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 March 31, 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 - MARCH 31, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1997 and December 31, 1996 ...............
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 1997 and 1996 ........................................
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 1997 .................................................
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 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
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans ................... $32,845,798 $30,255,687
Cash and cash equivalents ....................... 8,739,083 10,375,892
Real estate - net ............................... 7,822,622 7,777,158
Interest receivable - mortgage loans ............ 320,767 306,101
Other assets .................................... 158,639 154,030
Interest receivable - other ..................... 22,086 46,886
----------- -----------
$49,908,995 $48,915,754
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distributions payable ........................... $ 632,316 $ 632,316
Accounts payable and accrued expenses ........... 628,451 668,794
Other liabilities ............................... 443,050 443,050
Due to affiliates ............................... 425,259 224,716
----------- -----------
Total liabilities ............................ 2,129,076 1,968,876
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (as restated) (5,690,843
units issued and outstanding) ................ 47,302,130 46,477,419
General partners' equity (as restated) .......... 477,789 469,459
----------- -----------
Total partners' equity ....................... 47,779,919 46,946,878
----------- -----------
$49,908,995 $48,915,754
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF OPERATIONS
For the three months ended
March 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues
Mortgage loans interest income ........... $ 759,652 $ 789,854
Operating income - real estate ........... 277,718 268,707
Short term investment interest ........... 99,147 56,174
Other income ............................. 35,280 10,615
----------- -----------
1,171,797 1,125,350
Costs and expenses
Recovery of loan loss .................... (721,946) --
Management fees .......................... 180,705 182,135
Operating expenses - real estate ......... 149,371 160,687
Depreciation and amortization expense .... 53,000 51,550
Mortgage servicing fees .................. 19,838 19,046
Property management fees ................. 13,924 12,996
General and administrative expenses ...... 11,548 59,679
----------- -----------
(293,560) 486,093
----------- -----------
Net income .................................... $ 1,465,357 $ 639,257
=========== ===========
Net income attributable to
Limited partners ......................... $ 1,450,704 $ 632,864
General partners ......................... 14,653 6,393
----------- -----------
$ 1,465,357 $ 639,257
=========== ===========
Net income per unit of limited partnership
interest (5,690,843 units outstanding) ... $ .25 $ .11
=========== ===========
See notes to financial statements.
</TABLE>
<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 three months ended
March 31, 1997 ..................... 14,653 1,450,704 1,465,357
Distributions for the three months ended
March 31, 1997 ($.11 per limited
partnership unit) ................. (6,323) (625,993) (632,316)
------------ ------------ ------------
Balance, March 31, 1997 ................ $ 477,789 $ 47,302,130 $ 47,779,919
============ ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ........................................ $ 1,465,357 $ 639,257
Adjustments to reconcile net income to
net cash provided by operating activities
Recovery of loan loss ...................... (721,946) --
Depreciation and amortization expense ...... 53,000 51,550
Amortization of acquisition fees ........... 31,926 31,926
Deferred interest receivable ............... -- (37,219)
Changes in assets and liabilities
Interest receivable - mortgage loans ........... (14,666) --
Other assets ................................... (8,609) (49,206)
Interest receivable - other .................... 24,800 --
Accounts payable and accrued expenses .......... (40,343) 55,804
Due to affiliates .............................. 200,543 --
------------ ------------
Net cash provided by operating activities 990,062 692,112
------------ ------------
Cash flows from investing activities
Investment in mortgage loan ....................... (2,000,000) --
Mortgage loan repayments received ................. 99,909 98,142
Additions to real estate .......................... (94,464) (3,226)
------------ ------------
Net cash (used in) provided by
investing activities .................. (1,994,555) 94,916
------------ ------------
Cash flows from financing activities
Distributions to partners ......................... (632,316) (402,383)
------------ ------------
Net (decrease) increase in cash and
cash equivalents .................................. (1,636,809) 384,645
Cash and cash equivalents, beginning of period ......... 10,375,892 9,192,906
------------ ------------
Cash and cash equivalents, end of period ............... $ 8,739,083 $ 9,577,551
============ ============
See notes to financial statements.
</TABLE>
<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 three months ended March 31, 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
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
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of
March 31, 1997. There were no reserves required for the quarter ended
March 31, 1997 or 1996. During 1997, the Partnership recorded a
recovery of loan loss for $721,946 relating to the Santa Ana loan (Note
4).
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 three months ended
March 31, 1997 or March 31, 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 pronouncement
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" in February, 1997.
This pronouncement establishes standards for computing and presenting
earnings per share, and is effective for the Partnership's 1997
year-end financial statements. The Partnership's management has
determined that this standard will have no impact on the Partnership's
computation or presentation of net income per unit of limited
partnership interest.
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,
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
(continued)
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 months ended March 31, 1997 and March 31,
1996, reimbursable expenses to Wexford amounted to $7,697 and $36,369,
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 March 31,
1997 and 1996, the Administrative General Partner earned $180,705 and
$182,135, 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 March 31, 1997 and 1996, the Investment General Partner
earned $19,838 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 March 31, 1997 and 1996. Management fees
earned by the unaffiliated local management company amounted to $12,424
and $12,996 for the quarters ended March 31, 1997 and 1996,
respectively.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
(continued)
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 March
31, 1997 and 1996, the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
of $14,361, $146 and $146 and $6,265, $64 and $64, 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 purchaser to
approximately $59,180 in distributions for the quarter ended March 31,
1997.
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 with penalty. The Note is
secured by (among other things) a collateral assignment of DVL's
interest in certain promissory notes payable to DVL, which in the
aggregate amounted to $4,325,000 as of March 31, 1997.
On May 5, 1997, DVL notified the Partnership of its intention to sell
one of the properties underlying the promissory notes and make a
$1,075,000 prepayment of the Note in June 1997. The Partnership
anticipates that approximately $1,035,000 of the prepayment will be
applied toward the principal balance of the Note and the remainder will
be 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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS(continued)
As a result of an economic decline in the surrounding area, the tenancy
at the Santa Ana Shopping Center had been slowly shifting 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 has been 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. The net carrying value of the loan at
September 30, 1996, was $4,047,830, necessitating a provision of
$1,547,830. The Partnership also ceased accruing interest on this loan
as of such date.
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
at March 31, 1997, necessitating a recovery of loan loss of $721,946.
Xerox Loan
In March 1997, the Xerox loan matured. The Partnership is currently
negotiating a settlement, the details of which have not yet been
finalized. The net carrying value of the Xerox loan at March 31, 1997
was $1,100,000 with a contractual balance of $1,978,261. The
Partnership currently anticipates that a settlement would yield an
amount in excess of the net carrying value of the loan.
<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
Mortgage Recognized
Amount March 31
Description Current % Accrued % Date Advanced 1997 (4)
----------- --------- --------- ---- -------- --------
<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 $ 67,232
Lucky Supermarket
Buena Park, CA (6) 8.41-10.00 (1) 1.82 - 0 (1) May 2005 2,200,000 55,384
Avon Market Ctr.
Avon, CO (5) 8.35 - April 2003 3,750,000 76,633
Medford Village Outlet Center
Medford, MN (10) (5) 8.55 - April 1998 8,612,500 158,756
DVL, Inc. (9) (5) 12.00 - February 2000 2,000,000 21,333
Office Buildings
Bank of California
Seattle, WA (2) (6) 9.36 - 10.24 3.0 - 0 May 1998 8,500,000 286,325
Xerox
Arlington, TX (6) (8) 4.55 (1) 10.38 - 11.47 (1) March 1997 1,100,000 10,629
Lionmark Corp. Ctr.
Columbus, OH (5) 8.5 - 0 - June 2003 4,000,000 83,360
------------ ----------
$ 32,762,500 $ 759,652
</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
March 31, March 31, Dec. 31,
1997 (3) 1997 (3) 1996 (3)
-------- -------- --------
<S> <C> <C> <C>
Shopping Centers
Santa Ana Square,
Santa Ana, CA (5) (7) ..... $ 4,147,000 $ 3,213,908 $ 2,495,981
Lucky Supermarket
Buena Park, CA (6) ........ 2,476,176 2,243,226 2,244,550
Avon Market Ctr .............
Avon, CO (5) .............. 3,666,966 3,666,966 3,673,112
Medford Village Outlet Center
Medford, MN (10) (5) ...... 8,087,500 8,140,162 8,239,815
DVL, Inc. (9) (5) ........... 2,000,000 2,000,000 --
Office Buildings
Bank of California
Seattle, WA (2) (6) ....... 16,668,565 8,561,080 8,573,639
Xerox
Arlington, TX (6) (8) ..... 1,978,261 1,100,000 1,101,872
Lionmark Corp. Ctr ..........
Columbus, OH (5) .......... 3,920,455 3,920,456 3,926,718
----------- ----------- -----------
$42,944,923 $32,845,798 $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.
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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
8. This loan matured in March 1997. The Partnership is currently
negotiating a payoff, the amounts of which have not yet been
determined.
9. This loan loss was made in February 1997.
10. 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. Such loan was made with the
proceeds of two loans which were repaid during 1994.
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 March 31, 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.
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 $30,000 in the
March 31, 1997 financial statements for an aggregate potential
liability of $530,829 from inception through March 31, 1997.
As of March 31, 1997, the Garfinkel's property is still vacant.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE (continued)
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, 1997. The anticipated lease-up
of the vacant space had not occurred as of March 31, 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 approximate fair 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.
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Land ................................... $ 1,902,000 $ 1,902,000
Building and improvements .............. 6,614,654 6,520,190
----------- -----------
8,516,654 8,422,190
Less accumulated depreciation .......... (694,032) (645,032)
----------- -----------
$ 7,822,622 $ 7,777,158
=========== ===========
</TABLE>
6 DISTRIBUTIONS PAYABLE TO PARTNERS
Distributions payable are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
<S> <C> <C>
Limited partners ($.11 per unit) ............. $625,993 $625,993
General partners ............................. 6,323 6,323
-------- --------
$632,316 $632,316
======== ========
</TABLE>
Distributions were paid subsequent to March 31, 1997 and December 31,
1996, respectively.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
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
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 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, in
which the Administrative General Partner is also a General Partner,
were advised of the existence of an action (the "HEP Action") filed in
the Superior Court for the State of California for the County of Los
Angeles, by Mark Erwin, Trustee, Mark Erwin Sales, Inc. Defined Benefit
Plan; Nancy Cooper, Trustee of Nancy Cooper Individual Retirement
Account; and Leonard Drescher, Trustee of Drescher Family Trust Account
individually and purportedly on behalf of a class consisting of all of
the purchasers of limited partnership interests in the HEP Partnerships
(the "Plaintiffs"). The HEP Action names as defendants the
Administrative General Partner and several individuals who are general
partners of the former Associate General Partner, among others.
On November 30, 1995, the original plaintiffs and the intervening
plaintiffs filed a Consolidated Class and Derivative Action Complaint
against the General Partners of the HEP Partnerships alleging, among
other things, breach of fiduciary duties, breach of contract, and
negligence.
On or about January 31, 1996, the parties to the HEP Action agreed upon
a revised settlement, which would be significantly more favorable to
the Plaintiffs than the previously proposed settlement. The revised
settlement proposal, like the previous proposal, involves the
reorganization of the HEP Partnerships. Upon the effectuation of the
revised settlement, the HEP Action would be dismissed with prejudice.
On July 18, 1996, the Court preliminarily approved the revised
settlement. In August 1996, the Court approved the form and method of
notice regarding the revised settlement which was sent to the HEP
limited partners.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
8 COMMITMENTS AND CONTINGENCIES (continued)
HEP Action (continued)
Only approximately 2.5% of the limited partners of the HEP
Partnerships elected to "opt out" of the revised settlement. Despite
this, following the submission of additional briefs, the Court entered
an order on January 14, 1997 rejecting the revised settlement and
concluding that there had not been an adequate showing that the
settlement was fair and reasonable. Thereafter, the Plaintiffs filed a
motion seeking to have the Court reconsider its order. However, the
defendants withdrew the revised settlement and at a hearing on February
24, 1997, the Court denied the Plaintiffs' motion. Also at the February
24, 1997 hearing, the Court recused itself from considering a motion to
intervene and to file a new complaint in intervention by one of the
objectors to the revised settlement, granted the request of one of the
Plaintiffs' law firm to withdraw as class counsel and scheduled future
hearings on various matters.
It is impossible at this time to predict what the defense of this
lawsuit will cost the Administrative General Partner and whether such
costs could adversely effect the Administrative General Partners'
ability to perform its obligations to the Partnership.
<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.
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's 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%. In February 1997 the Partnership funded a
promissory note in the principal amount of $2,000,000 with an annual
interest rate of 12%, maturing on February 27, 2000. As of March 31,
1997, the Partnership has funded an aggregate of $32,762,500 to the
mortgagors in eight mortgage loans which are outstanding, consisting of
seven first mortgage loans and one wraparound mortgage loan.
<PAGE>
Liquidity and capital resources (continued)
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, which in the
aggregate amounted to $4,325,000 as of March 31, 1997.
On May 5, 1997, DVL notified the Partnership of its intention to sell
one of the properties underlying the promissory notes and make a
$1,075,000 prepayment of the Note in June 1997. The Partnership
anticipates that approximately $1,035,000 of the prepayment will be
applied toward the principal balance of the Note and the remainder will
be 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
at March 31, 1997, necessitating a recovery of loan loss of $721,946.
In March 1997, the Xerox loan matured. The Partnership is currently
negotiating a settlement, the details of which have not yet been
finalized. The net carrying value of the Xerox loan at March 31, 1997
was $1,100,000 with a contractual balance of $1,978,261. The
Partnership currently anticipates that a settlement would yield an
amount in excess of the net carrying value of the loan.
For the quarter ended March 31, 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 March 31, 1997, working capital reserves
were approximately $8,567,000.
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 foreclosed 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.
<PAGE>
Liquidity and capital resources (continued)
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 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
March 31, 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 at March 31, 1997, necessitating a
recovery of loan loss of $721,946.
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 three months ended
March 31, 1997 or March 31, 1996.
<PAGE>
Results of operations
Net income increased for the three months ended March 31, 1997 when
compared to the same period in 1996. The increase is primarily due to
the recovery of loan loss related to the Santa Ana loan as discussed
above.
Revenues increased primarily due to the increase in short term
investment income, and other income. Short term investment income
increased due to an increase in interest rates and other income
increased due to an increase in transfer fees.
Costs and expenses decreased for the three months ended March 31, 1997
compared to the same period in 1996, primarily a result of the recovery
of loan loss related to the Santa Ana loan, as discussed above, and a
decrease in general and administrative expenses. 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
For a discussion of Legal Proceedings, please see Note 8 ("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 8 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: May 15, 1997 By: /s/ Joseph M. Jacobs
--------------------
Joseph M. Jacobs
President
(Duly Authorized Officer)
Dated: May 15, 1997 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 extracted from the financial
statements of the March 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,739,083
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,081,936
<PP&E> 0
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<TOTAL-ASSETS> 49,908,995
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 49,908,995
<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 375,386
<OTHER-EXPENSES> (668,946)
<LOSS-PROVISION> (721,946)
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</TABLE>
