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, 1998
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, Suite 270, Greenwich, CT 06830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(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 10Q - SEPTEMBER 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1998 and December 31, 1997
STATEMENTS OF OPERATIONS - For the three months ended September 30,
1998 and 1997 and for the nine months ended September 30, 1998 and 1997
STATEMENT OF PARTNERS' EQUITY - For the nine months ended September 30,
1998
STATEMENTS OF CASH FLOWS - For the nine months ended September 30, 1998
and 1997
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>
RESOURCES PENSION SHARES 5, L.P.
BALANCE SHEETS
September 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans............ $12,601,801 $25,448,823
Cash and cash equivalents ............... 2,958,195 15,725,616
Real estate - net ....................... 7,604,874 9,232,074
Other assets ............................ 233,539 181,635
Interest receivable - mortgage loans .... 47,129 126,512
Interest receivable - other ............. 15,663 78,593
----------- -----------
$23,461,201 $50,793,253
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distributions payable ................... $ -- $ 632,316
Accounts payable and accrued expenses ... 48,717 779,912
Other liabilities ....................... 443,050 608,438
Due to affiliates ....................... 106,317 321,525
----------- -----------
Total liabilities .................... 598,084 2,342,191
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (5,690,843
units issued and outstanding) ........ 22,634,487 47,966,562
General partners' equity ................ 228,630 484,500
----------- -----------
Total partners' equity ............... 22,863,117 48,451,062
----------- -----------
$23,461,201 $50,793,253
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<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,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Mortgage loans interest income ....... $ 319,104 $ 1,051,041 $10,226,571 $ 2,469,620
Operating income - real estate ....... 201,411 254,478 752,260 770,758
Short term investment interest ....... 40,143 234,990 435,021 493,813
Other income ......................... 14,479 106,879 68,644 193,139
----------- ----------- ----------- -----------
575,137 1,647,388 11,482,496 3,927,330
----------- ----------- ----------- -----------
Costs and expenses
Partnership management fees .......... 98,771 180,303 505,032 540,290
Operating expenses - real estate ..... 99,685 166,985 327,788 434,730
Depreciation and amortization ........ 53,592 53,000 168,841 159,000
General and administrative ........... 58,612 51,236 203,318 129,810
Property management fees ............. 12,750 22,502 44,905 46,953
Mortgage servicing fees .............. 7,546 12,463 37,814 50,994
Loss on disposition of real estate ... -- -- 28,156 --
Recovery of loan loss ................ -- -- -- (721,946)
----------- ----------- ----------- -----------
330,956 486,489 1,315,854 639,831
----------- ----------- ----------- -----------
Net income ................................ $ 244,181 $ 1,160,899 $10,166,642 $ 3,287,499
=========== =========== =========== ===========
Net income attributable to
Limited partners ..................... $ 241,740 $ 1,149,290 $10,064,976 $ 3,254,624
General partners ..................... 2,441 11,609 101,666 32,875
----------- ----------- ----------- -----------
$ 244,181 $ 1,160,899 $10,166,642 $ 3,287,499
=========== =========== =========== ===========
Net income per unit of limited partnership
interest (5,690,843 units outstanding) $ .04 $ .20 $ 1.77 $ .57
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<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, 1998 ................. $ 484,500 $ 47,966,562 $ 48,451,062
Net income for the nine months ended
September 30, 1998 ................... 101,666 10,064,976 10,166,642
Distributions for the nine months ended
September 30, 1998 ($6.22 per limited
partnership unit) ................... (357,536) (35,397,051) (35,754,587)
------------ ------------ ------------
Balance, September 30, 1998 .............. $ 228,630 $ 22,634,487 $ 22,863,117
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ............................................ $ 10,166,642 $ 3,287,499
Adjustments to reconcile net income to
net cash provided by operating activities
Recovery of loan loss .......................... -- (721,946)
Depreciation and amortization expense .......... 168,841 159,000
Amortization of origination and acquisition fees (1,068) 112,354
Interest earned on Xerox loan .................. -- (400,000)
Loss on disposition of real estate ............. 28,156 --
Changes in assets and liabilities
Other assets ....................................... (65,062) (19,610)
Interest receivable - mortgage loans ............... 79,383 146,416
Interest receivable - other ........................ 62,930 46,886
Accounts payable and accrued expenses .............. (896,583) (836)
Due to affiliates .................................. (215,208) (31,953)
------------ ------------
Net cash provided by operating activities .. 9,328,031 2,577,810
------------ ------------
Cash flows from investing activities
Proceeds from disposition of real estate, net ......... 1,456,844 --
Mortgage loan repayments received ..................... 12,848,090 12,603,849
Investment in mortgage loan ........................... -- (2,000,000)
Additions to real estate .............................. (13,483) (138,800)
------------ ------------
Net cash provided by investing activities .. 14,291,451 10,465,049
------------ ------------
Cash flows from financing activities
Distributions to partners ............................. (36,386,903) (1,896,948)
------------ ------------
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
(continued)
For the nine months ended
September 30,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net (decrease) increase in cash and cash equivalents ....... (12,767,421) 11,145,911
Cash and cash equivalents, beginning of period ............. 15,725,616 10,375,892
------------ ------------
Cash and cash equivalents, end of period ................... $ 2,958,195 $ 21,521,803
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
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 (which was
accounted for under the investment method) had a carrying value of $1,100,000
and the 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, recorded an addition to real estate for
the estimated net realizable value of the underlying property which resulted in
mortgage loan interest income of $400,000.
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and 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, 1997. The
results of operations for the nine months ended September 30, 1998 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)
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, 1998. Accordingly, the Partnership may provide additional
losses in subsequent periods and such provisions could be material. A
provision for loan losses was not required for the quarterly periods
ended September 30, 1998 and 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 quarterly periods
ended September 30, 1998 and 1997.
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.
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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
indirect ownership of the General Partners. Effective July 31, 1998,
Presidio is indirectly controlled by NorthStar Capital Investment
Corp., ("NorthStar"), a Maryland Corporation.
Effective as of August 28, 1997, Presidio has a management agreement
with NorthStar Presidio Management Company, LLC ("NorthStar Presidio"),
pursuant to which NorthStar Presidio provides the day-to-day management
of Presidio and its direct and indirect subsidiaries and affiliates.
For the nine months ended September 30, 1998 reimbursable expenses due
NorthStar Presidio amounted to $6,000.
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, 1998 and 1997, the Administrative General Partner earned $98,771
and $180,303, 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, 1998 and 1997, the Investment General
Partner earned $7,546 and $12,463, 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, 1998 and 1997. Management
fees earned by the unaffiliated local management company amounted to
$12,750 and $12,202 for the quarters ended September 30, 1998 and 1997,
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
September 30, 1998 and 1997, the Administrative General Partner,
Investment General Partner and Associate General Partner were allocated
net income of $2,393, $24 and $24 and $11,377, $116 and $116,
respectively.
As of September 30, 1998 affiliates of Presidio have purchased
1,490,562 limited partnership units of the Partnership and received, or
were entitled to receive distributions of $163,962 with respect to such
units for the quarter then ended.
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 Note
and made a $1,075,000 prepayment to the Partnership. Approximately
$1,032,000 of the prepayment was applied towards the principal balance
of the Note and the remainder was applied to interest and yield
maintenance fee.
On April 1, 1998, DVL sold another of the properties underlying the
Note and made a $500,000 prepayment to the Partnership. $467,787 was
applied towards the principal balance of the Note and the remainder was
applied to interest and yield maintenance fee.
Xerox Loan
The Xerox loan was originally a $1,100,000 first mortgage loan which
was secured by an office building located in Arlington, Texas. In March
1997, the Xerox loan matured in accordance with its terms. 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 (this loan was accounted for under the
investment method) and the underlying property had an estimated net
realizable value of $1,500,000. Accordingly, the Partnership had
reduced its investments in mortgage loans by the carrying value of the
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Xerox Loan (continued)
Xerox loan and recorded an addition to real estate for the fair market
value of the underlying property, which resulted in recognition of
interest income for amounts previously deferred in the amount of
$400,000. A separate entity was formed, 2810 Arlington Holding, LLC, to
take title to the property. The Partnership is the sole member of the
entity and is entitled to 100% of all assets, distributions and net
income.
On March 10, 1998, 2810 Arlington Holding, LLC sold this property for
$1,550,000, inclusive of closing costs of approximately $93,000. At
that time the property had a net carrying value of $1,485,000,
resulting in a loss on the disposition of the property of approximately
$28,000.
Bank of California Loan
The Bank of California Loan, in the original principal amount of
$8,500,000 ("Wrap Loan"), was secured by, among other things, the
interest of Gum Loong Limited Partnership ("Gum Loong") in the land
located in downtown Seattle, Washington underlying a building commonly
known as The Bank of California Building (the "Building").
In August 1993, Gum Loong filed for bankruptcy protection under Chapter
11 of the United States Bankruptcy Code, and a plan of reorganization
was approved in September 1993. In June 1998, the Bankruptcy Court
approved settlement of the Wrap Loan in its entirety. At that time, the
net carrying value of the Wrap Loan on the Partnership's books was
$8,500,000. The Partnership received the full contractual amount of
$16,955,560, of which $8,500,000 was applied towards principal and
$8,455,560 applied to interest.
Avon Market Center Loan
On March 19, 1993, the Partnership funded a first mortgage loan in the
principal amount of $3,750,000 at an annual interest rate of 8.35%,
payable in monthly installments of principal and interest (based on a
35-year amortization schedule). The loan was for a period of ten years,
may not have been prepaid during its first two years and may have been
prepaid thereafter without penalty. This loan did not provide for any
accrued or contingent interest. The loan was secured by a shopping
center located in Eagle County, Colorado.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Avon Market Center Loan (continued)
On June 3, 1998, the loan was prepaid in its entirety. The Partnership
received $3,694,492 of which $3,638,804 was applied towards principal
and $55,688 to interest.
Information with respect to the Partnership's investments in mortgage
loans is summarized below:
<TABLE>
<CAPTION>
Interest Contractual Carrying
Mortgage Recognized Balance Value
Interest Rate Maturity Amount Sept. 30, Sept. 30, Sept. 30, Sept. 30,
Description Current % Accrued % Date Advanced 1998 1998 (2) 1998 (1)
----------- --------- --------- ---- -------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
Lucky Supermarket
Buena Park, CA (4) 8.41-10.00 1.82 - 0 May 2005 $ 2,200,000 $ 166,154 $2,485,376 $2,235,288
DVL, Inc. (3) 12.00 - February 2000 2,000,000 28,473 75,361 75,631
Hotel
Crowne Plaza Hotel (3)
Cincinnati, Ohio 11.00 - October 2000 6,500,000 536,212 6,412,721 6,412,721
Lionmark Corp. Ctr.
Columbus, OH (3) 8.5 - June 2003 4,000,000 247,832 3,878,161 3,878,161
----------- ----------- ----------- -----------
$14,700,000 $ 978,671 $12,851,619 $12,601,801
=========== =========== =========== ===========
</TABLE>
1. The carrying values of the above mortgage loans are inclusive of
acquisition fees, accrued interest recognized and loan origination
fees.
2. The contractual balance represents the original mortgage amount
advanced plus accrued interest calculated in accordance with the loan
agreements, less principal amortization received.
3. These loans are accounted for under the interest method.
4. This loan is accounted for under the investment method.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE
Landover, Maryland
The owner of the Landover Mall ("Mall Owner"), where the property is
located, had 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 believed it was obligated only
for the actual value of certain items. Discussions between the
Partnership and Mall Owner were on-going as to the exact amount to be
paid. The Partnership had provided a liability (included in accounts
payable and accrued expenses in the accompanying balance sheets) in the
amount of $672,329 at December 31, 1997, for such charges. On December
22, 1997 the Partnership entered into a settlement agreement with Mall
Owner and on February 4, 1998 the Partnership paid $667,407 in full
satisfaction of amounts owed at December 31, 1997 (excluding energy
charges for December 1997).
Arlington, Texas
As discussed in Note 4, this property, which was originally owned by
Xerox, was acquired by the Partnership via a deed-in-lieu of
foreclosure on September 30, 1997. The property has been recorded at
its estimated net realizable value at such date. On March 10, 1998, the
Partnership sold this property for approximately $1,457,000, net of
closing costs.
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
Sept. 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land ........................ $ 2,460,000 $ 2,202,000
Building and improvements ... 6,135,645 7,880,162
------------ ------------
8,595,645 10,082,162
Less accumulated depreciation (990,771) (850,088)
------------ ------------
$ 7,604,874 $ 9,232,074
============ ============
</TABLE>
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
6 DISTRIBUTIONS PAYABLE TO PARTNERS
Distributions payable are as follows:
<TABLE>
<CAPTION>
Sept. 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Limited partners ($.11 per unit) --- $625,993
General partners ............... --- 6,323
-------- --------
--- $632,316
======== ========
</TABLE>
Such distributions were paid subsequent to December 31, 1997.
<PAGE>
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and capital resources
As of September 30, 1998, the Partnership has funded an aggregate of
$14,700,000 to the mortgagors in four outstanding mortgage loans. (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. Since inception through September 30, 1998, the Partnership
has received approximately $423,000 in principal payments.
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.
On April 1, 1998, DVL sold another of the properties underlying the
note and made a $500,000 prepayment to the Partnership. Approximately
$467,787 was applied towards the principal balance of the Note and the
remainder was applied to interest and yield maintenance fee.
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 March 10, 1998, the
Partnership sold this property for net proceeds of approximately
$1,457,000.
On June 3, 1998, the Avon loan was prepaid in its entirety. The
Partnership received $3,694,492 of which $3,638,804 was applied towards
principal and $55,688 to interest.
In June 1998, the Bankruptcy Court approved the settlement of the Bank
of California Wrap Loan in its entirety. At that time, the net carrying
value on the Partnership's books was $8,500,000. The Partnership
received the full contractual amount of $16,955,560, of which
$8,500,000 was applied towards principal and $8,455,560 applied to
interest.
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 require funds for capital improvements to
and the leasing of the property which formerly secured the Groton loan.
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)
On June 16, 1998, the Partnership paid a special cash distribution of
$34,489,955 ($6.00 per limited partnership unit), substantially all of
which represents proceeds from mortgage principal payments and property
sales. At September 30, 1998 the Partnership had working capital
reserves of approximately $2,866,000. Working capital reserves are
invested in short-term instruments and are expected to be sufficient to
pay administrative expenses during the term of the Partnership. If
necessary, the Partnership has the right to establish reserves from
disposition proceeds or from cash flow.
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.
Results of operations
Net income increased for the nine month period ended September 30, 1998
compared with the same period in the prior year. The increase was
primarily due to the receipt of the entire outstanding contractual
balances from the Bank of California and Avon Market Center loans in
June 1998.
Revenues increased for the nine month period ended September 30, 1998
compared with the same period in the prior year primarily due to an
increase in mortgage interest income resultinlg from loan repayments
received from Bank of California and Avon Market Center, in addition to
prepayments received from DVI Inc.. Revenues decreased for the three
month period ended September 30, 1998 compared with the same period in
the prior year primarily due to a decrease in mortgage loan interest,
short-term investment interest and other income. Mortgage loans
interest income decreased primarily as a result of the Bank of
California and Avon Market Center payoffs in June 1998. Short-term
investment income decreased as a result of a decrease in cash and cash
equivalents on which the interest is earned. Other income decreased as
a result of a decrease in transfer fee income.
Costs and expenses decreased for both the three and nine months ended
September 30, 1998 compared with the same period in the prior year
(excluding recovery of loan losses) partially offset by the increase in
general and administrative expenses. The September 30, 1997 cost and
expenses were offset by the recovery of loan losses related to the
Santa Ana property. The decrease is primarily due to a decrease in
management fees as a result of a decrease in the fee percentage of net
asset value on which such fees are calculated. In addition, operating
expenses decreased as a result of the disposition of 2810 Arlington in
March 1998. General and administrative expenses increased primarily as
a result of an increase in legal expenses due to the loan payoffs.
Inflation has not had a material effect on the Partnership's revenues
during the period 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.
<PAGE>
Year 2000 Compliance
The Year 2000 compliance issue concerns the inability of computerized
information systems and equipment to accurately calculate, store or use
a date after December 31, 1999, as a result of the year being stored as
a two digit number. This could result in a system failure or
miscalculations causing disruptions of operations. The Partnership and
its Manager (NorthStar Presidio Management Co., LLC) recognize the
importance of ensuring that its business operations are not disrupted
as a result of Year 2000 related computer system and software issues.
The Manager is in the process of assessing its internal computer
information systems and is now taking the further steps necessary to
remediate these systems so that they will be Year 2000 compliant. In
connection therewith, the Manager is currently in the process of
installing a new fully compliant accounting and reporting system. The
Manager is also currently reviewing its other internal systems and
programs, along with those of its unaffiliated third party service
providers, in order to insure compliance.
Further, the Manager and these service providers are currently
evaluating and assessing those computer systems not related to
information technology. These systems, that generally operate in a
building include, without limitation, telecommunication systems,
security systems (such as card-access door lock systems), energy
management systems and elevator systems. As a result of the technology
used in this type of equipment, it is possible that this equipment may
not be repairable, and accordingly may require complete replacement.
Because this assessment is ongoing, the total cost of bringing all
systems and equipment into Year 2000 compliance has not been fully
quantified. Based upon available information, the Manager does not
believe that these costs will have a material adverse effect on the
Partnership's business, financial condition or results. However, it is
possible that there could be adverse consequences to the Partnership as
a result of Year 2000 issues that are outside the Partnership's
control. The Manager is in the preliminary stages of evaluating these
issues and will be developing contingency plans.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) See Management Discussion and Analysis of Financial Condition and
Results of Operations 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
By: /s/Allan B. Rothschild
----------------------
Allan B. Rothschild
President
By: /s/ Lawrence Schachter
----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
Date: November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the September 30, 1998 Form 10Q of Resources Accrued Mortgage
Investors 2 L.P. and is qualified in its entirety by reference for such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,958,195
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,020,987
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,461,201
<CURRENT-LIABILITIES> 155,034
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,863,117
<TOTAL-LIABILITY-AND-EQUITY> 23,461,201
<SALES> 0
<TOTAL-REVENUES> 11,482,496
<CGS> 0
<TOTAL-COSTS> 1,118,857
<OTHER-EXPENSES> 196,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,166,647
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,166,642
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
