UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
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 : 0-17150
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
(Exact name of registrant as specified in its charter)
Texas 76-0147579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X . No .
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and March 31, 1995
(Unaudited)
(In Thousands)
ASSETS
September 30 March 31
Operating investment properties:
Land $ 18,190 $ 18,190
Buildings and improvements 76,825 76,825
95,015 95,015
Less accumulated depreciation (23,895) (22,386)
71,120 72,629
Cash and cash equivalents 2,912 1,292
Restricted cash 2,095 3,045
Accounts receivable - affiliates 13 11
Prepaid and other assets 55 67
Deferred expenses, net 825 880
$ 77,020 $ 77,924
LIABILITIES AND PARTNERS' DEFICIT
Long-term debt in technical default $ 83,745 $ 83,745
Accounts payable and accrued expenses 526 390
Accrued interest and fees 3,747 3,156
Tenant security deposits 397 441
Minority interest in net assets of
consolidated ventures 1,219 1,221
Equity in losses of unconsolidated joint venture
in excess of investments and advances 2,143 2,099
Deferred gain on forgiveness of debt 3,915 4,087
Long-term debt 9,125 9,125
Total partners' deficit (27,797) (26,340)
$ 77,020 $ 77,924
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the six months ended September 30, 1995 and 1994
(Unaudited)
(In Thousands)
General Limited
Partners Partners
Balance at March 31, 1994 $(2,396) $(21,862)
Net loss (40) (765)
BALANCE AT SEPTEMBER 30, 1994 $(2,436) $(22,627)
Balance at March 31, 1995 $(2,500) $(23,840)
Net loss (73) (1,384)
BALANCE AT SEPTEMBER 30, 1995 $(2,573) $(25,224)
See accompanying notes.
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended September 30, 1995 and 1994
(Unaudited)
(In Thousands, except per Unit data)
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
REVENUES:
Rental income $ 2,410 $ 2,357 $ 4,844 $4,756
Interest income 57 32 98 60
Other income 100 120 218 218
2,567 2,509 5,160 5,034
EXPENSES:
Property operating expenses 882 931 1,750 1,742
Real estate taxes 247 39 494 547
Interest expense 1,312 987 2,694 1,930
Depreciation and amortization 757 752 1,513 1,505
General and administrative 66 67 124 117
3,264 2,776 6,575 5,841
Operating loss (697) (267) (1,415) (807)
Partnership's share of
unconsolidated
venture's income (loss) (28) 4 (44) -
Co-venturers' share of
consolidated
ventures' losses 2 1 2 2
NET LOSS $ (723) $ (262) $(1,457) $ (805)
Net loss per Limited
Partnership Unit $(16.47) $ (5.97) $ (33.23) $(18.37)
The above net loss per Limited Partnership Unit is based upon the 41,644 Limited
Partnership Units outstanding for each period.
See accompanying notes.
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended September 30, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(In Thousands)
1995 1994
Cash flows from operating activities:
Net loss $ (1,457) $ (805)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,513 1,505
Amortization of deferred financing costs 51 147
Amortization of deferred gain on
forgiveness of debt (172) (172)
Partnership's share of unconsolidated
venture's loss 44 -
Co-venturers' share of consolidated
ventures' losses (2) (2)
Changes in assets and liabilities:
Accounts receivable - affiliates (2) 4
Prepaid and other assets 12 11
Accounts payable and accrued expenses 136 102
Accrued interest and fees 591 146
Tenant security deposits (44) (35)
Advances from consolidated ventures - (97)
Total adjustments 2,127 1,609
Net cash provided by operating
activities 670 804
Cash flows from investing activities:
Additions to buildings and improvements - (207)
Net cash used for investing
activities - (207)
Cash flows from financing activities:
Release of funds from restricted cash 950 963
Repayment of long term debt - (389)
Net cash provided by
financing activities 950 574
Net increase in cash and cash equivalents 1,620 1,171
Cash and cash equivalents, beginning of period 1,292 1,252
Cash and cash equivalents, end of period $ 2,912 $ 2,423
Cash paid during the period for interest $ 2,224 $ 1,808
See accompanying notes.
1. Organization
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements and footnotes contained in
the Partnership's Annual Report for the year ended March 31, 1995.
In the opinion of management, the accompanying financial statements, which
have not been audited, reflect all adjustments necessary to present fairly
the results for the interim period. All of the accounting adjustments
reflected in the accompanying interim financial statements are of a normal
recurring nature.
2. Investment in Unconsolidated Joint Venture Partnership
At September 30, 1995, the Partnership has an investment in one
unconsolidated joint venture which owns an operating investment property
(Lincoln Garden Apartments), as discussed further in the Annual Report. The
unconsolidated joint venture is accounted for by using the equity method
because the Partnership does not have a voting control interest in the
venture. Under the equity method, the investment is carried at cost
adjusted for the Partnership's share of the unconsolidated venture's
earnings, losses and distributions. The Partnership's policy is to
recognize its share of unconsolidated venture's operations three months in
arrears.
Summarized operations of the unconsolidated joint venture, for the periods
indicated, are as follows:
CONDENSED SUMMARY OF OPERATIONS
For the three and six months ended June 30, 1995 and 1994
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Rental revenues $ 296 $ 272 $ 597 $ 527
Interest and other income 12 50 23 85
308 322 620 612
Property operating expenses 158 155 310 298
Interest expense 133 106 260 207
Depreciation and amortization 59 53 115 104
350 314 685 609
Net income (loss) $ (42) $ 8 $ (65) $ 3
Net income (loss):
Partnership's share of net
income (loss) $ (27) $ 5 $ (42) $ 2
Co-venturer's share of net
income (loss) (15) 3 (23) 1
$ (42) $ 8 $ (65) $ 3
Reconciliation of Partnership's Share of Operations
For the three and six months ended June 30, 1995 and 1994
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Partnership's share of
operations, as shown above $ (27) $ 5 $ (42) $ 2
Amortization of excess basis (1) (1) (2) (2)
Partnership's share of
unconsolidated venture's
income (loss) $ (28) $ 4 $ (44) $ -
3. Operating Investment Properties
The Partnership consolidates the results of two majority-owned and controlled
joint ventures in its financial statements. The Partnership's policy is to
report the operations of the consolidated joint ventures on a three month
lag.
On December 16, 1985, the Partnership acquired an interest in 71st Street
Housing Partners, Ltd., a joint venture formed to develop, own and operate
the Harbour Pointe Apartments, a 234-unit two-story garden apartment complex
located in Bradenton, Florida. Pursuant to an Amended and Restated Agreement
of the Limited Partnership dated August 4, 1989, the general partner
interests of the co-venturers were converted to limited partnership
interests. As a result of the amendment, the Partnership, as the sole
general partner, assumed full control of the operations of the property and,
accordingly, presents the financial position and the operating results of the
joint venture on a consolidated basis.
The Lakes Joint Venture ("Venture") was formed on May 30, 1985 in accordance
with the provisions of the laws of the State of California for the purpose of
developing, owning and operating The Lakes at South Coast Apartments, a 770-
unit apartment complex located in Costa Mesa, California. As discussed
further in the Annual Report, on September 26, 1991, in conjunction with a
refinancing and modification of the Venture's long-term indebtedness, the
original co-venture partner transferred its interest in the Venture to
Development Partners, Inc. ("DPI"), a Delaware corporation and a wholly-owned
subsidiary of Paine Webber Group, Inc., and withdrew from the Venture. As a
result of the original co-venturer's withdrawal, the Partnership assumed full
control over the operations of the Venture. Accordingly, the financial
position and results of operations of the Venture are presented on a
consolidated basis.
The following is a combined summary of property operating expenses for the
Harbour Pointe Apartments and The Lakes at South Coast Apartments for the
three and six months ended June 30, 1995 and 1994 (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Property operating expenses:
Repairs and maintenance $ 284 $ 213 $ 434 $ 342
Utilities 145 169 297 267
Other operating and
administrative 453 549 1,019 1,133
$ 882 $ 931 $ 1,750 $ 1,742
4.Related Party Transactions
Included in general and administrative expenses for each of the six months
ended September 30, 1995 and 1994 is $42,000, representing reimbursements
to an affiliate of the Managing General Partner for providing certain
financial, accounting and investor communication services to the Partnership.
Also included in general and administrative expenses for the six months ended
September 30, 1995 and 1994 is $3,000 and $2,000, respectively, representing
fees earned by Mitchell Hutchins Institutional Investors, Inc. for managing
the Partnership's cash assets.
5.Long-term Debt
Long-term debt on the Partnership's balance sheet at September 30, 1995 and
March 31, 1995 consists of the following (in thousands):
September 30 March 31
Nonrecourse, variable rate mortgage note
pay-able which secures Manatee County
Housing Finance Authority Revenue
Refunding Bonds. The mortgage loan is
secured by a deed to secure debt and a
security agreement covering the real and
personal property of the Harbour Pointe
Apartments. $ 9,125 $ 9,125
Developer loan payable which secures
County of Orange, California Tax-Exempt
Apartment Development Revenue Bonds. The
mortgage loan carries a variable interest
rate, is nonrecourse and is secured by a
first deed of trust plus all future rents
and income generated by The Lakes at
South Coast Apartments. 75,600 75,600
11% nonrecourse loan payable to bank
secured by a third deed of trust plus all
future rents and income generated by The
Lakes at South Coast
Apartments. 4,584 4,584
Prior indebtedness principal payable to
bank. This obligation, which is related
to The Lakes Joint Venture, bears
interest at 11% per annum and is
nonrecourse. 3,561 3,561
92,870 92,870
Less: Long-term debt in technical
default (see discussion below) (83,745) (83,745)
$ 9,125 $ 9,125
Mortgage loan secured by the Harbour Pointe Apartments
Original financing for construction of the Harbour Pointe Apartments was
provided through $9,200,000 of Multi-Family Housing Mortgage Revenue Bonds,
Series 1985 E due December 1, 2007 (the original Bonds) issued by the
Manatee County Housing Finance Authority which bore interest at 8.25% plus a
1.25% letter of credit fee. An amount of $75,000 was paid on the original
bonds prior to the refinancing. The original bond issue was refinanced on
May 1, 1990 with $9,125,000 Weekly Adjustable/Fixed Rate Multi-Family
Housing Revenue Refunding Bonds, Series 1990A, due December 1, 2007 (the
Bonds). The interest rate on the Bonds is adjusted weekly to a minimum rate
that would be necessary to remarket the Bonds in a secondary market as
determined by a bank remarketing agent. The Bonds are secured by the
Harbour Pointe Apartments.
Interest on the underlying bonds is intended to be exempt from federal
income tax pursuant to Section 103 of the Internal Revenue Code. In
connection with obtaining the mortgage, the Harbour Pointe joint venture
executed a Land Use Restriction Agreement with the Manatee County Housing
Finance Authority which provides, among other things, that substantially all
of the proceeds of the Bonds issued be utilized to finance multi-family
housing of which 20% or more of the units are to be leased to low and
moderate income families as established by the United States Department of
Housing and Urban Development. In the event that the underlying Bonds do
not maintain their tax-exempt status, whether by a change in law or by
noncompliance with the rules and regulations related thereto, repayment of
the note may be accelerated.
Pursuant to the financing agreement, a bank has issued an irrevocable
letter of credit to the Bond trustee in the joint venture's name for
$9,247,500. An annual fee equal to 1% of the letter of credit balance is
payable monthly to the extent of net cash operating income available to pay
such fees.
Debt secured by The Lakes at South Coast Apartments
Original financing for construction of The Lakes at South Coast Apartments
was provided from a developer loan in the amount of $76,000,000 funded by
the proceeds of a public offering of tax-exempt apartment development
revenue bonds. The Venture had been in default of the developer loan since
December 1989 for failure to make full and timely payments on the loan. The
original bond issue was refinanced during 1991 and the original developer
loan was extinguished. The new developer loan (1991 Developer Loan), in the
amount of $75,600,000, is payable to the County of Orange and was funded by
the proceeds of a public offering of tax-exempt apartment development
revenues bonds issued, at par, by the County of Orange, California in
September 1991. Principal is payable upon maturity, December 1, 2006.
Interest on the bonds is variable, with the rate determined weekly by a
remarketing agent and is payable in arrears on the first of each month.
The loan is secured by a first deed of trust plus all future rents and
income generated by the operating investment property. Bond principal and
interest payments are secured by and payable from an irrevocable letter of
credit issued by a bank in the amount of $76,569,000, expiring December 15,
1998. The Venture pays an annual letter of credit fee equal to 1.0% of the
outstanding amount, payable 60% monthly with the remaining 40% (Unpaid
Accrued Letter of Credit Fees) deferred and paid in accordance with the
Reimbursement Agreement (see the Partnership's Annual Report for a further
discussion of the Reimbursement Agreement). Such Unpaid Accrued Letter of
Credit Fees were $1,152,000 and $999,000 at June 30, 1995 and December 31,
1994, respectively. The bank letter of credit is secured by a second deed
of trust on the operating investment property and future rents and income
from the operating investment property.
The 1991 Developer Loan contains several restrictive covenants, including,
among others, a requirement that the Venture furnish the letter of credit
issuer in September 1994 and September 1996 with certified independent
appraisals of the fair market value of the operating investment property for
amounts equal to or greater than $92,000,000 and $100,000,000, respectively.
Failure to provide such appraisals constitute events of default under the
Reimbursement Agreement. To date, the Lakes Joint Venture has not provided
the lender with an appraisal which meets the $92,000,000 requirement, and
the lender has not waived or modified the minimum appraised value
requirement. Accordingly, the Venture is technically in default under
the Reimbursement Agreement. The Managing General Partner has had
preliminary discussions with the lender regarding possible changes to the
1994 appraisal requirement. Preliminary indications have been that the
lender might consider waiving or modifying the minimum appraised value
requirement for September 1994 in exchange for a rearrangement of the timing
and amounts of certain priorities, as specified in the Reimbursement
Agreement. Management does not expect the lender to take any actions as
long as progress continues to be made in negotiations for modification to
the terms of the Reimbursement Agreement. However, there can be no
assurances that the lender will grant any relief in connection with this
appraisal covenant and, accordingly, the principal amount of the debt
related to The Lakes Joint Venture has been classified as long-term debt in
technical default on the balance sheet as of September 30, 1995 and March
31, 1995. These conditions raise substantial doubt about the Venture's and
the Partnership's ability to continue as going concerns. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
The restructuring of the Prior Indebtedness, the Deferred Letter of Credit
Fees and the line of credit borrowings in 1991 was accounted for in
accordance with Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings".
Accordingly, the forgiveness of debt, aggregating $5,279,000, has been
deferred and is being amortized as a reduction of interest expense
prospectively using a method approximating the effective interest method
over the estimated remaining term of the Venture's indebtedness. At June
30, 1995 and December 31, 1994, $3,915,000 and $4,087,000, respectively of
such forgiven debt (net of accumulated amortization) is reflected in the
accompanying balance sheets.
6. Contingencies
The Partnership is involved in certain legal actions. The Managing General
Partner believes that these actions will be resolved without material adverse
effect on the Partnership's financial statements, taken as a whole.
.
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As discussed in the Annual Report, the operations of the three remaining
assets, The Lakes at South Coast Apartments, the Harbour Pointe Apartments and
the Lincoln Garden Apartments, have been stabilized as a result of successful
debt restructurings, and the properties do not currently require the use of the
Partnership's cash reserves to support operations. Nonetheless, the properties
would not operate at or above breakeven under conventional financing terms based
on the current outstanding principal amounts owed. All three of these
properties have been financed with tax-exempt bonds issued by local housing
authorities. The interest rates on all three of these restructured debt
obligations are now variable rates which are based on comparable rates on
similar tax-exempt obligations. Such rates rose during fiscal 1995 along with
the general increase in market interest rates, but remained 3 to 4 percent per
annum below comparable conventional rates. As previously reported, the debt
modification agreement for The Lakes was structured with certain debt service
reserves and accrual features intended to help absorb interest rate
fluctuations. Although such reserves have been drawn down during the first six
months of fiscal 1996 to cover required current debt service, the Lakes Joint
Venture still has over $1,000,000 of reserves in place to help cover possible
future debt service shortfalls. The Harbour Pointe and Lincoln Garden joint
ventures would require advances from the venture partners, principally the
Partnership in the case of Harbour Pointe, if future cash flows are
insufficient to cover any increases in debt service payments.
Despite a general strengthening in the real estate market for multi-family
residential properties over the past three years, based on current cash flows
generated from operations, all three of the Partnership's remaining properties
have estimated current market values which are below the balances of their
outstanding debt obligations. It remains to be seen whether further improvement
in market conditions will occur as rapidly or to the extent necessary to enable
the Partnership to recover any meaningful portion of its original investment in
these three remaining properties. In addition, the Reimbursement Agreement
which governs the secured debt obligations of The Lakes Joint Venture contains
certain restrictive covenants, including a provision that required the venture
to provide the lender, in September 1994, with an independent appraisal of the
operating property showing the value of the property to be equal to or greater
than $92 million. Failure to provide such an appraisal is defined as an event of
default under the Reimbursement Agreement. Based on current cash flow levels and
the prevailing market conditions, the value of the property could be expected to
be considerably less than $92 million. The Managing General Partner has had
preliminary discussions with the lender regarding possible changes to the 1994
appraisal requirement. Preliminary indications have been that the lender might
consider waiving or modifying the minimum appraised value requirement for
September 1994 in exchange for a rearrangement of the timing and amounts of
certain payment priorities, as specified in the Reimbursement Agreement.
However, to date the venture has not provided the lender with an appraisal which
meets the $92 million requirement, and the lender has not waived or modified the
minimum appraised value requirement. Accordingly, the venture is technically in
default under the Reimbursement Agreement. Management does not expect the lender
to take any actions as long as progress continues to be made in negotiations for
modification to the terms of the Reimbursement Agreement. However, there can be
no assurances that the lender will grant any relief in connection with this
appraisal covenant.
In the event that management is successful in negotiating a waiver or
modification of the minimum appraised value requirement described above for The
Lakes Joint Venture, which represents approximately 49% of the Partnership's
original investment portfolio, the Partnership will continue to direct the
management of the remaining operating properties in order to generate sufficient
cash flow to sustain operations in the near-term while attempting to maximize
their long-term values. As discussed above, even under these circumstances, it
remains to be seen whether such a strategy would result in the return of any
significant amount of invested capital to the Limited Partners. If management
cannot reach an agreement with The Lakes' mortgage lender regarding the
appraisal covenant, the lender could choose to initiate foreclosure proceedings.
The Partnership is prepared to exercise all available legal remedies in the
event that the lender takes such actions. If the Partnership were not successful
with such legal defenses and the result was a foreclosure of the operating
property, the Partnership would have to weigh the costs of continued operations
against the realistic hopes for any future recovery of capital from the other
two investments. Under such circumstances, the Managing General Partner might
determine that it would be in the best interests of the Limited Partners to
liquidate the remaining investments and terminate the Partnership. Management
will reassess its future operating strategy once the appraisal covenant
compliance issue on The Lakes is fully resolved.
Barring a significant increase in tax-exempt interest rates, excess
cash flow from Harbour Pointe should be sufficient to cover the Partnership's
operating expenses over the near term. Excess cash flow from the Lincoln
Garden joint venture has been minimal and is primarily payable to the co-
venturer for the repayment of prior advances. To the extent that the
Partnership's operating properties generate excess cash flow after current debt
service, a substantial portion of such amounts will be reinvested in the
properties to make certain repairs and improvements aimed at maximizing long-
term values. At The Lakes, planned capital improvements for fiscal 1996 include
upgrading the hallways, elevator landings and lobbies and painting.
Improvements planned at Lincoln Garden for fiscal 1996 include resurfacing the
pool deck, replacing the roofs on several buildings, repairing the sidewalks and
upgrading the unit interiors on a turnover basis. Future improvements at the
Harbour Pointe Apartments are expected to include new pool furniture, additional
exterior lighting and the installation of individual water meters in
all units. The amount and timing of the funds to be spent on property
improvements at all three of the remaining ventures will depend upon the
availability of cash flow from the respective property's operations.
At September 30, 1995, the Partnership and its consolidated joint ventures
had available cash and cash equivalents of approximately $2,912,000. Such cash
and cash equivalents will be used for the working capital requirements of the
Partnership and the consolidated ventures and, to the extent necessary and
economically justified, to fund the Partnership's share of any future operating
deficits of its remaining joint venture investments. The source of future
liquidity and distributions to the partners is expected to be through proceeds
received from the sale, refinancing or other disposition of the remaining
investment properties and, to a lesser extent, from cash generated from the
operations of such properties.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995
The Partnership's net loss increased by $461,000 for the three-month period
ended September 30, 1995, as compared to the same period in the prior year.
This unfavorable change in net loss resulted primarily from an increase in the
Partnership's operating loss of $430,000. Operating loss increased mainly due
to increases in interest expense and real estate taxes of the consolidated
joint ventures. Interest expense increased by $325,000 in the current period
due to an increase in the variable interest rates on the mortgage loans
secured by The Lakes at South Coast Apartments and the Harbour Pointe
Apartments. Real estate taxes increased by $208,000 primarily due to an over
accrual of expense for The Lakes at South Coast Apartments which was reversed
in the prior period. A small increase in rental income and a decline in
property operating expenses of the consolidated joint ventures partially offset
the increases in real estate taxes and interest expense. In addition,
the Partnership reported a loss from the operations of the unconsolidated
Lincoln Garden joint venture of $24,000, as compared to income of $4,000 for the
same period in the prior year. The primary reason for this unfavorable change
is an increase in the variable interest rate on the property's mortgage loan.
Six Months Ended September 30, 1995
The Partnership's net loss increased by $652,000 for the six-month period
ended September 30, 1995, as compared to the same period in the prior year.
This unfavorable change in net loss resulted from increases in the Partnership`s
operating loss of $608,000 and in the Partnership's share of unconsolidated
venture's loss of $44,000. Operating loss increased mainly due to an increase
in interest expense of $764,000, attributable to an increase in the variable
interest rates on the mortgage loans secured by The Lakes at South Coast
Apartments and the Harbour Pointe Apartments. This increase in interest expense
was partially offset by an increase in rental income of $88,000, due to small
increases in rental income at both of the Partnership's consolidated joint
ventures, and a decrease of $53,000 in real estate taxes from The Lakes Joint
Venture.
The Partnership's share of unconsolidated venture's loss, which represents
the operating results of the Lincoln Garden joint venture, increased by $44,000
for the current six-month period. This increase in the Partnership's share
of the venture's net loss is mainly due to an increase in interest expense, as
a result of an increase in the variable interest rate on the property's
mortgage loan, and an increase in administrative expenses.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As discussed in the Partnership's annual report on Form 10-K for the year
ended March 31, 1995, 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. On May 30, 1995, the court
certified class action treatment of the claims asserted in the litigation.
Refer to the description of the claims in the prior year Form 10-K for further
information. The General Partners continue to believe that the action will be
resolved without material adverse effect on the Partnership's financial
statements, taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.
PAINEWEBBER DEVELOPMENT PARTNERS FOUR, LTD.
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 DEVELOPMENT
PARTNERS FOUR, LTD.
By: Fourth Development Fund Inc.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Partnership's interim financial statements for the six months ended
September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,912
<SECURITIES> 0
<RECEIVABLES> 13
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,075
<PP&E> 95,015
<DEPRECIATION> (23,895)
<TOTAL-ASSETS> 77,020
<CURRENT-LIABILITIES> 4,273
<BONDS> 96,785
<COMMON> 0
0
0
<OTHER-SE> (27,797)
<TOTAL-LIABILITY-AND-EQUITY> 77,020
<SALES> 0
<TOTAL-REVENUES> 5,160
<CGS> 0
<TOTAL-COSTS> 3,881
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,694
<INCOME-PRETAX> (1,457)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,457)
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