UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 - JUNE 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - June 30, 1997 and December 31, 1996 .................
STATEMENTS OF OPERATIONS - For the three months ended June 30, 1997
and 1996 and for the six months ended June 30, 1997 and 1996 ....
STATEMENT OF PARTNERS' EQUITY - For the six months ended
June 30, 1997 ...................................................
STATEMENTS OF CASH FLOWS - For the six months ended
June 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>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Investments in mortgage loans ................... $21,386,648 $30,255,687
Cash and cash equivalents ....................... 20,293,991 10,375,892
Real estate - net ............................... 7,789,920 7,777,158
Interest receivable - mortgage loans ............ 172,494 306,101
Other assets .................................... 96,733 154,030
Interest receivable - other ..................... -- 46,886
----------- -----------
$49,739,786 $48,915,754
=========== ===========
Accounts payable and accrued expenses ........... $ 657,602 $ 668,794
Distributions payable ........................... 632,316 632,316
Other liabilities ............................... 443,050 443,050
Due to affiliates ............................... 197,972 224,716
----------- -----------
Total liabilities .......................... 1,930,940 1,968,876
----------- -----------
Limited partners' equity (as restated) (5,690,843
units issued and outstanding) .............. 47,330,768 46,477,419
General partners' equity (as restated) .......... 478,078 469,459
----------- -----------
Total partners' equity ..................... 47,808,846 46,946,878
----------- -----------
$49,739,786 $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 For the six months ended
June 30, June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Mortgage loans interest income ...... $ 658,927 $ 781,348 $ 1,418,579 $ 1,571,202
Operating income - real estate ...... 238,562 251,806 516,280 520,513
Short term investment interest ...... 159,676 117,408 258,823 173,582
Other income ........................ 50,980 16,340 86,260 26,955
----------- ----------- ----------- -----------
1,108,145 1,166,902 2,279,942 2,292,252
----------- ----------- ----------- -----------
Costs and expenses
Management fees ..................... 179,282 183,007 359,987 365,142
Operating expenses - real estate .... 118,374 125,670 267,745 286,357
General and administrative expenses . 67,026 70,274 78,574 129,953
Depreciation and amortization expense 53,000 51,598 106,000 103,148
Mortgage servicing fees ............. 18,693 19,046 38,531 38,092
Property management fees ............ 10,527 15,924 24,451 28,920
Recovery of loan loss ............... -- -- (721,946) --
----------- ----------- ----------- -----------
446,902 465,519 153,342 951,612
----------- ----------- ----------- -----------
Net income ............................... $ 661,243 $ 701,383 $ 2,126,600 $ 1,340,640
=========== =========== =========== ===========
Net income attributable to
Limited partners .................... $ 654,630 $ 694,369 $ 2,105,334 $ 1,327,234
General partners .................... 6,613 7,014 21,266 13,406
----------- ----------- ----------- -----------
$ 661,243 $ 701,383 $ 2,126,600 $ 1,340,640
=========== =========== =========== ===========
Net income per unit of limited
partnership interest (5,690,843
units outstanding) .................. $ .12 $ .12 $ .37 $ .23
=========== =========== =========== ===========
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 six months ended
June 30, 1997 .................... 21,266 2,105,334 2,126,600
Distributions for the six months ended
June 30, 1997 ($.22 per limited
partnership unit) ............... (12,647) (1,251,985) (1,264,632)
------------ ------------ ------------
Balance, June 30, 1997 ............... $ 478,078 $ 47,330,768 $ 47,808,846
============ ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ......................................... $ 2,126,600 $ 1,340,640
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Recovery of loan loss ....................... (721,946) --
Depreciation and amortization expense ....... 106,000 103,148
Amortization of acquisition fees ............ 98,471 63,852
Deferred interest receivable ................ -- (75,463)
Changes in assets and liabilities
Interest receivable - mortgage loans ............ 133,607 --
Other assets .................................... 49,297 (14,513)
Interest receivable - other ..................... 46,886 --
Accounts payable and accrued expenses ........... (11,192) 89,096
Due to affiliates ............................... (26,744) 105
------------ ------------
Net cash provided by operating activities 1,800,979 1,506,865
------------ ------------
Cash flows from investing activities
Mortgage loan repayments received .................. 11,492,514 198,103
Additions to real estate ........................... (110,762) --
Investment in mortgage loan ........................ (2,000,000) --
------------ ------------
Net cash provided by investing activities 9,381,752 198,103
------------ ------------
Cash flows from financing activities
Distributions to partners .......................... (1,264,632) (1,034,699)
------------ ------------
Net increase in cash and cash equivalents ............... 9,918,099 670,269
Cash and cash equivalents, beginning of period .......... 10,375,892 9,192,906
------------ ------------
Cash and cash equivalents, end of period ................ $ 20,293,991 $ 9,863,175
============ ============
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 six months ended June 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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of June
30, 1997. There were no reserves required for the quarter ended June
30, 1997 or 1996. During the first quarter of 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 six months ended
June 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 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
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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,
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 six months ended June 30, 1997 and June 30,
1996, reimbursable expenses to Wexford amounted to $11,887 and $23,069,
respectively. Wexford is engaged to perform similar services for other
similar entities that may be in competition with the Partnership.
For management of the affairs of the Partnership, the Administrative
General Partner is entitled to receive a management fee equal to 1.25%
per annum of the average month-end net asset value of the Partnership
for the first four years after the initial closing date; 1.5% for the
next six years; and 1.75% thereafter. For the quarters ended June 30,
1997 and 1996, the Administrative General Partner earned $179,282 and
$183,007, respectively.
For the servicing of mortgage loans made by the Partnership, the
Investment General Partner is entitled to receive a mortgage servicing
fee of 1/4 of 1% per annum of the principal balances loaned. During the
quarters ended June 30, 1997 and 1996, the Investment General Partner
earned $18,693 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
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
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 June 30, 1997 and 1996. Management fees
earned by the unaffiliated local management company amounted to $12,026
and $15,924 for the quarters ended June 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 June
30, 1997 and 1996, the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
of $6,481, $66 and $66 and $6,874, $70 and $70, 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 affiliate to
approximately $59,000 in distributions for the quarter ended June 30,
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. 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 June 30, 1997.
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.
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)
Santa Ana Square Loan (continued)
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 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, 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. 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 June 30, 1997 is
$1,100,000 with a contractual balance of $1,970,261. The Partnership
currently anticipates that a settlement would yield an amount in excess
of the net carrying value of the loan.
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
Mortgage Recognized
Interest Rate Maturity Amount June 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 2,200,000 110,769
Avon Market Ctr.
Avon, CO (5) 8.35 - April 2003 3,750,000 153,138
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 73,952
Office Buildings
Bank of California
Seattle, WA (2)(6) 9.36 - 10.24 3.0 - 0 May 1998 8,500,000 572,649
Xerox
Arlington, TX (6)(7) 4.55 (1) 10.38 - 11.47 (1) March 1997 1,100,000 10,629
Lionmark Corp. Ctr.
Columbus, OH (5) 8.5 - June 2003 4,000,000 166,586
------------ ----------
$ 32,762,500 $ 1,418,579
============ ===========
</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
June 30, June 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) 2,491,962 2,241,903 2,244,550
Avon Market Ctr
Avon, CO (5) 3,660,690 3,660,690 3,673,112
Medford Village Outlet Center
Medford, MN (10(5) -- -- 8,239,815
DVL, Inc. (9)(5) 1,921,476 1,921,476 --
Office Buildings
Bank of California
Seattle, WA (2)(6) 16,793,873 8,548,520 8,573,639
Xerox
Arlington, TX (6)(7) 1,970,261 1,100,000 1,101,872
Lionmark Corp. Ctr
Columbus, OH (5) 3,914,058 3,914,059 3,926,718
----------- ----------- -----------
$30,752,320 $21,386,648 $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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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. The Partnership is currently
negotiating a payoff, the amounts of which have not yet been
determined.
9. This loan was made in February 1997.
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 June 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.
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
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE (continued)
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 in the
second quarter of 1997 for an aggregate potential liability of $560,829
from inception through June 30, 1997.
As of June 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 June 30, 1997. The anticipated lease-up
of the vacant space had not occurred as of June 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 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 at March 31, 1995.
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Land $ 1,902,000 $ 1,902,000
Building and improvements 6,630,952 6,520,190
----------- -----------
8,532,952 8,422,190
Less accumulated depreciation (743,032) (645,032)
------------- ------------
$ 7,789,920 $ 7,777,158
=========== ===========
</TABLE>
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
6 DISTRIBUTIONS PAYABLE TO PARTNERS
Distributions payable are as follows:
<TABLE>
<CAPTION>
June 30, 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 June 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
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.
<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.
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.
As of June 30, 1997, the Partnership has funded an aggregate of
$21,550,000 to the mortgagors in six outstanding mortgage loans,
consisting of five first mortgage loans and one wraparound mortgage
loan. See Note 4 to the financial statements.
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 June 30, 1997.
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.
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 June 30, 1997 is
$1,100,000 with a contractual balance of $1,970,261. The Partnership
currently anticipates that a settlement would yield an amount in excess
of the net carrying value of the loan.
<PAGE>
Liquidity and capital resources (continued)
For the quarter ended June 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 June 30, 1997, working capital reserves
were approximately $18,700,000. 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 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.
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
senior debt, the prospect for the property and the economic situation
in the region where the property is located. Because this determination
of net realizable value is based upon projections of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of June
30, 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
<PAGE>
Liquidity and capital resources (continued)
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 six months ended
June 30, 1997 and 1996.
Results of operations
Net income increased for the six months and decreased for the three
months ended June 30, 1997 when compared to the same periods in 1996.
The increase for the six months was primarily due to the recovery of
loan losses that was recorded in 1997, related to the Santa Ana sale
(see above). The decrease for the three months was a result of a
greater decrease in revenues than the decrease in costs and expenses.
Revenues decreased for both the six and the three months ended June 30,
1997 compared with the same periods in the prior year primarily due to
a decrease in mortgage interest income, partially offset by an increase
in short term investment income. Mortgage interest income decreased as
a result of the Santa Ana and Medford payoffs. Short term investment
income increased due to an increase in cash and cash equivalents
available for short term investment.
Costs and expenses decreased for both the six and the three months
ended June 30, 1997 compared to the same periods in the prior year. The
decrease for the six months ended June 30, 1997 was primarily a result
of the recovery of loan losses 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. The decrease for the three
months ended June 30, 1997 the decrease was primarily due to a decrease
in operating expenses.
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 5 - OTHER EVENTS
On July 25, 1997, Wexford Management LLC ("Wexford"), the administrator
for Presidio Capital Corp. ("Presidio") the parent company of Resources
Capital Corp., Resources Pension Advisory Corp. and Presidio AGP Corp.,
the Administrative, Investment and Associate General Partners,
respectively, of Resources Pension Shares 5, L.P. (the "Partnership"),
received notice from Presidio Holding Company, LLC, which stated that
it is the holder of 63% of the outstanding Class A common shares of
Presidio, that it was seeking to remove the three current Class A
directors and replacing them with Edward Sheetz, David Hamamoto and
David King effective as of 12:00 p.m. on September 2, 1997. There
exists substantial doubt as to the effectiveness of such notice. On
August 15, 1997, Presidio applied to the Judge of the High Court in the
British Virgin Islands for a declaration that the written resolution of
Presidio Holding LLC dated July 25, 1997 was invalid and of no effect
insofar as it purports to be a written resolution of the Class A
Members of Presidio.
As of August 18, 1997, there have been no changes in the composition of
the officers and directors of the general partners. In addition, the
administrative services agreement with Wexford remains in effect and is
scheduled to terminate in November 1997.
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: August 18, 1997 By: /s/ Joseph M. Jacobs
--------------------
Joseph M. Jacobs
President
(Duly Authorized Officer)
Dated: August 18, 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 June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,293,991
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0
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