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 September 30, 1997
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 - SEPTEMBER 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1997 and December 31, 1996
STATEMENTS OF OPERATIONS - For the three months ended September 30,
1997 and 1996 and for the nine months ended September 30, 1997
and 1996
STATEMENT OF PARTNERS' EQUITY - For the nine months ended September 30,
1997
STATEMENTS OF CASH FLOWS - For the nine months ended September 30, 1997
and 1996
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
BALANCE SHEETS
September 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents ....................... $21,521,803 $10,375,892
Investments in mortgage loans ................... 19,161,430 30,255,687
Real estate - net ............................... 9,268,958 7,777,158
Other assets .................................... 161,640 154,030
Interest receivable - mortgage loans ............ 159,685 306,101
Interest receivable - other ..................... -- 46,886
----------- -----------
$50,273,516 $48,915,754
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses ........... $ 667,958 $ 668,794
Distributions payable ........................... 632,316 632,316
Other liabilities ............................... 443,050 443,050
Due to affiliates ............................... 192,763 224,716
----------- -----------
Total liabilities ............................ 1,936,087 1,968,876
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (as restated) (5,690,843
units issued and outstanding) ................ 47,854,065 46,477,419
General partners' equity (as restated) .......... 483,364 469,459
----------- -----------
Total partners' equity ....................... 48,337,429 46,946,878
----------- -----------
$50,273,516 $48,915,754
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Mortgage loans interest income ........ $ 651,041 $ 745,052 $ 2,069,620 $ 2,316,254
Operating income - real estate ........ 254,478 207,943 770,758 728,456
Short term investment interest ........ 234,990 120,570 493,813 294,152
Other income .......................... 106,879 220,509 193,139 247,464
----------- ----------- ----------- -----------
1,247,388 1,294,074 3,527,330 3,586,326
----------- ----------- ----------- -----------
Costs and expenses
Management fees ....................... 180,303 204,245 540,290 569,387
Operating expenses - real estate ...... 166,985 205,221 434,730 491,578
Depreciation and amortization expense . 53,000 52,299 159,000 155,447
General and administrative expenses ... 51,236 70,010 129,810 199,963
Property management fees .............. 22,502 13,500 46,953 42,420
Mortgage servicing fees ............... 12,463 19,046 50,994 57,138
Provision for (recovery of) loan losses -- 1,547,830 (721,946) 1,547,830
----------- ----------- ----------- -----------
486,489 2,112,151 639,831 3,063,763
Gain on foreclosure ................... 400,000 -- 400,000 --
----------- ----------- ----------- -----------
86,489 2,112,151 239,831 3,063,763
----------- ----------- ----------- -----------
Net income (loss) .......................... $ 1,160,899 $ (818,077) $ 3,287,499 $ 522,563
Net income (loss) attributable to
Limited partners ...................... $ 1,149,290 $ (809,897) $ 3,254,624 $ 517,337
General partner........................ 11,609 (8,180) 32,875 5,226
----------- ----------- ----------- -----------
$ 1,160,899 $ (818,077) $ 3,287,499 $ 522,563
=========== =========== =========== ===========
Net income (loss) per unit of limited
partnership interest (5,690,843
units outstanding) .................... $ .20 $ (.14) $ .57 $ .09
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1997 ................ $ (71,931) $ 47,018,809 $ 46,946,878
Reallocation of partners' equity ........ 541,390 (541,390) --
------------ ------------ ------------
Balance, January 1, 1997 (as restated) .. 469,459 46,477,419 46,946,878
Net income for the nine months ended
September 30, 1997 .................. 32,875 3,254,624 3,287,499
Distributions for the nine months ended
September 30, 1997 ($.33 per limited (18,970) (1,877,978) (1,896,948)
partnership unit)
------------ ------------ ------------
Balance, September 30, 1997 ............. $ 483,364 $ 47,854,065 $ 48,337,429
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ........................................... $ 3,287,499 $ 522,563
Adjustments to reconcile net income to net
cash provided by operating activities
(Recovery of) provision for loan losses ....... (721,946) 1,547,830
Gain on foreclosure ........................... (400,000) --
Depreciation and amortization expense ......... 159,000 155,447
Amortization of mortgage acquisition fees ..... 112,354 95,779
Deferred interest receivable
-- (75,463)
Changes in assets and liabilities
Other assets ...................................... (19,610) --
Interest receivable - mortgage loans .............. 146,416 --
Interest receivable - other ....................... 46,886 (34,381)
Accounts payable and accrued expenses ............. (836) 187,313
Due to affiliates ................................. (31,953) 21,343
------------ ------------
Net cash provided by operating activities .. 2,527,810 2,420,431
------------ ------------
Cash flows from investing activities
Mortgage loan repayments received .................... 12,603,849 297,546
Additions to real estate ............................. (138,800) (80,488)
Investment in mortgage loan .......................... (2,000,000) --
------------ ------------
Net cash provided by investing activities .. 10,465,049 217,058
------------ ------------
Cash flows from financing activities
Distributions to partners ............................ (1,896,948) (1,667,015)
------------ ------------
Net increase in cash and cash equivalents ................. 11,095,911 970,474
Cash and cash equivalents, beginning of period ............ 10,375,892 9,192,906
------------ ------------
Cash and cash equivalents, end of period .................. $ 21,521,803 $ 10,163,380
============ ============
</TABLE>
<PAGE>
Supplemental disclosure of noncash investing and financing activities
As discussed in Note 4, on September 30, 1997, the Partnership received a
deed-in-lieu of foreclosure on the property underlying the Xerox loan. At that
date, the Xerox loan had a carrying value of $1,100,000 and the underlying
property had an estimated net realizable value of $1,500,000, necessitating a
gain on foreclosure of $400,000. The carrying value of the Xerox loan was
removed from the books and the Partnership recorded an investment in real estate
assets of $1,500,000. This mortgage loan was accounted for under the investment
method.
<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 discussions 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, 1996. The
results of operations for the nine months ended September 30, 1997 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 investments 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
is not recognized as revenue during periods where there are
concerns about the ultimate realization of the interest or the
loan principal.
Allowance for loan losses
A provision 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
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for loan losses (continued)
senior debt, the prospects 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
September 30, 1997. A provision for loan loss of $1,547,830 was
recorded for the quarter ended September 30, 1996 relating to the Santa
Ana loan. During the first quarter of 1997, the Partnership recorded a
recovery of loan loss for $721,946 relating to that loan (Note 4).
There was no reserve required for the quarter ended September 30, 1997.
Write-down for impairment
The Partnership records write-downs for impairment based upon a
quarterly review of the real estate in its portfolio. Real estate
property is carried at the lower of depreciated cost or estimated fair
value. In performing this review, management considers the estimated
fair value of the property based upon the undiscounted future cash
flows, as well as other factors, such as the current occupancy, the
prospects for the property and the economic situation in the region
where the property is located. Because this determination of estimated
fair 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 at each
period. Accordingly, the Partnership may record additional write-downs
in subsequent periods and such write-downs could be material. A
write-down for impairment was not required for the quarter ended
September 30, 1997 and 1996.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The
Partnership's financial instruments include cash and cash equivalents
and investments in mortgage loans. Unless otherwise disclosed, the fair
value of financial instruments approximates their recorded values.
Recently issued accounting pronouncements
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No. 128, "Earnings per Share"
establishes standards for computing and presenting earnings per share,
and is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Statement No. 129, "Disclosure
of Information about Capital Structure" establishes standards for
disclosing information about an entity's capital structure, and is
effective for financial statements for periods ending after December
15, 1997. Statement No. 130, "Reporting Comprehensive Income"
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently issued accounting pronouncements (continued)
establishes standards for reporting and display of comprehensive income
and its components, and is effective for fiscal years beginning after
December 15, 1997. Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" establishes standards for the way
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial
statements for periods beginning after December 15, 1997.
Management of the Company does not believe that these new standards
will have a material effect on the Company's reported operating
results, per share amounts, financial position or cash flows.
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
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.
On November 2, 1997, the Administrative Services Agreement with Wexford
Management LLC ("Wexford"), the administrator for Presidio, expired.
Pursuant to that agreement, Wexford had the authority to designate
directors of the General Partners. Effective November 3, 1997, Wexford
and Presidio entered into an Administrative Services Agreement dated as
of November 3, 1997 (the "ASA") which expires on May 3, 1998. Under the
terms of the ASA Wexford will provide consulting and administrative
services to Presidio and its affiliates for a term of six months.
During the nine months ended September 30, 1997 and September 30, 1996,
reimbursable expenses to Wexford amounted to $20,678 and $88,539,
respectively.
Effective November 3, 1997, the officers and employees of Wexford that
had served as officers and/or directors of the General Partners
tendered their resignation. On the same date, the Board of Directors
appointed new individuals to serve as officers and/or directors of the
General Partners.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
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 September
30, 1997 and 1996, the Administrative General Partner earned $180,303
and $204,245, 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 September 30, 1997 and 1996, the Investment General
Partner earned $12,463 and $19,046, 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 quarters ended September 30, 1997 and 1996. Management
fees earned by the unaffiliated local management company amounted to
$12,202 and $13,500 for the quarters ended September 30, 1997 and 1996,
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
September 30, 1997 and 1996, the Administrative General Partner,
Investment General Partner and Associate General Partner were allocated
net income (loss) of $11,377, $116 and $116 and $(8,016), $(82) and
$(82), respectively.
As of April 1, 1997 affiliates of Presidio have purchased 538,004 units
of the Partnership. These units represent approximately 9.45% of the
outstanding Partnership units and entitle the affiliates to
approximately $59,000 in distributions for the quarter ended September
30, 1997.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS
DVL Loan
On February 28, 1997, the Partnership funded a Negotiable Promissory
Note (the "Note") to DVL, Inc. ("DVL"), in the principal amount of
$2,000,000 at an annual interest rate of 12% with interest payable
monthly. In addition, the Partnership is entitled to receive payments
equal to DVL's excess cash flow (as defined) from the mortgages
underlying DVL's collateral assignment, which is to be applied as a
reduction of principal. The Note matures on February 27, 2000 and may
be pre-paid during the first two years. The Note is secured by (among
other things) a collateral assignment of DVL's interest in certain
promissory notes payable to DVL.
On July 30, 1997, DVL sold one of the properties underlying the
promissory notes and made a $1,075,000 prepayment of the Note.
Approximately $1,032,000 of the prepayment was applied towards the
principal balance of the Note and the remainder was applied to interest
and a yield maintenance fee.
Santa Ana Square Loan
On March 15, 1988, the Partnership funded a first mortgage loan in the
principal amount of $2,600,000 at an annual interest rate of 10.91%.
Payments were due based upon a payment schedule which required monthly
payments ranging from $6,250 and increasing to $23,750. Interest, which
was in excess of amounts received, was deferred and added to the
principal balance for purposes of computing such interest.
As a result of an economic decline in the surrounding area, the tenancy
at the Santa Ana Shopping Center slowly shifted from regional, credit
tenants to local, non-credit tenants. Consequently, although the cash
flow from the operation of the center had not declined, its value was
eroded due to the shift in tenancy. Management performed cash flow
projections and analyzed data regarding sales of comparable centers in
order to estimate the fair value of the center for the purpose of
valuing the loan. Based upon an analysis of the projected cash flow
from the center using a 13% capitalization rate and market comparables
indicating a value of approximately $78 per square foot, the fair value
of the center was estimated to be approximately $2,500,000 at September
30, 1996. The net carrying value of the loan at September 30, 1996, was
$4,047,830, necessitating a provision for loan loss of $1,547,830. The
Partnership also ceased accruing interest on this loan as of such date.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Santa Ana Square Loan (continued)
On April 10, 1997 the Partnership entered into a settlement agreement
with the Santa Ana borrower in which, among other things, the borrower
gave the Partnership a deed-in-lieu of foreclosure on the property. A
separate entity was formed, Santa Ana Holding, LLC, to take title to
the property. The Partnership is a member of the entity and is entitled
to 100% of all assets, distributions, and net income. On April 30, 1997
the Partnership sold this property for net proceeds of $3,213,908. The
net carrying value of the Santa Ana loan was $2,491,962, necessitating
a recovery of loan loss of $721,946 which was recorded in the first
quarter of 1997.
Xerox Loan
In March 1997, the Xerox loan matured. On September 30, 1997, the
Partnership received a deed-in-lieu of foreclosure on the property
underlying this loan. At that date, the Xerox loan had a carrying value
of $1,100,000 and the underlying property had a fair market value of
$1,500,000. Accordingly, the Partnership has reduced its investments in
mortgage loans by the carrying value of the Xerox loan and recorded an
addition to real estate for the fair market value of the underlying
property, which resulted in a gain on foreclosure in the amount of
$400,000. A separate entity was formed, 2810 Arlington Holding LLC, to
take title to the property. The Partnership is a member of the entity
and is entitled to 100% of all assets, distributions, and net income.
Medford Loan
On June 30, 1997, the Medford loan was prepaid in its entirety. The
Partnership received $8,129,181 of which $8,000,000 was applied towards
the principal balance of the loan and the remainder was applied to
interest.
<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 existing loans
is summarized below:
<TABLE>
<CAPTION>
Interest
Interest Rate Mortgage Recognized
--------------------------------------- Maturity Amount Sept. 30,
Description Current % Accrued % Date Advanced 1997
----------- --------- --------- ---- -------- ----
<S> <C> <C> <C> <C> <C>
Shopping Centers
Santa Ana Square
Santa Ana, CA (5) (7) 10.91 1.29 - 0 March 1997 $ 2,600,000 $ 43,482
Lucky Supermarket
Buena Park, CA (6) 8.41 - 10.00 (1) 1.82 - 0 (1) May 2005 2,200,000 166,154
Avon Market Ctr.
Avon, CO (5) 8.35 - April 2003 3,750,000 204,068
Medford Village Outlet Center
Medford, MN (10) (5) 8.55 - April 1998 8,612,500 287,374
DVL, Inc. (9) (5) 12.00 - February 2000 2,000,000 99,266
-
Office Buildings
Bank of California
Seattle, WA (2) (6) 9.36 - 10.24 3.0 - 0 May 1998 8,500,000 958,972
8,573,639
Xerox
Arlington, TX (6) (8) 4.55 (1) 10.38 - 11.47 (1) March 1997 1,100,000 60,628
Lionmark Corp. Ctr.
Columbus, OH (5) 8.5 - June 2003 4,000,000 249,676
----------- ----------
$32,762,500 $ 2,069,620
=========== ===========
</TABLE>
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
<TABLE>
<CAPTION>
Contractual Carrying Carrying
Balance Value Value
Sept. 30, Sept. 30, Dec. 31,
1997 (4) 1997 (3) 1996 (3)
----------- ------------ -------------
<S> <C> <C> <C>
Shopping Centers
Santa Ana Square
Santa Ana, CA (5) (7) $ - $ - $2,495,981
Lucky Supermarket
Buena Park, CA (6) 2,508,145 2,240,580 2,244,550
Avon Market Ctr.
Avon, CO (5) 3,656,433 3,656,433 3,673,112
Medford Village Outlet Center
Medford, MN (10) (5) - - 8,239,815
DVL, Inc. (9) (5) 820,932 820,932 -
-
Office Buildings
Bank of California
Seattle, WA (2) (6) 16,845,828 8,535,960 8,573,639
8,573,639
Xerox
Arlington, TX (6) (8) - - 1,101,872
Lionmark Corp. Ctr.
Columbus, OH (5) 3,907,525 3,907,525 3,926,718
----------- ------------ -----------
$27,738,863 $ 19,161,430 $30,255,687
=========== ============ ===========
</TABLE>
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 $6,000, $3,400 and $800 of contingent
interest was earned during 1996, 1995, and 1994, 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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
3. The carrying values of the above mortgage loans are inclusive of
acquisition fees and accrued interest recognized and allowance for
loan losses.
4. The contractual balance represents the original mortgage amount
advanced plus accrued interest calculated in accordance with the loan
agreements, less principal amortization received.
5. These loans are accounted for under the interest method.
6. These loans are accounted for under the investment method.
7. During 1996, the Partnership recorded a provision for loan losses of
$1,547,830 on this loan. Due to a settlement in April 1997 with the
Santa Ana borrower, the Partnership recorded a recovery of loan loss
of $721,946 in the first quarter of 1997. The property securing this
loan was sold by the Partnership on April 30, 1997.
8. This loan matured in March 1997. On September 30, 1997 the
Partnership received a deed in lieu of foreclosure on the property
underlying the loan and is currently attempting to secure a sale of
the property.
9. This loan was made in February 1997. On July 30, 1997, the
Partnership received a prepayment of $1,075,000, of which
approximately $1,032,000 was applied to the principal balance of the
loan with the remainder applied to interest and a yield maintenance
fee.
10. This loan was made in July 1995 and had a floating interest rate,
capped at 10%, based on the Eurodollar rate for each quarterly
interest period plus 280 basis points. Such loan was made with the
proceeds of two loans which were repaid during 1994. This loan was
repaid in its entirety on June 30, 1997.
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 September 30, 1997 and December 31,
1996. The Partnership does not presently plan to commence removal of
the asbestos until a purchaser or tenant for the property is
identified.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE
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 $60,000 for the
nine months ended September 30, 1997 for an aggregate potential
liability of $560,829 from inception through September 30, 1997. Such
liability is included in accounts payable and accrued expenses in the
accompanying balance sheet.
As of September 30, 1997, 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 79% at September 30, 1997. The anticipated
lease-up of the vacant space had not occurred as of September 30, 1997
resulting in lower than anticipated net operating income. In addition,
management is currently investigating the potential cost to correct
certain environmental violations at the shopping center. It was
determined, based on an internal analysis prepared as of March 31,
1995, that the net carrying value of the property could not be
realized. The analysis indicated that the property had an estimated net
realizable value of $5,500,000 compared to a net carrying value of
approximately $7,360,000. Consequently, management established a
write-down for impairment on the property of $1,860,000 at March 31,
1995.
Xerox
This property was acquired via a deed-in-lieu of foreclosure on
September 30, 1997 (Note 4). The property has been recorded at its
estimated net realizable value at such date. The Partnership is
currently attempting to secure a sale of the property.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE (continued)
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Land ................................. $ 2,202,000 $ 1,902,000
Building and improvements ............ 7,858,990 6,520,190
------------ ------------
10,060,990 8,422,190
Less accumulated depreciation ........ (792,032) (645,032)
------------ ------------
$ 9,268,958 $ 7,777,158
============ ============
</TABLE>
6 DISTRIBUTIONS PAYABLE TO PARTNERS
Distributions payable are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
<S> <C>
Limited partners ($.11 per unit) .......... $625,993 $625,993
General partners .......................... 6,323 6,323
-------- --------
$632,316 $632,316
======== ========
</TABLE>
Such distributions were paid subsequent to September 30, 1997 and
December 31, 1996, respectively.
7 PARTNERS' EQUITY
The General Partners hold a 1% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners'
equity account was credited with only the actual capital contributed in
cash, $1,000. The Partnership's management determined that this
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
7 PARTNERS' EQUITY (continued)
accounting does not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it does not reflect the General Partners' 1% equity
interest in the Partnership. Thus, the Partnership has restated its
financial statements to reallocate $541,390 (1% of the gross proceeds
raised at the Partnership's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the
inception of the Partnership and all periods presented in the financial
statements have been restated to reflect the reallocation. The
reallocation has no impact on the Partnership's financial position,
results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
8 SUBSEQUENT EVENTS
Oliveye Loan
On October 31, 1997, the Partnership funded a first mortgage loan to
Oliveye Hotel Limited Partnership in the principal amount of
$6,500,000. The loan has an annual interest rate of 11% and is payable
monthly. The loan is secured by the Crowne Plaza Hotel located in
Cincinnati, Ohio, and matures in October, 2000.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and capital resources
The General Partners hold a 1% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners'
equity account was credited with only the actual capital contributed in
cash, $1,000. The Partnership's management determined that this
accounting does not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it does not reflect the General Partners' 1% equity
interest in the Partnership. Thus, the Partnership has restated its
financial statements to reallocate $541,390 (1% of the gross proceeds
raised at the Partnership's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the
inception of the Partnership and all periods presented in the financial
statements have been restated to reflect the reallocation. The
reallocation has no impact on the Partnership's financial position,
results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
As of September 30, 1997, the Partnership has funded an aggregate of
$20,450,000 to the mortgagors in five outstanding mortgage loans,
consisting of five first mortgage loans and one wraparound mortgage
loan. See Note 4 to the financial statements.
On June 30, 1997 the Medford loan was prepaid in its entirety. The
Partnership received $8,129,181 of which $8,000,000 was applied toward
the principal balance of the loan and the remainder was applied to
interest.
On February 28, 1997, the Partnership funded a Negotiable Promissory
Note (the "Note") to DVL, Inc. ("DVL"), in the principal amount of
$2,000,000 at an annual interest rate of 12% with interest payable
monthly. In addition, the Partnership is entitled to receive payments
equal to DVL's excess cash flow (as defined) from the mortgages
underlying DVL's collateral assignment, which is to be applied as a
reduction of principal. The Note matures on February 27, 2000 and may
be pre-paid during the first two years without penalty. The Note is
secured by (among other things) a collateral assignment of DVL's
interest in certain promissory notes payable to DVL.
On July 30, 1997, DVL sold one of the properties underlying the
promissory notes and made a $1,075,000 prepayment of the Note.
Approximately $1,032,000 of the prepayment was applied toward the
principal balance of the Note and the remainder was applied to interest
and a yield maintenance fee.
On April 10, 1997 the Partnership entered into a settlement agreement
with the Santa Ana borrower in which, among other things, the borrower
gave the Partnership a deed-in-lieu of foreclosure on the property. On
April 30, 1997 the Partnership sold this property for net proceeds of
$3,213,908. The net carrying value of the Santa Ana loan was
$2,491,962, necessitating a recovery of loan loss of $721,946 which was
recorded in the first quarter of 1997.
<PAGE>
Liquidity and capital resources (continued)
In March 1997, the Xerox loan matured. On September 30, 1997 the
Partnership received a deed-in-lieu of foreclosure on the property
underlying this loan. At that date, the Xerox loan had a carrying value
of $1,100,000 and the underlying property had an estimated net
realizable value of $1,500,000. Accordingly, the Partnership has
reduced its investments in mortgage loans by the carrying value of the
Xerox loan and recorded an addition to real estate for the estimated
net realizable value of the underlying property.
On October 31, 1997, the Partnership funded a first mortgage loan to
Oliveye Hotel Limited Partnership, in the principal amount of
$6,500,000. This loan has an annual interest rate of 11% and is payable
monthly. The loan is secured by the Crowne Plaza Hotel located in
Cincinnati, Ohio, and matures in October, 2000.
For the quarter ended September 30, 1997, the Partnership paid a cash
distribution to its partners representing a 4.4% annualized return on
each limited partner's original investment. If necessary, the
Partnership has the right to establish reserves either from disposition
proceeds or from cash flow. At September 30, 1997, working capital
reserves were approximately $19,000,000. Management is actively seeking
new investment opportunities for the recent disposition proceeds.
According to the Partnership Agreement, disposition proceeds are
required to be reinvested or held in reserves until August 1998 after
which time management will evaluate whether a distribution is
warranted, or proceeds will be held in working capital reserves.
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
will be supplied from the Partnership's working capital reserves. In
addition, the Partnership may in the future need funds for capital
improvements to, and leasing of, the property which formerly secured
the Groton loan and such funds may be drawn 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.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each mortgage loan 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
<PAGE>
Liquidity and capital resources (continued)
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
September 30, 1997. On April 10, 1997 the Partnership entered into a
settlement agreement with the Santa Ana borrower in which, among other
things, the borrower gave the Partnership a deed in lieu of foreclosure
on the property. On April 30, 1997 the Partnership sold this property
for net proceeds of $3,213,908. The carrying value of the Santa Ana
loan was approximately $2,491,962, necessitating a recovery of loan
loss of $721,946 which was recorded in the first quarter of 1997.
Write-down for impairment
The Partnership records write-downs for impairment based upon a
quarterly review of the real estate in its portfolio. Real estate
property is carried at the lower of depreciated cost or estimated fair
value. In performing this review, management considers the estimated
fair value of the property based upon the undiscounted future cash
flows, as well as other factors, such as the current occupancy, the
prospects for the property and the economic situation in the region
where the property is located. Because this determination of estimated
fair 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 at each
period. Accordingly, the Partnership may record additional write-downs
in subsequent periods and such write-downs could be material. A
write-down for impairment was not required for the nine months ended
September 30, 1997 and 1996.
Results of operations
Net income increased for both the three and nine months ended September
30, 1997. The increase for both periods was primarily due to a
provision for loan losses recorded on the Santa Ana property in 1996
compared with a recovery of loan losses recorded in 1997 as described
above and the gain on foreclosure relating to the Xerox loan recorded
for the three months ended September 30, 1997.
Revenues decreased for both the three and nine months ended September
30, 1997 compared with the same periods in the prior year primarily due
to a decrease in mortgage loans interest income partially offset by a
decrease in short term investment income. Short term investment income
increased due to an increase in cash and cash equivalents available for
short term investment. Mortgage loans interest income decreased as a
result of the Santa Ana and Medford repayments.
<PAGE>
Liquidity and capital resources (continued)
Costs and expenses decreased for both the three and six months ended
September 30, 1997 compared to the same periods in the prior year. The
decrease was primarily a result of the provision for loan losses
recorded in 1996 on the Santa Ana loan, compared with the recovery of
loan losses that was recorded in 1997 coupled with a decrease in
general and administrative expenses for both periods. General and
administrative expenses decreased primarily as a result of a decrease
in payroll costs.
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
None.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: A Form 8-K was filed on August 7, 1997.
<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: November 19, 1997 By: /s/ Richard Sabella
-------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: November 19, 1997 By: /s/ Kevin Reardon
-----------------
Kevin Reardon
Vice President, Secretary and
Treasurer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the September 30, 1997 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,521,803
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,843,128
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,273,516
<CURRENT-LIABILITIES> 932,208
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 48,337,429
<TOTAL-LIABILITY-AND-EQUITY> 50,273,516
<SALES> 0
<TOTAL-REVENUES> 3,527,330
<CGS> 0
<TOTAL-COSTS> 1,202,777
<OTHER-EXPENSES> (562,946)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,287,499
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,287,499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,287,499
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
