan to the Joint Venture for the defaulting
partner's share at twice the prime rate. Outstanding operating loans totalling
$87,000 have been made 100% by the Co-Venturer through December 31, 1995.
The joint venture has entered into a property management contract with an
affiliate of the Co-Venturer, cancellable at the option of the joint venture
upon the occurrence of certain events. The management fee is equal to 5% of the
gross receipts, as defined.
3. Venturer loans
Venturer loans consist of the following (in thousands):
1995 1994
Deficit loans, payable to the
Co-Venturer, interest at 1%
over prime (9.5% at December
31, 1995) $ 130 $ 130
Operating loans, payable to
the Co-Venturer, interest at
prime (8.5% at December 31,
1995) 26 26
Operating loans, payable to
the Co-Venturer, interest at
twice the prime rate (17.0% at
December 31, 1995) 61 61
---- ------
$ 217 $ 217
====== ======
Repayment of the above loans (and accrued interest) is limited to net cash
flow and capital proceeds, as defined. Unpaid interest on partner loans at
December 31, 1995 and 1994 totalled approximately $153,000 and $127,000,
respectively. Interest on the $61,000 operating loan is first in priority for
payment from net cash flow available for distribution.
<PAGE>
4. Long-term debt
Long-term debt was refinanced September 14, 1995 and consists of a 7.5%
nonrecourse mortgage note secured by the operating investment property and an
assignment of rents and leases. The mortgage is payable in monthly
installments, including principal and interest, of $57,336 through October 1,
2002, at which time the final principal installment of $7,540,598 plus any
unpaid accrued interest is due. In addition, the property submits monthly
escrow deposits of $8,531 for tax escrow. Debt refinancing costs of $130,298
were capitalized during 1995. The fair value of the mortgage note payable
approximated its carrying value as of December 31, 1995.
The scheduled annual principal payments to retire the long-term debt are as
follows (in thousands):
1996 $ 77
1997 82
1998 89
1999 95
2000 104
Thereafter 7,741
-------
$ 8,188
=======
<PAGE>
<TABLE>
Schedule III - Real Estate and Accumulated Depreciation
ST. LOUIS WOODCHASE ASSOCIATES
SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
(In thousands)
<CAPTION>
Cost
Capitalized Life on Which
(Removed) Depreciation
Initial Cost to Subsequent to Gross Amount at Which Carried at in Latest
Partnership Acquisition End of Year Income
Buildings & Buildings & Buildings & Accumulated Date of Date Statement
Description Encumbrances Land Improvements Improvements Land Improvements Total Depreciation Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Woodchase
Apartments
St. Louis,
MO $ 8,188 $1,013 $9,924 $ 998 $983 $10,952 $11,935 $ 4,113 1985 12/31/85 5 - 30 yrs
Notes
(A) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax purposes is approximately $12,157.
(B) See Note 4 of Notes to Financial Statements for a description of the debt
encumbering the property.
(C) Reconciliation of real estate owned:
1995 1994 1993
Balance at beginning of period $ 11,784 $ 11,730 $ 11,724
Acquisitions and improvements 151 54 6
-------- -------- --------
Balance at end of period $ 11,935 $ 11,784 $ 11,730
======== ======== ========
(D) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 3,752 $ 3,410 $ 3,067
Depreciation expense 361 342 343
-------- -------- --------
Balance at end of period $ 4,113 $ 3,752 $ 3,410
======== ======== ========
(E) Costs capitalized subsequent to acquisition are net of certain guaranty payments from the co-venturer (see Note 2).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the year ended March 31, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 801
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 819
<PP&E> 9,247
<DEPRECIATION> 3,336
<TOTAL-ASSETS> 7,024
<CURRENT-LIABILITIES> 433
<BONDS> 8,330
0
0
<COMMON> 0
<OTHER-SE> (3,339)
<TOTAL-LIABILITY-AND-EQUITY> 7,024
<SALES> 0
<TOTAL-REVENUES> 1,460
<CGS> 0
<TOTAL-COSTS> 1,338
<OTHER-EXPENSES> 181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 551
<INCOME-PRETAX> (610)
<INCOME-TAX> 0
<INCOME-CONTINUING> (610)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (610)
<EPS-PRIMARY> (22.61)
<EPS-DILUTED> (22.61)
</TABLE>
