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, 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 - JUNE 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - June 30, 1998 and December 31, 1997 .................
STATEMENTS OF OPERATIONS - For the three months ended June 30, 1998
and 1997 and for the six months ended June 30, 1998 and 1997 ....
STATEMENT OF PARTNERS' EQUITY - For the six months ended June 30, 1998
STATEMENTS OF CASH FLOWS - For the six months ended
June 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 1 - FINANCIAL INFORMATION
ITEM - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
BALANCE SHEETS
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investment in mortgage loans ............ $12,676,938 $25,448,823
Cash and cash equivalents ............... 3,432,032 15,725,616
Real estate - net ....................... 7,645,356 9,232,074
Other assets ............................ 130,756 181,635
Interest receivable - mortgage loans .... 107,438 126,512
Interest receivable - other ............. 24,924 78,593
----------- -----------
$24,017,444 $50,793,253
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Distributions payable ................... $ 632,316 $ 632,316
Accounts payable and accrued expenses ... 112,927 779,912
Other liabilities ....................... 443,050 608,438
Due to affiliates ....................... 210,215 321,525
----------- -----------
Total liabilities .................... 1,398,508 2,342,191
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (5,690,843
units issued and outstanding) ........ 22,392,756 47,966,562
General partners' equity ................ 226,180 484,500
----------- -----------
Total partners' equity ............... 22,618,936 48,451,062
----------- -----------
$24,017,444 $50,793,253
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF OPERATIONS
For the three months ended For the six months ended
June 30, June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Mortgage loans interest income ....... $ 9,107,135 $ 658,927 $ 9,907,467 $ 1,418,579
Operating income - real estate ....... 248,616 238,562 550,849 516,280
Short term investment interest ....... 200,713 159,676 394,878 258,823
Other income ......................... 39,386 50,980 54,165 86,260
----------- ----------- ----------- -----------
9,595,850 1,108,145 10,907,359 2,279,942
----------- ----------- ----------- -----------
Costs and expenses
Management fees ...................... 225,252 179,282 406,261 359,987
Operating expenses - real estate ..... 109,721 118,374 228,103 267,745
Depreciation and amortization ........ 53,974 53,000 115,249 106,000
General and administrative ........... 102,136 67,026 144,706 78,574
Property management fees ............. 14,860 10,527 32,155 24,451
Mortgage servicing fees .............. 15,134 18,693 30,268 38,531
Recovery of loan loss ................ -- -- -- (721,946)
----------- ----------- ----------- -----------
521,077 446,902 956,742 153,342
----------- ----------- ----------- -----------
9,074,773 661,243 9,950,617 2,126,600
Loss on disposition of real estate ........ -- -- 28,156 --
----------- ----------- ----------- -----------
Net income ................................ $ 9,074,773 $ 661,243 $ 9,922,461 $ 2,126,600
=========== =========== =========== ===========
Net income attributable to
Limited partners ..................... $ 8,984,025 $ 654,630 $ 9,823,236 $ 2,105,334
General partners ..................... 90,748 6,613 99,225 21,266
----------- ----------- ----------- -----------
$ 9,074,773 $ 661,243 $ 9,922,461 $ 2,126,600
=========== =========== =========== ===========
Net income per unit of limited partnership
interest (5,690,843 units outstanding) $ 1.58 $ .12 $ 1.73 $ .37
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1998 ...................... $ 484,500 $ 47,966,562 $ 48,451,062
Net income for the six months ended
June 30, 1998 ............................. 99,225 9,823,236 9,922,461
Distributions for the six months ended
June 30, 1998 ($6.22 per limited
partnership unit) ........................ (357,545) (35,397,042) (35,754,587)
------------ ------------ ------------
Balance, June 30, 1998 ........................ $ 226,180 $ 22,392,756 $ 22,618,936
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
For the six months ended
June 30,
------------------------------
1998 1997
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
<S> <C> <C>
Cash flows from operating activities
Net income ............................................ $ 9,922,461 $ 2,126,600
Adjustments to reconcile net income to
net cash provided by operating activities
Recovery of loan loss .......................... -- (721,946)
Depreciation and amortization expense .......... 115,249 106,000
Amortization of origination and acquisition fees 7,089 98,471
Loss on disposition of real estate ............. 28,156 --
Changes in assets and liabilities
Other assets ....................................... 42,107 49,297
Interest receivable - mortgage loans ............... 19,074 133,607
Interest receivable - other ........................ 53,669 46,886
Accounts payable and accrued expenses .............. (666,985) (11,192)
Other liabilities .................................. (165,388) --
Due to affiliates .................................. (111,310) (26,744)
------------ ------------
Net cash provided by operating activities ... 9,244,122 1,800,979
------------ ------------
Cash flows from investing activities
Proceeds from disposition of real estate, net ......... 1,456,844 --
Mortgage loan repayments received ..................... 12,764,796 11,492,514
Investment in mortgage loan ........................... -- (2,000,000)
Additions to real estate .............................. (4,759) (110,762)
------------ ------------
Net cash provided by investing activities ... 14,216,881 9,381,752
------------ ------------
Cash flows from financing activities
Distributions to partners ............................. (35,754,587) (1,264,632)
------------ ------------
Net (decrease) increase in cash and cash equivalents ....... (12,293,584) 9,918,099
Cash and cash equivalents, beginning of period ............. 15,725,616 10,375,892
------------ ------------
Cash and cash equivalents, end of period ................... $ 3,432,032 $ 20,293,991
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and 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 six months ended June 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
senior debt, the prospects for the property and the economic situation
in the region where the property is located. Because this determination
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, 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 June
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 June 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 on August 28, 1997 Presidio entered into a management
agreement with NorthStar Presidio Management Company LLC, ("NorthStar
Presidio"), an affiliate of NorthStar, pursuant to which NorthStar
Presidio provides the day-to-day management of Presidio and its direct
and indirect subsidiaries and affiliates. For the six months ended June
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 June 30,
1998 and 1997, the Administrative General Partner earned $225,252 and
$179,282, 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, 1998 and 1997, the Investment General Partner
earned $15,134 and $18,693, 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, 1998 and 1997. Management fees
earned by the unaffiliated local management company amounted to $14,860
and $10,527,802 the quarters ended June 30, 1998 and 1997,
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, 1998 and 1997, the Administrative General Partner, Investment
General Partner and Associate General Partner were allocated net income
of $88,934, $907 and $907 and $6,481, $66 and $66, respectively.
As of June 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 $9,107,334 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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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
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, net 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.
The approved plan called for, among other things, a Bankruptcy Court
appointed liquidating agent to manage the Building securing the Wrap
Loan and to pay the installments due the Partnership. The liquidating
agent was also required to sell the Building by June 1998 in a sale
that had to have been approved by the Bankruptcy Court and to which the
Partnership may have objected, or at a court approved auction in which
the Partnership could have bid.
In June 1998, the Bankruptcy Court approved settlement of the 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.
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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.
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 June 30, June 30, June 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 $ 110,769 $2,482,359 $ 2,236,608
DVL, Inc. (3) 12.00 - February 2000 2,000,000 25,928 143,526 143,526
Hotel
Crowne Plaza Hotel (3)
Cincinnati, Ohio 11.00 - October 2000 6,500,000 357,500 6,411,527 6,411,527
Lionmark Corp. Ctr.
Columbus, OH (3) 8.5 - June 2003 4,000,000 165,370 3,885,277 3,885,277
----------- ---------- ----------- -----------
$14,700,000 $ 659,567 $12,922,689 $12,676,938
=========== ========== =========== ===========
</TABLE>
1. The carrying values of the above mortgage loans are inclusive of
acquisition fees, accrued interest recognized, loan origination fees
and allowance for loan losses.
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>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land ........................ $ 2,460,000 $ 2,202,000
Building and improvements ... 6,126,921 7,880,162
------------ ------------
8,586,921 10,082,162
Less accumulated depreciation (941,565) (850,088)
------------ ------------
$ 7,645,356 $ 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>
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Limited partners ($.11 per unit) $625,993 $625,993
General partners ............... 6,323 6,323
-------- --------
$632,316 $632,316
======== ========
</TABLE>
Such distributions were paid subsequent to June 30, 1998 and December
31, 1997, respectively.
<PAGE>
Liquidity and capital resources
As of June 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.
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 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 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. Also, for the quarter ended June 30, 1998, the Partnership paid
a cash distribution to its partners of $625,993 ($.11 per limited
partnership unit). At June 30, 1998 the Partnership had working capital
reserves of approximately $2,609,000. 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.
In June 1998, the Bankruptcy Court approved 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.
<PAGE>
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.
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.
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 both the six and three months ended June 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.
Revenues increased for both the six and three months ended June 30,
1998 compared with the same periods in the prior year due to increases
in mortgage interest income, operating income, and short-term
investment interest partially offset by a decrease in other income.
Mortgage interest income increased primarily as a result of the Bank of
California loan payoff. Operating income increased as a result of the
acquisition of the Xerox property and increased rental income from
Groton. Short-term investment income increased as a result of a
temproary increase in cash and cash equivalents. Other income decreased
as a result of a decrease in transfer fee income.
Costs and expenses increased for both the six and three months ended
June 30, 1998 compared to the same periods in the prior year. For the
six months ended, the increase was primarily due to the recovery of
loan losses in 1997 related to the Santa Ana property. In addition, the
increase for both periods is due to an increase in management fees and
general and administrative expenses. The increase in management fees is
a result of an increase in the fee percentage of net asset value on
which the fee is calculated. General and administrative expenses
increased as a result of legal expenses related to the Bank of
California and Avon Market loan repayments.
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>
Legal proceedings
Everest Litigation
On February 6, 1998, Everest Investors 8, LLC ("Everest") commenced an
action in the Superior Court of the state of California for the County
of Los Angeles, against, among other things, the HEP Partnerships and
the Partnership and the general partners of each of the partnerships.
In the action, Everest alledged, among other things, that the
partnerships and the general partners breached the provisions of the
applicable partnership agreements by refusing to recognize transfers to
Everest of limited partnership units purportedly acquired pursuant to
tender offers that had been made by Everest (the "Everest Tender
Units"). Everest sought injunctive relief (i) directing the recognition
of the transfers to Everest of the Everest Tender Units and the
admission of Everest as a limited partner with respect to the Everest
Tender Units and (ii) enjoining the transfers of the Everest Tender
Units to any other party. Everest seeks damages, including punitive
damages, for alleged breach of contract, defamation and intentional
interference with contractual relations. Everest's motion for a
temporary restraining order was denied on February 6, 1998. A hearing
on Everest's application for a preliminary injunction had been
scheduled for February 26; however, on February 20, 1998, Everest asked
the Court to take its application off the calendar.
On March 27, 1998, Everest commenced an action in the United States
District Court for the Central District of California against, among
others, the general partners of the Partnership and of the HEP
partnerships. In the action, Everest alleged, among other things,
various violations of the Williams Act Section 14(d) of the Securities
Exchange Act of 1934 in connection with the general partners' refusal
to recognize transfers to Everest of limited partnership units
purportedly acquired pursuant to the Everest tender offers and the
letters sent by the general partners to the limited partners advising
them of the general partners' determination that the Everest tender
offers violated applicable securities laws.
During the quarter ended June 30, 1998, the litigations involving the
Partnership and Everest were discontinued with prejudice.
<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
Dated: August 12, 1998 By: /s/ Richard Sabella
-------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: August 12, 1998 By: /s/ Lawrence Schachter
----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,432,032
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,564,394
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,017,444
<CURRENT-LIABILITIES> 955,458
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,618,936
<TOTAL-LIABILITY-AND-EQUITY> 24,017,444
<SALES> 0
<TOTAL-REVENUES> 10,907,359
<CGS> 0
<TOTAL-COSTS> 841,493
<OTHER-EXPENSES> 115,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,922,461
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,922,461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,922,461
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
