UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-15690
RESOURCES PENSION SHARES 5, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3353722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
(203) 862-7000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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>
RESOURCES PENSION SHARES 5, L.P.
FORM 10-Q - JUNE 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - June 30, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended June 30, 1996 and
1995 and the six months ended June 30, 1996 and 1995
STATEMENT OF PARTNERS' EQUITY - For the six months ended June 30, 1996
STATEMENTS OF CASH FLOWS - For the six months ended June 30, 1996 and
1995
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Investments in mortgage loans ............................................. $ 32,066,434 $ 32,252,926
Cash and cash equivalents ................................................. 9,863,175 9,192,906
Real estate - net ......................................................... 7,784,448 7,881,094
Interest receivable ....................................................... 306,101 306,101
Other assets .............................................................. 106,054 98,043
------------ ------------
$ 50,126,212 $ 49,731,070
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses ..................................... $ 540,906 $ 451,810
Other liabilities ......................................................... 443,050 443,050
Distributions payable ..................................................... 632,316 402,383
Due to affiliates ......................................................... 202,053 201,948
------------ ------------
Total liabilities ...................................................... 1,818,325 1,499,191
------------ ------------
Commitments and contingencies
Partners' equity
Limited partners' equity (5,690,843 units issued
and outstanding) ....................................................... 48,366,209 48,290,961
General partners' deficit ................................................. (58,322) (59,082)
------------ ------------
Total partners' equity ................................................. 48,307,887 48,231,879
------------ ------------
$ 50,126,212 $ 49,731,070
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
----------------------------- ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Mortgage loan interest income ....................... $ 781,348 $ 501,119 $ 1,571,202 $ 1,010,610
Operating income .................................... 251,806 166,150 520,513 353,716
Short term investment interest ...................... 117,408 221,341 173,582 425,916
Other income ........................................ 16,340 8,905 26,955 20,980
----------- ----------- ----------- -----------
1,166,902 897,515 2,292,252 1,811,222
----------- ----------- ----------- -----------
Costs and expenses
Asset management fees ............................... 183,007 185,333 365,142 369,017
Operating expenses .................................. 125,670 153,036 286,357 284,370
General and administrative expenses ................. 70,274 69,746 129,953 139,061
Depreciation expense ................................ 48,322 47,084 96,646 94,010
Mortgage servicing fees ............................. 19,046 13,793 38,092 27,592
Property management fees ............................ 15,924 4,261 28,920 16,286
Amortization expense ................................ 3,276 -- 6,502 --
Write-down for impairment ........................... -- -- -- 1,860,000
----------- ----------- ----------- -----------
465,519 473,253 951,612 2,790,336
----------- ----------- ----------- -----------
Net income (loss) ........................................ $ 701,383 $ 424,262 $ 1,340,640 $ (979,114)
=========== =========== =========== ===========
Net income (loss) attributable to
Limited partners .................................... $ 694,369 $ 420,019 $ 1,327,234 $ (969,323)
General partners .................................... 7,014 4,243 13,406 (9,791)
----------- ----------- ----------- -----------
$ 701,383 $ 424,262 $ 1,340,640 $ (979,114)
=========== =========== =========== ===========
Net income (loss) per unit of limited partnership
interest (5,690,843 units outstanding) .............. $ .12 $ .07 $ .23 $ (.17)
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
STATEMENT OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Deficit Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 ................................... $ (59,082) $ 48,290,961 $ 48,231,879
Net income for the six months ended
June 30, 1996 .......................................... 13,406 1,327,234 1,340,640
Distributions for the six months ended
June 30, 1996 ($ .22 per limited
partner unit) ......................................... (12,646) (1,251,986) (1,264,632)
------------ ------------ ------------
Balance, June 30, 1996 ..................................... $ (58,322) $ 48,366,209 $ 48,307,887
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
June 30,
-----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) ......................................................... $ 1,340,640 $ (979,114)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation expense ............................................... 96,646 94,010
Amortization of acquisition fees ................................... 63,852 34,750
Amortization of leasing commissions ................................ 6,502 --
Deferred interest receivable ....................................... (75,463) (70,164)
Write-down for impairment .......................................... -- 1,860,000
Changes in assets and liabilities
Other assets ........................................................... (14,513) 8,011
Accounts payable and accrued expenses .................................. 89,096 (40,004)
Due to affiliates ...................................................... 105 199,203
------------ ------------
Net cash provided by operating activities ....................... 1,506,865 1,106,692
------------ ------------
Cash flows from investing activities
Medford loan deposit ...................................................... -- (450,000)
Mortgage loan repayments received ......................................... 198,103 21,129
Additions to real estate .................................................. -- (186,464)
------------ ------------
Net cash provided by (used in) investing activities ............. 198,103 (615,335)
------------ ------------
Cash flows from financing activities
Distributions to partners ................................................. (1,034,699) (689,799)
------------- ------------
Net increase (decrease) in cash and cash equivalents ........................... 670,269 (198,442)
Cash and cash equivalents, beginning of period ................................. 9,192,906 16,864,138
------------ ------------
Cash and cash equivalents, end of period ....................................... $ 9,863,175 $ 16,665,696
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussion should be read in conjunction with
the financial statements, related footnotes and discussions contained
in the Resources Pension Shares 5, L.P. (the "Partnership") annual
report on Form 10-K for the year ended December 31, 1995. The results
of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in mortgage loans
The Partnership accounts for its investment in mortgage loans under the
following methods:
Investment method
Mortgage loans representing transactions in which the Partnership
is considered to have substantially the same risks and potential
rewards as the borrower are accounted for as investments in real
estate rather than as loans. Although the transactions are
structured as loans, due to the terms of the deferred interest
portion of the mortgage loan, it is not readily determinable at
inception that the borrower will continue to maintain a minimum
investment in the property. Under this method of accounting, the
Partnership will recognize as revenue the lesser of the amount of
interest as contractually provided for in the mortgage loan, or
the pro rata share of the actual cash flow from operations of the
underlying property inclusive of depreciation and interest
expense on any senior indebtedness.
Interest method
Under this method of accounting, the Partnership recognizes
revenue as interest income over the term of the mortgage loan so
as to produce a constant periodic rate of return. Interest income
will not be recognized as revenue during periods where there are
concerns about the ultimate realization of the interest or the
loan principal.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each of the mortgage loans in the Partnership's portfolio. In
performing the review, management considers the estimated net
realizable value of the mortgage loan or collateral as well as other
factors, such as the current occupancy, the amount and status of any
senior debt, the prospects for the property and the economic situation
<PAGE>
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
in the region where the property is located. Because this determination
of net realizable value is based upon projections of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of June
30, 1996. No allowances were recorded for the quarter ended June 30,
1996 or 1995.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets. Under SFAS #121 the initial test to determine
if an impairment exists is to compute the recoverability of the asset
based on anticipated cash flows (net realizable value) compared to the
net carrying value of the asset. If anticipated cash flows on an
undiscounted basis are insufficient to recover the net carrying value
of the asset, an impairment loss should be recognized, and the asset
written down to its estimated fair value. The fair value of the asset
is the amount by which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or
liquidation sale. The net realizable value of an asset will generally
be greater than its fair value because net realizable value does not
discount cash flows to present value and discounting is usually one of
the assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of June 30, 1996. The cash flows used to determine
fair value and net realizable value are based on good faith estimates
and assumptions developed by management. Inevitably, unanticipated
events and circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from our estimate and
the variances may be material. The Partnership may provide additional
losses in subsequent years if the real estate market or local economic
conditions change and such write-downs could be material.
No write-down for impairment was recorded for the six months ended June
30, 1996. A write-down for impairment of $1,860,000 was recorded on the
Groton property for the six months ended June 30, 1995.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Investment General Partner of the Partnership, Resources Pension
Advisory Corp., and the Administrative General Partner, Resources
Capital Corp., are wholly-owned subsidiaries of Presidio Capital Corp.
("Presidio"). As of February 28, 1995, the Associate General Partner of
the Partnership is Presidio AGP Corp., also a wholly-owned subsidiary
<PAGE>
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
of Presidio and a Delaware Corporation, which replaced Richard H. Ader,
formerly an executive officer of Integrated Resources, Inc. The
Administrative General Partner is also a general partner in several
other limited partnerships which are also affiliated with Presidio, and
which are engaged in businesses that are, or may be in the future, in
direct competition with the Partnership. Wexford Management LLC
("Wexford"), a company controlled by certain officers and directors of
Presidio, performs administrative services for Presidio and its direct
and indirect subsidiaries as well as the Partnership. During the three
and six months ended June 30, 1996, reimbursable expenses to Wexford by
the Partnership amounted to $23,069 and $59,438, respectively. Wexford
is engaged to perform similar services for other similar entities that
may be in competition with the Partnership.
For management of the affairs of the Partnership, the Administrative
General Partner is entitled to receive a management fee equal to 1.25%
per annum of the average month-end net asset value of the Partnership
for the first four years after the initial closing date; 1.5% for the
next six years; and 1.75% thereafter. For the quarters ended June 30,
1996 and 1995, the Administrative General Partner earned $183,007 and
$185,333, respectively.
For the servicing of mortgage loans made by the Partnership, the
Investment General Partner is entitled to receive a mortgage servicing
fee of 1/4 of 1% per annum of the principal balances loaned. During the
quarters ended June 30, 1996 and 1995, the Investment General Partner
earned $19,046 and $13,793, respectively, for mortgage servicing fees.
The Partnership has entered into a supervisory management agreement
with Resources Supervisory Management Corp. ("RSMC"), an affiliate of
the General Partners, to perform certain functions relating to
supervising the management of the Groton property. As such, RSMC is
entitled to receive as compensation for its supervisory management
services the greater of 6% of annual gross revenues from the Groton
property when leasing services are performed or 3% of gross revenue
when no leasing services are performed. During 1994, RSMC entered into
an agreement with an unaffiliated local management company to perform
such services on behalf of the Partnership. The terms of this agreement
are substantially the same as the agreement entered into between the
Partnership and RSMC. There was no supervisory management fee earned by
RSMC for the quarter ended June 30, 1996. Management fees earned by the
unaffiliated local management company amounted to $15,924 and $4,261
for the quarters ended June 30, 1996 and 1995, respectively.
The General Partners collectively are allocated 1% of net income, loss
and cash flow distributions of the Partnership. Such amounts allocated
or distributed to the General Partners are apportioned .98% to the
Administrative General Partner, .01% to the Investment General Partner
and .01% to the Associate General Partner. For the quarters ended June
30, 1996 and 1995, the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
of $6,874, $70 and $70 and $4,159, $42 and $42, respectively.
Presidio Partnership II Corp., a wholly owned indirect subsidiary of
Presidio has entered into an agreement to purchase 500,000 units of the
Partnership from the Trustee for Policeman and Fireman Retirement
System of the City of Detroit and expects to close on the sale on or
<PAGE>
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
about August 15, 1996. This purchase represents approximately 8.8% of
the outstanding limited partnership units of the Partnership. In July
1996, Presidio Partnership II Corp. purchased 4,465 units of the
Partnership from various other limited partners, which equals less than
10% of the outstanding limited partnership units.
4 INVESTMENTS IN MORTGAGE LOANS
Bank of California, Seattle Loan
The Bank of California, Seattle Loan, in the principal amount of
$8,500,000 ("Wrap Loan"), is secured by, among other things, the
interest of Gum Loong Limited Partnership ("Gum Loong") in the Land
located in downtown Seattle, Washington underlying a building commonly
known as The Bank of California Building (the "Building"). The Land is
subject to a long term ground lease (the "Ground Lease"). Concurrently
with the closing of the Wrap Loan, Gum Loong acquired the lessor's
interest under the Ground Lease and Continental Seattle Partners, L.P.
("CSP"), a partnership related to Gum Loong, acquired the lessee's
interest under the Ground Lease. CSP also acquired the lessor's
interest under a master (net) sublease with The Bank of California for
a substantial portion of the Building. A first mortgage on the Land
("Land Loan") in the principal amount of $8,000,000, is held by Anchor
National Life Insurance Company ("Anchor"). Under the provisions of the
Wrap Loan, Gum Loong is required to make the payments required under
both the Land Loan and the Wrap Loan to the Partnership on a monthly
basis. The Partnership, in turn, then pays Anchor the amounts due under
the Land Loan on a monthly basis. The Wrap Loan is secured by a
Wraparound Deed of Trust, Security Agreement, Financing Statement and
Assignment of Lessor's Interest in Ground Lease(s) dated May 5, 1988 in
the amount of $16,500,000, between the Partnership and Gum Loong. The
Building is encumbered by a loan ("Building Loan"), which matured on
March 26, 1992, between The Bank of Tokyo Trust Company (Seattle
Branch) ("BOT") and CSP, in the principal amount of $48,000,000,
secured by a first mortgage on the Building and a third mortgage on the
Land. This loan is also guaranteed by Gum Loong. The Partnership's
collateral for the Wrap Loan is the Land, the lessor's interest in the
Ground Lease and subject to the Ground Lease, BOT's lien, the Building,
the rents and profit and proceeds therefrom.
The Partnership received a letter dated April 22, 1993, stating that
BOT had commenced a foreclosure action against CSP for failure to repay
the Building Loan which matured on March 26, 1992. An Option Agreement
entered into at the time the Wrap Loan was made gives BOT the right,
after commencing a foreclosure action, to exercise an option to
purchase either (i) the Land Loan and the Wrap Loan from Anchor and the
Partnership or (ii) the Land from Gum Loong subject to the Land Loan
and the Wrap Loan. On July 9, 1993 the Partnership received notice from
BOT that it intended to exercise its option to purchase the Land.
Gum Loong did not make timely payments of its scheduled July, August,
and September 1993 debt service on the Wrap Loan. The Partnership
utilized its working capital reserves to make the required payments on
the Land Loan. On July 20, 1993, and again on August 9, 1993, the
Partnership notified Gum Loong that an event of default had occurred
because of the CSP default on the BOT loan and because of Gum Loong's
failure to make its scheduled payments. Both Gum Loong and CSP filed
for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code in August 1993, staying BOT's foreclosure action. On
<PAGE>
4. INVESTMENTS IN MORTGAGE LOANS (continued)
Bank of California, Seattle Loan (continued)
September 27, 1993 the Partnership, Anchor and Gum Loong entered into
an Interim Stipulation and Order Concerning Cash Collateral, which was
approved by the Bankruptcy Court on September 29, 1993. Since October
1993, various Cash Collateral Orders had been entered into which
required Gum Loong to make its monthly payments to the Partnership. The
September 1993 payment and all monthly contract interest payments due
thereafter under the Cash Collateral Orders have been made. The current
Cash Collateral Order requires Gum Loong to make monthly payments to
the Partnership through the maturity date of the loan.
On January 31, 1994, a Proof of Claim was filed in connection with the
Gum Loong Bankruptcy by the Partnership as it relates to amounts due
under the Wrap Loan, including principal, interest and other amounts
due. On January 6, 1995, a Proof of Claim was filed in connection with
the CSP bankruptcy by the Partnership for a contingent and unliquidated
claim under the Wrap Loan. Despite the bankruptcy filings by both Gum
Loong and CSP, the Partnership has not provided for an allowance for
loan loss on this loan. The Partnership believes that the collateral
for the Wrap Loan, the Land as encumbered by the Ground Lease, is of
sufficient value to realize the amount due under the Wrap Loan. If BOT
exercises its option to purchase the Land, it will be required, as a
condition of such exercise, to cure any defaults by Gum Loong.
On or about January 3, 1995, the United States Trustee moved to convert
the Gum Loong Chapter 11 Bankruptcy to a Chapter 7 Bankruptcy or to
dismiss the Gum Loong Case, or to set a deadline for filing a plan of
reorganization. This motion was scheduled for a hearing on February 9,
1995. This motion has been adjourned pending the hearing on its
proposed disclosure statement and proposed plan. The hearing on the
adequacy of BOT's proposed disclosure statement was set for April 6,
1995. The Third Amended Disclosure Statement was approved on May 31,
1995.
Thereafter, BOT sought confirmation of various amended plans to which
the Partnership successfully objected. Such plans included provisions
that were adverse to the Partnership's interests. The Partnership's
objections, and the Bankruptcy Court's rulings thereon, prompted BOT to
make various amendments and revisions to its proposed plan of
reorganization and withdraw various provisions that were objectionable
to the Partnership. After extended confirmation hearings on BOT's
proposed plans, the Bankruptcy Court approved the revised Fifth Amended
Plan in September 1995. As part of the approved plan, in September
1995, approximately $335,000 was paid to the Partnership. This amount
consisted of approximately $266,000 of interest payments due the
Partnership which resulted from two missed interest payments in 1993,
and late charges and interest related to these payments of
approximately $69,000.
The approved plan calls for, among other things, a Bankruptcy Court
appointed liquidating agent to manage the Building securing the Wrap
Loan and to pay the installments due the Partnership. The liquidating
agent is also required to sell the Building by June 1998 in a sale that
must be approved by the Bankruptcy Court and to which the Partnership
may object, or at a court approved auction in which the Partnership
could bid. If the property is sold in a non-auction sale, the purchaser
<PAGE>
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Bank of California, Seattle Loan (continued)
can buy the Building by satisfying the Wrap Loan, or purchase the
Building subject to the Wrap Loan. If the Building is purchased subject
to the Wrap Loan, the purchaser will have the right to extend the Wrap
Loan for three years from the present maturity date at a rate of 300
basis points over the yield on three year United States Treasury Notes
at that time, paying interest only from May 1998 until the new maturity
date. Such a purchaser would also have to pay an extension fee of 60
basis points if it elects the three year extension option.
Medford Village Loan
On July 25, 1995, the Partnership purchased a first mortgage loan in
the principal amount of $8,612,500 for approximately $8,700,000 in
cash. In addition, the Partnership incurred $45,469 of consulting fees
with respect to this loan. The loan has a floating interest rate,
capped at 10%, based on the Eurodollar rate for each quarterly interest
period plus 280 basis points. It is payable in quarterly installments
of principal and interest, maturing on April 22, 1998, with a balloon
payment of $7,737,500, plus any accrued interest due. The borrower has
the right to two, one year extensions for a fee of $23,500 each year,
provided the loan to value ratio at the time does not exceed 60%. The
loan is collateralized by a guarantee from the borrowers principals,
should the borrower default, and is secured by a 121,660 square foot
shopping center known as the Medford Village Outlet Center located in
Medford, Minnesota.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Information with respect to the Partnership's mortgage loans is
summarized below:
<TABLE>
<CAPTION>
Interest
Interest Rate Mortgage Recognized
------------------------------- Maturity Amount June 30,
Description Current % Accrued % Date Advanced 1996
----------- ------------ ------------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Shopping Centers
Santa Ana Square,
Santa Ana, CA (5) 7.10 3.81 March 1997 $ 2,600,000 $ 209,926
Groton Shopping Car.
Groton, CT (8) - - (8) - -
Lucky Supermarket
Buena Park, CA (6) 7.62 (1) 2.38 (1) May 2005 2,200,000 116,769
Avon Market Ctr.
Avon, CO (5) (7) 8.35 - April 2003 3,750,000 154,030
Medford Village Outlet Center
Medford, MN (5) (11) 8.55 - April 1998 8,612,500 328,998
Office Buildings
Bank of California
Seattle, WA (2) (6) (10) 7.33 2.93 May 1998 8,500,000 572,649
Xerox
Arlington, TX (6) 2.68 (1) 7.32 (1) March 1997 1,100,000 21,257
Lionmark Corp. Ctr.
Columbus, OH (5) (9) 8.5 - June 2003 4,000,000 167,573
------------ ----------
$ 30,762,500 $ 1,571,202
=========== ===========
<PAGE>
<CAPTION>
Contractual Carrying Carrying
Balance Value Value
June 30, March 31, December 31,
Description 1996 (4) 1996 (3) 1995 (3)
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Shopping Centers
Santa Ana Square,
Santa Ana, CA (5) $4,039,791 $4,051,849 $3,984,645
Groton Shopping Car.
Groton, CT (8) -- -- --
Lucky Supermarket
Buena Park, CA (6) 2,431,112 2,247,196 2,250,159
Avon Market Ctr.
Avon, CO (5) (7) 3,685,028 3,685,028 3,696,458
Medford Village Outlet Center
Medford, MN (5) (11) 8,350,000 8,439,120 8,638,426
Office Buildings
Bank of California
Seattle, WA (2) (6) (10) 16,369,653 8,598,759 8,623,102
Xerox
Arlington, TX (6) 1,864,450 1,105,615 1,109,596
Lionmark Corp. Ctr.
Columbus, OH (5) (9) 3,938,867 3,938,867 3,950,540
----------- ----------- ----------
$40,678,901 $32,066,434 $32,252,926
=========== =========== ===========
</TABLE>
<PAGE>
1. In addition to the fixed interest, the Partnership is entitled to
contingent interest in an amount equal to a percentage of the rent
received by the borrower from the property securing the mortgage
above a base amount, payable annually, and/or a percentage of the
excess of the value of the property above a base amount, payable at
maturity. Approximately $3,400, $800 and $1,600 of contingent
interest was earned in 1995, 1994, and 1993, respectively.
2. All of the above mortgage loans are first mortgage loans except for
the Bank of California which is a wraparound mortgage loan,
subordinate to prior liens held by others with no recourse.
3. The carrying values of the above mortgage loans are inclusive of
acquisition fees and accrued interest recognized.
4. The contractual balance represents the original mortgage amount
advanced plus accrued interest calculated in accordance with the loan
agreements, less principal amortization received. There is no
assurance that the contractual balance will be realized at maturity.
5. This loan is accounted for under the interest method.
6. This loan is accounted for under the investment method.
7. This loan was made in March 1993.
8. This loan was foreclosed on December 9, 1993.
9. This loan was made in June 1993.
10. This loan has cured its default and the borrower is current on debt
service payments, as previously discussed.
11. This loan was made in July 1995 and has a floating interest rate,
capped at 10%, based on the Eurodollar rate for each quarterly
interest period plus 280 basis points.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE
Garfinkel's
On December 21, 1992 the Investment General Partner, on behalf of the
Partnership, foreclosed on the property securing the Garfinkel's loan.
At the foreclosure sale, the Partnership acquired the property for a
bid of $3,200,000. In addition, in June 1993, the Partnership paid
$84,404 for costs associated with the foreclosure. Such costs have been
capitalized as real estate assets and are being depreciated over the
estimated useful life of the property.
On January 27, 1992, the Partnership received $450,000 from the former
property owner in exchange for a release of a personal guarantee in
which the former property owner was obligated to reimburse the
Partnership for asbestos removal up to a maximum of $500,000. The
receipt of these funds was recorded as a liability on the Partnership's
balance sheet. During June 1992, $6,950 was paid for remedial cleaning
in connection with the asbestos removal and the unexpended asbestos
reserve aggregated $443,050 at June 30, 1996 and December 31, 1995. The
Partnership does not presently plan to commence removal of the asbestos
until a purchaser or tenant for the property is identified.
The owner of the Landover Mall ("Mall Owner"), where the Garfinkel
property is located, has requested reimbursement from the Partnership
for common area maintenance and utility usage charges, allegedly due
under certain agreements made between the former owner of the property
and Mall Owner for periods subsequent to the date that the Partnership
took title to the property. The Partnership believes it may be
obligated only for the actual value of certain items. Discussions
between the Partnership and Mall Owner are on-going as to the exact
amount to be paid. However, the Partnership has accrued $36,000 in the
June 30, 1996 financial statements for an aggregate potential liability
of $428,829 from inception through June 30, 1996.
As of June 30, 1996, the Garfinkel's property is still vacant.
Groton
This property was acquired via foreclosure on December 9, 1993.
Occupancy at the shopping center declined from approximately 82% at the
time of foreclosure to 77% at March 31, 1995. The anticipated lease-up
of the vacant space had not occurred as of March 31, 1995 resulting in
lower than anticipated net operating income. It was determined as a
result of an in depth analysis for the quarter ended March 31, 1995
that the carrying value could not be realized and, consequently,
management established a write-down for impairment on the shopping
center of $1,860,000. This analysis determined the value of the
building and improvements to be $5,500,000. The carrying value was
approximately $7,360,000, thus requiring a $1,860,000 write-down.
<PAGE>
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Land ..................................... $ 2,460,000 $ 2,460,000
Building and improvements ................ 7,731,702 7,731,702
Write-down for impairment ................ (1,860,000) (1,860,000)
----------- -----------
8,331,702 8,331,702
Less accumulated depreciation ............ (547,254) (450,608)
----------- -----------
$ 7,784,448 $ 7,881,094
=========== ===========
</TABLE>
<PAGE>
6 DISTRIBUTIONS PAYABLE TO PARTNERS
Such distributions payable as of June 30, 1996 and December 31, 1995
are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Limited partners ($0.11 and $0.07 per unit) ........ $625,993 $398,359
General partners ................................... 6,323 4,024
-------- --------
$632,316 $402,383
======== ========
</TABLE>
Such distributions were paid subsequent to June 30, 1996 and December
31, 1995, respectively.
7 COMMITMENTS AND CONTINGENCIES
HEP Action
On or about May 11, 1993, three public real estate partnerships (the
"HEP Partnerships") including High Equity Partners, L.P. - Series 86
("HEP-86"), in which the Administrative General Partner is also a
General Partner, were advised of the existence of an action (the "B&S
Litigation") in which a complaint (the "HEP Complaint") was filed in
the Superior Court for the State of California for the County of Los
Angeles (the "Court") on behalf of a purported class consisting of all
of the purchasers of limited partnership interests in HEP-86.
On April 7, 1994 Plaintiffs were granted leave to file an amended
complaint (the "Amended Complaint"). The amended complaint asserted
claims against the Administrative General Partner, certain former
officers of the Administrative General Partner, and other former
subsidiaries of Integrated and a number of other defendants, including
certain former officers of Integrated.
On July 19, 1995, the Court approved the B&S Litigation and approved a
form of notice (the "Notice") concerning such proposed settlement. In
response to the Notice, approximately 1.1% of the limited partners of
the three HEP Partnerships requested exclusion and 15 limited partners
filed written objections to the settlement. The California Department
of Corporations also sent a letter to the Court opposing the
settlement. Five objecting limited partners, represented by two law
firms, also made motions to intervene so they could participate more
directly in the action. The motions to intervene were granted by the
Court on September 14, 1995.
In October and November 1995, the attorneys for the
plaintiffs-intervenors conducted extensive discovery. At the same time,
there were continuing negotiations concerning possible revisions to the
proposed settlement.
<PAGE>
7 COMMITMENTS AND CONTINGENCIES (continued)
HEP Action (continued)
On November 30, 1995, the original plaintiffs and the intervening
plaintiffs filed a Consolidated Class and Derivative Action Complaint
("Consolidated Complaint") against the General Partners alleging, among
other things, breach of fiduciary duties, breach of contract, and
negligence.
On or about January 31, 1996, the parties to the B&S Litigation agreed
upon a revised settlement, which would be significantly more favorable
to the HEP limited partners than the previously proposed settlement.
The revised settlement proposal, like the previous proposal, involves
the reorganization of the HEP Partnership (the "Revised Exchange").
Upon the effectuation of the Revised Exchange, the B&S Litigation would
be dismissed with prejudice.
On February 8, 1996, at a hearing on preliminary approval of the
revised settlement, the Court determined that in light of renewed
objections to the settlement by the California Department of
Corporations, the Court would appoint a securities litigation expert to
evaluate the settlement. On May 6, 1996, the expert submitted a report
stating that he was unable to conclude that the revised settlement as
proposed is fair, reasonable and adequate, and recommending that the
revised settlement be restructured in certain respects. On May 28,
1996, at a hearing in connection with the expert's report, the Court
ordered the parties to brief certain valuation issues, the requisite
consents required from limited partners to approve the Revised Exchange
and the applicability of exemptions from the California securities law.
A hearing on the issues the Court had ordered the parties to brief was
held on July 9, 1996. On July 18, 1996, the Court preliminarily
approved the proposed, revised settlement of the B&S Litigation, and
made a preliminary finding that the proposed revised settlement is
fair, adequate and reasonable to the class, and that a settlement class
should be conditionally certified. The Court also set a hearing for
August 19, 1996 to settle the form and method of notice to limited
partners regarding the proposed, revised settlement. If final approval
of the settlement is granted by the Court, a solicitation statement
concerning the settlement and the reorganization would be sent to all
HEP limited partners. The reorganization of the HEP Partnerships cannot
be consummated unless a majority of the limited partners in the HEP
Partnerships affirmatively vote to approve it.
It is impossible to predict what financial exposure the Administative
General Partner will have, if any, as a result of this litigation or
its indirect effect on the Partnership.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and capital resources
The Partnership's public offering commenced on May 15, 1986 and
terminated on February 12, 1988 generating gross proceeds of
$56,907,425, including $699,565 through the Partnership's Reinvestment
Plan. The Partnership initially made ten permanent investments,
consisting of nine first mortgage loans and one wraparound mortgage
loan, in which the Partnership had funded a total of $49,300,000 or
100% of its net proceeds available for investment. On May 21, 1992 and
November 16, 1992 loans in the original principal amounts of $8,200,000
and $3,800,000, respectively were prepaid. In addition, on December 21,
1992 the Investment General Partner, on behalf of the Partnership
foreclosed on the property securing the Garfinkel Loan. The original
principal amount of this loan was $4,850,000. On March 12, 1993, the
Partnership funded an additional mortgage loan in the principal amount
of $3,750,000 at an annual rate of 8.35%. On June 15, 1993 the
Partnership funded another new mortgage loan in the principal amount of
$4,000,000 at an annual interest rate of 8.5% payable in monthly
installments of principal and interest. On December 9, 1993 the
Investment General Partner on behalf of the Partnership foreclosed on
the shopping center securing the Groton loan which was in the original
principal amount of $8,000,000. On February 2, 1994 the mortgagor on
the 415 East 149th Street loan prepaid the entire amount of such loan.
The Partnership received $4,781,922 of gross proceeds, consisting of
$4,739,540 of principal and $43,382 of interest. On October 11, 1994
the mortgagor on the 134-140 East Fordham Road loan prepaid the entire
amount of such loan. The Partnership received $5,238,595 of gross
proceeds. In July 1995 the Partnership funded an additional mortgage
loan in the principal amount of $8,612,500, payable in quarterly
installments of principal and interest at a floating interest rate
based on the Eurodollar plus 280 basis points for the applicable
period, capped at 10%. As of June 30, 1996, the Partnership has funded
an aggregate of $30,762,500 to the mortgagors in seven mortgage loans
which are outstanding, consisting of six first mortgage loans and one
wraparound mortgage loan.
Previously, the Bank of California, Seattle wraparound mortgage loan
was in default. See Note 4 to the financial statements. As part of a
plan of reorganization approved in 1995, approximately $336,000 was
paid to the Partnership in September 1995 which included approximately
$226,000 in missed payments and $69,000 of late charges and interest
relating to the payments. The borrower is currently making the required
payments to the Partnership on the Wrap Loan.
If necessary, the Partnership has the right to establish reserves
either from disposition proceeds or from cash flow.
For the quarter ended June 30, 1996, the Partnership paid a cash
distribution to its partners equivalent to a 4.4% annualized return on
each limited partner's original investment. At June 30, 1996, working
capital reserves were approximately $8,798,000. This represents an
increase of approximately $406,000 from December 31, 1995.
Currently, the foreclosed property which formerly secured the Garfinkel
Loan is vacant. Funds which are necessary to lease up the property and
to remedy deferred maintenance conditions at the Garfinkel's property
<PAGE>
Liquidity and capital resources (continued)
will be supplied from the Partnership's working capital reserves. In
addition, the Partnership may need to expend funds for capital
improvements to and leasing of the property which formerly secured the
foreclosed Groton loan. Such funds may be expended from working capital
reserves. The Partnership currently holds working capital reserves in
short term investments, at rates which are lower than the returns
previously earned on the loans that have been prepaid. If excess
working capital is ultimately invested in new loans, these investments
are likely to be at lower rates than previous investments due to
current market conditions.
Except as discussed above, management is not aware of any other known
trends, events, commitments or uncertainties that will have a
significant impact on liquidity.
Real estate market
The real estate market continues to suffer from the effects of the
recent recession which included a substantial decline in the market
value of existing properties. Market values have begun to recover, and
while the pace of new construction has slowed, high vacancy rates
continue to exist in many areas. These factors may continue to reduce
rental rates. As a result, the Partnership's potential for realizing
the full value of its investments in mortgages is at increased risk.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each mortgage loan and property in the Partnership's
portfolio. In performing the review, management considers the estimated
net realizable value of the property or collateral as well as other
factors, such as the current occupancy, the amount and status of any
senior debt, the prospect for the property and the economic situation
in the region where the property is located. Because this determination
of net realizable value is based upon projections of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of June
30, 1996.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
<PAGE>
Impairment of assets (continued)
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of June 30, 1996. The cash flows used to determine
fair value and net realizable value are based on good faith estimates
and assumptions developed by management. Inevitably, unanticipated
events and circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from our estimate and
the variances may be material. The Partnership may provide additional
losses in subsequent years if the real estate market or local economic
conditions change and such write-downs could be material.
No write-downs for impairment were recorded for the three months ended
June 30, 1996 or June 30, 1995. A write-down for impairment of
$1,860,000 was recorded on the Groton property in the first quarter
1995. See Note 5 to the Financial Statements.
Allowances and write-downs are inherently subjective and are based on
management's best estimate of current conditions and assumptions about
expected future conditions. The Partnership may provide for additional
losses in subsequent years and such provisions could be material.
Results of operations
Net income increased for the three months ended June 30, 1996 when
compared to the same period in 1995. The increase was due to an
increase in revenues coupled with a decrease in costs and expenses. The
Partnership experienced net income for the six months ended June 30,
1996 compared to a net loss for the same period in 1995 primarily as a
result of the write-down for impairment recorded on the Groton property
in 1995.
The increase in revenues for both the three and six months ended June
30, 1996 compared to the same periods in 1995 was primarily due to
increases in mortgage interest income and operating income, partially
offset by decreases in short term investment income. Mortgage interest
income increased due to the funding of the Medford loan in July of
1995. Operating income increased primarily due to the increase in
occupancy at the Groton Shopping Center in 1996 compared to 1995. Short
term investment income decreased as a result of a decrease in interest
rates and a reduction in invested cash due to the funding of the
Medford loan in July 1995.
The decrease in costs and expenses for the three months ended June, 30,
1996 compared to the same period in 1995 was primarily due to a
decrease in operating expenses partially offset by increases in
property management fees and mortgage servicing fees. Operating
expenses decreased primarily as a result of a decrease in utility
<PAGE>
Results of operations (continued)
expenses. The increase in property management fees is a result of the
increase in revenues at the Groton Shopping Center. Mortgage servicing
fees increased as a result of the funding of the Medford loan in July
1996.
The decrease in costs and expenses for the six months ended June 30,
1996 compared to the same period in 1995 was primarily due to the
write-down for impairment recorded on the Groton property in 1995.
Property management fees increased due to the increase in revenues at
the Groton Shopping Center. Mortgage servicing fees increased due to
the funding of the Medford loan.
Inflation has not had a material effect on the Partnership's revenues
during the last year and is not expected to have a material effect in
the future. However, prolonged periods of low or no inflation could
result in low levels of interest rates which could result in certain of
the Partnership's loans being prepaid prior to maturity and the
Partnership receiving decreased revenues on any reinvestment of such
funds.
Legal proceedings
For a discussion on a Legal Proceedings, please see Note 7
("Commitments and Contingencies") to the Financial Statements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) See Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Financial
Statements - Note 7 which is herein incorporated by reference.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
<PAGE>
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.
RESOURCES PENSION SHARES 5, L.P.
By: Resources Capital Corp.
Administrative General Partner
Dated: August 14, 1996 By: /s/ Joseph M. Jacobs
--------------------
Joseph M. Jacobs
President
(Duly Authorized Officer)
Dated: August 14, 1996 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information from the Financial Statements of the
June 30, 1996 Form 10-Q of Resources Pension Shares 5, L.P. and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,863,175
<SECURITIES> 0
<RECEIVABLES> 306,101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,169,276
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,126,212
<CURRENT-LIABILITIES> 926,659
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 48,307,887
<TOTAL-LIABILITY-AND-EQUITY> 50,126,212
<SALES> 0
<TOTAL-REVENUES> 2,292,252
<CGS> 0
<TOTAL-COSTS> 848,464
<OTHER-EXPENSES> 103,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,340,640
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,340,640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,340,640
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
