<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 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: 0-17149
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
(Exact name of registrant as specified in its charter)
Delaware 04-2889712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) Zip Code)
Registrant's telephone number, including area code (617) 439-8118
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes .X No. ____
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
BALANCE SHEETS
November 30, 1995 and August 31, 1995
(Unaudited)
(In thousands)
ASSETS
November 30 August 31
Real estate investments:
Investment properties held for sale, net $ 9,900 $ 9,900
Land 230 230
Mortgage loan receivable 1,270 1,270
--------- ---------
11,400 11,400
Cash and cash equivalents 2,652 2,692
Interest and land rent receivable 10 10
Accounts receivable 41 26
Prepaid expenses 11 17
Deferred expenses, net 29 30
-----------------------
$14,143 $14,175
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable - affiliates $ 33 $ 33
Accounts payable and accrued expenses 259 192
Tenant security deposits 80 79
Deferred management fees 245 245
Partners' capital 13,526 13,626
-------- --------
$14,143 $14,175
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended November 30, 1995 and 1994
(Unaudited)
(In thousands)
General Limited
Partners Partners
Balance at August 31, 1994 $(75) $15,194
Net income 2 151
Cash distributions (2) (184)
------- ----------
Balance at November 30, 1994 $ (75) $15,161
===== =======
Balance at August 31, 1995 $( 90) $ 13,716
Net income 1 98
Cash distributions (2) (197)
------ -----------
Balance at November 30, 1995 $(91) $13,617
==== =======
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
STATEMENTS OF INCOME
For the three months ended November 30, 1995 and 1994
(Unaudited)
(In thousands, except per Unit data)
1995 1994
---- ----
Revenues:
Interest from mortgage loan $ 29 $ 29
Land rent 12 10
Other interest income 35 35
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76 74
Expenses:
Management fees 35 35
General and administrative 63 65
Amortization of deferred expenses 1 1
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99 101
------- -----
Operating loss (23) (27)
Income from operations of investment
properties held for sale, net 122 180
------ ------
Net income $ 99 $153
====== ====
Net income per Limited
Partnership Unit $0.13 $0.19
===== =====
Cash distributions per Limited
Partnership Unit $0.25 $0.24
===== =====
The above net income and cash distributions per Limited Partnership Unit are
based upon the 776,988 Units ($50 per Unit) of Limited Partnership Interest
outstanding during each period.
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended November 30, 1995 and 1994
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(In thousands)
1995 1994
Cash flows from operating activities:
Net income $ 99 $ 153
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of deferred expenses 1 1
Changes in assets and liabilities:
Accounts receivable (15) (17)
Prepaid expenses 6 12
Accounts payable and accrued expenses 67 66
Tenant security deposits 1 12
Deferred revenue - (4)
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Total adjustments 60 70
----------- ---------
Net cash provided by operating activities 159 223
Cash flows from financing activities:
Distributions to partners (199) (186)
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Net (decrease) increase in cash and cash equivalents (40) 37
Cash and cash equivalents, beginning of period 2,692 3,035
---------- --------
Cash and cash equivalents, end of period $ 2,652 $3,072
========= ======
See accompanying notes.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
Notes to Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in
the Partnership's Annual Report for the year ended August 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. Mortgage Loan and Land Investments
The following first mortgage loan was outstanding at November 30, 1995 and
August 31, 1995 (in thousands):
Date of
Property Amount of Loan Interest Rate Loan and Term
Park South $1,270 9% through 12/28/01 12/29/88
Charlotte, 13 years
North Carolina
The loan is secured by a first mortgage on the property and an assignment of
all tenant leases. Interest is payable monthly and the principal is due at
maturity.
In addition to the above mortgage loan, the following land purchase-leaseback
transaction had also been entered into as of November 30, 1995 and August 31,
1995 (in thousands):
Cost of Land
Property to the Partnership Annual Base Rent
Park South $ 230 $21 through 12/28/28
The land lease has a term of 40 years. Among the provisions of the lease
agreement, the Partnership is entitled to additional rent based upon gross
revenues in excess of a base amount, as defined. The Partnership received
additional rent of $7,000 and $5,000 during the three months ended November
30, 1995 and 1994, respectively. The lessee has the option to repurchase the
land for a specified period of time beginning in December of 1997 at a price
based on the fair market value, as defined, but not less than the original
cost to the Partnership.
The objectives of the Partnership with respect to its mortgage loan and land
investments are to provide current income from fixed mortgage interest
payments and base land rents, then to provide increases to this current
income through participation in the annual revenues generated by the property
as they increase above a specified base amount. In addition, the
Partnership's investment is structured to share in the appreciation in value
of the underlying real estate. Accordingly, upon either sale, refinancing,
maturity of the mortgage loan or exercise of the option to repurchase the
land, the Partnership will receive a 50% share of the appreciation above a
specified base amount.
<PAGE>
3. Investment Properties Held for Sale
At November 30, 1995 and August 31, 1995, the Partnership owned two
operating investment properties directly as a result of foreclosure
proceedings prompted by defaults under the terms of first mortgage loans
held by the Partnership. Descriptions of the transactions through which the
Partnership acquired these properties and of the properties themselves are
summarized below:
Hacienda Plaza
The Partnership assumed ownership of Hacienda Plaza on June 22, 1990.
The property, which is comprised of 78,415 square feet of leasable office
and retail space in Pleasanton, California, was 85% leased as of November
30, 1995. The combined balance of the land and the mortgage loan investments
at the time title was transferred to the Partnership was $9,789,000. The
estimated fair value of the operating property at the date of foreclosure
was $8,200,000. Accordingly, a write-down of $1,589,000 was recorded in
fiscal 1990. Since the date of the foreclosure, the Partnership has recorded
provisions for possible investment loss totalling $3,300,000 to write down
the net carrying value of the Hacienda Plaza investment property to reflect
additional declines in its estimated fair value, net of selling expenses.
The resulting net carrying value of the Hacienda Plaza investment property
at both November 30, 1995 and August 31, 1995 is $4,900,000.
Spartan Place Shopping Center
The Partnership assumed ownership of the Spartan Place Shopping Center,
in Spartanburg, South Carolina, on February 12, 1991. The property, which is
comprised of 151,489 square feet of leasable retail space, was 38% occupied
as of November 30, 1995. The combined balance of the land and the mortgage
loan investment at the time title was transferred to the Partnership was
$8,419,000. Management estimated that the fair value of the property, net of
selling expenses, at the time of the foreclosure was approximately
$7,840,000. Accordingly, a loss of $579,000 was recorded in fiscal 1991 to
adjust the carrying value to this estimate. Since the date of the
foreclosure, the Partnership has recorded provisions for possible investment
loss totalling $2,840,000 to write down the net carrying value of the
Spartan Place investment property to reflect additional declines in its
estimated fair value, net of selling expenses. The resulting net carrying
value of the Spartan Place investment property at both November 30, 1995 and
August 31, 1995 is $5,000,000.
During the first quarter of fiscal 1996, the Partnership had entered
into a preliminary agreement to sell the Spartan Place property to a third
party. Subsequent to the buyer's due diligence period, the offer was
withdrawn. Management of the Partnership is currently considering whether to
re-market the property for sale or to hold the property and invest the funds
required to redevelop the property, which, as noted above, has a substantial
amount of vacant space. Funds for such a redevelopment could be provided
from a combination of Partnership cash reserves and secured borrowings.
<PAGE>
The Partnership recognizes income from its investment properties held for
sale in the amount of the excess of the properties' gross revenues over the
sum of property operating expenses (including capital improvement expenses
and leasing commissions), taxes and insurance. Combined summarized operating
results for Hacienda Plaza and Spartan Place for the three-month periods
ended November 30, 1995 and 1994 are as follows (in thousands):
1995 1994
Revenues:
Rental income and expense reimbursements $ 378 $ 470
Other income 3 2
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381 472
Expenses:
Property operating expenses 203 266
Property taxes and insurance 56 26
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259 292
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Income from operations of
investment properties held for sale, net $ 122 $180
======= ====
4. Related Party Transactions
The Adviser earned basic management fees of $35,000 for each of the
three-month periods ended November 30, 1995 and 1994. Accounts payable
affiliates at both November 30, 1995 and August 31, 1995 consists of
management fees of $33,000 payable to the Adviser.
Included in general and administrative expenses for the three months ended
November 30, 1995 and 1994 is $33,000 and $38,000, respectively, representing
reimbursements to an affiliate of the Managing General Partner for providing
certain financial, accounting and investor communication services to the
Partnership.
Also included in general and administrative expenses for the three months
ended November 30, 1995 is $5,000 representing fees earned by Mitchell
Hutchins Institutional Investors, Inc. for managing the Partnership's cash
assets.
5. Contingencies
The Partnership is involved in certain legal actions. The Managing General
Partner believes these actions will be resolved without material adverse
effect on the Partnership's financial statements, taken as a whole.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L. P.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Spartan Place Shopping Center, in Spartanburg, South Carolina, was 38%
occupied as of November 30, 1995. As previously reported, Circuit City vacated
one of the anchor tenant spaces at the property during the quarter ended May 31,
1995 to move to a location they believed to be better suited to their future
operations. Circuit City had occupied 16,412 square feet at the Center and
remains obligated to pay annual base rent of approximately $112,000, plus its
pro rata share of operating expenses, through the end of its lease term, in
January 2008. In addition, management of Phar-Mor, another anchor tenant, which
occupied 26% of the leasable space at Spartan Place, closed its store at Spartan
Place and terminated its lease in July 1995 as part of its bankruptcy
reorganization plan. A number of smaller shop space tenants also either went out
of business or failed to renew their leases during fiscal 1995. Re-leasing the
Circuit City and Phar-Mor space to high-profile, strong credit tenants will be
critical to increasing shopper traffic at the center which will be necessary to
retain the existing tenants and to lease the vacant shop space. However, such
re-leasing plans could require a significant expansion and/or repositioning of
the shopping center. Alternatively, management has considered a possible sale of
the property prior to undertaking any major re-leasing commitments and
potentially spending significant funds or assuming financing for capital and
tenant improvements. During the quarter ended May 31, 1995, the Partnership
received offers to purchase Spartan Place. During the first quarter of fiscal
1996, the Partnership entered into a purchase and sale agreement with the
highest bidder at a negotiated sales price of $6,150,000. Under the terms of the
contract, the buyer had thirty days to perform its due diligence procedures.
Subsequent to the buyer's due diligence period, the offer to purchase the
property was withdrawn. Management of the Partnership re-contacted the other
prospective buyers, but, to date, has not been able to meet a mutually
acceptable sale agreement. As a result, management of the Partnership is
currently considering whether to re-market the property for sale or to hold the
property and redevelop it. Funds for such a redevelopment could be provided from
a combination of Partnership cash reserves and secured borrowings.
The wholly-owned Hacienda Plaza office and retail complex was 85% leased as
of November 30, 1995. As previously reported, a substantial amount of office and
retail space and undeveloped land remains available within the same planned
development area in which the property is located. Despite this fact, rental
rates in the Pleasanton, California office and retail market have improved in
recent months and fewer concessions are being offered. In addition, a portion of
the land in the planned development area in which Hacienda Plaza is located has
been re-zoned for residential use. Approximately 800 housing units are scheduled
for construction in the near future. This development and any future residential
development in the immediate vicinity of Hacienda Plaza would reduce the amount
of developable land available for new competing office space and would increase
the pedestrian traffic for the retail tenants at the Partnership's property. As
a result of these conditions, management believes that operations at the
Hacienda Plaza investment property appear to have stabilized after several years
of intense local office and retail market competition. The Managing General
Partner continues to plan to make selective capital improvements aimed at
enhancing marketing and leasing efforts until market conditions favorable to a
sale of the property can be achieved. A substantial amount of the property's
cash flow has been, and will likely continue to be, reinvested to pay for the
leasing costs associated with attracting new tenants and renewing existing
leases.
Occupancy at the Park South Apartments in Charlotte, North Carolina,
averaged 94% for the quarter ended November 30, 1995, compared to an average of
96% for the same period in the prior fiscal year. Operations of the property
continue to fully support the debt service and ground lease payments owed to the
Partnership in addition to providing a small amount of supplemental rent under
the terms of the ground lease. Such results are reflective of the strengthening
local and national market conditions for multi-family residential properties and
the favorable position that this property enjoys in its local sub-market.
At November 30, 1995, the Partnership had available cash and cash
equivalents of $2,652,000. Such cash and cash equivalents will be used for the
working capital requirements of the Partnership, distributions to the partners
and, if necessary, for leasing costs related to the Spartan Place and Hacienda
Plaza properties. Beginning with the quarter ended November 30, 1992, the
Managing General Partner began a program to gradually increase the quarterly
distribution rate to the Limited Partners. The quarterly distribution rate
increased to 3% per annum on remaining invested capital during the quarter ended
February 28, 1995. Given the potential future capital needs of the Partnership's
two wholly-owned properties, as well as the loss of income at Spartan Place
which resulted from the significant decrease in occupancy during fiscal 1995,
the distribution rate will be reduced to 1% per annum on remaining invested
capital effective for the payment to be made on January 12, 1996 for the quarter
ending November 30, 1995. Distributions are expected to remain at this level
until Spartan Place is either sold or its operations have been stabilized. The
source of future liquidity and distributions to the partners is expected to be
from the operations and future sale of the two wholly-owned investment
properties, mortgage interest and land rent payments from the Partnership's
mortgage loan and ground lease investments, interest income on the Partnership's
cash reserves, the repayment of the mortgage loan receivable and the sale of the
underlying parcel of land.
Results of Operations
Three Months Ended November 30, 1995
The Partnership's net income decreased by $54,000 for the three month
period ended November 30, 1995, when compared to the same period in the prior
year. The primary reason for the decrease in net income in the current period is
the decrease in income from the operations of investment properties held for
sale. Income from operations of investment properties held for sale decreased by
$58,000 in the current period due to a decrease in income at the Spartan Place
Shopping Center. Net income from Spartan Place decreased by $79,000 due to a
decrease in rental income of $77,000. Rental income decreased as a result of the
decrease in occupancy from 80% at November 30, 1994 to 38% at November 30, 1995,
as discussed further above. The decrease in income from Spartan Place was
partially offset by an increase in income from Hacienda Plaza of $21,000. The
increase in income from Hacienda Plaza was primarily due to a decrease in
capital improvement and leasing costs during the current period as compared to
the same period in the prior year. The decrease in income from operations of
investment properties held for sale was partially offset by a decrease in the
Partnership's operating loss of $4,000. Operating loss decreased due to an
increase in additional land rent income from the Park South Apartments of $2,000
and a decrease in Partnership general and administrative expenses of $2,000.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As discussed in the Partnership's annual report on Form 10-K for the year
ended August 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. The status of such litigation
remains unchanged at the present time. Refer to the description of the claims in
the fiscal 1995 annual report 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.
<PAGE>
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAINEWEBBER MORTGAGE PARTNERS FIVE, L.P.
By: FIFTH MORTGAGE PARTNERS, INC.
Managing General Partner
By: /s/ Walter V. Arnold
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: January 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the period ended November 30,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 2,652
<SECURITIES> 0
<RECEIVABLES> 1,321
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,714
<PP&E> 10,130
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,143
<CURRENT-LIABILITIES> 372
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 13,526
<TOTAL-LIABILITY-AND-EQUITY> 14,143
<SALES> 0
<TOTAL-REVENUES> 198
<CGS> 0
<TOTAL-COSTS> 99
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 99
<INCOME-TAX> 0
<INCOME-CONTINUING> 99
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 99
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
