UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 or principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-862-7444
Securities registered pursuant to Section 12(b) of the Act:
None
----------------
(Title of Class)
----------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Indicate by check mark 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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Exhibit Index is set forth on page IV-1.
<PAGE>
PART I
Item 1. Business
General
Resources Pension Shares 5, L.P. (the "Registrant") is a Delaware limited
partnership which was formed on February 11, 1986 as an investment medium
primarily for tax-exempt investors. Registrant was formed for the purpose of
investing primarily in participating mortgage loans and, to a lesser extent, in
land sale-leasebacks on improved, income-producing commercial real estate.
Through April 1, 1998, Disposition Proceeds (as hereinafter defined) were
required to be reinvested by Registrant or held as reserves. Thereafter,
Resources Capital Corp. (the "Administrative General Partner") may either
reinvest or distribute any such Disposition Proceeds. Due to the substantial
changes which have occurred in the real estate financing markets during the last
several years, none of the mortgage loans made after 1992 contain provisions
permitting Registrant to participate in the economic benefits of any increase in
a property's revenue or value ("Participations"). Such mortgage loans also do
not provide for a certain portion of the base interest to accrue and be paid
upon maturity of the respective mortgage loan, upon sale or refinancing of the
property or after a stated period of time. Certain loans made prior to 1993 do
contain such features. The security for any mortgage loan investment is intended
to consist of commercial and industrial properties (such as office buildings,
shopping centers and industrial buildings) and, possibly, leasehold interests in
properties.
Registrant had registered 16,000,000 units of limited partnership interest at
$10 per interest (the "Units") with the Securities and Exchange Commission,
6,000,000 of which were for Registrant's Reinvestment Plan. On February 12,
1988, Registrant terminated its offering of Units, having raised $56,908,426
from approximately 5,800 investors (including $699,565 from Units issued
pursuant to the Reinvestment Plan). After the payment of a nonaccountable
expense reimbursement to the Administrative General Partner, Registrant had
approximately $54,238,000, including evaluation fees and acquisition fees paid
or payable to the Administrative General Partner, available for investment and
reserves.
The Investment General Partner of Registrant, Resources Pension Advisory Corp.,
and the Administrative General Partner, Resources Capital Corp., are
wholly-owned subsidiaries of Presidio Capital Corp. ("Presidio"). Resources
Pension Advisory Corp. and Resources Capital Corp. were, until November 3, 1994,
wholly-owned subsidiaries of Integrated Resources Inc. ("Integrated"). On
November 3, 1994, as a result of the reorganization plan relating to
Integrated's bankruptcy, indirect ownership of the Administrative General
Partner, the Investment General Partner and the Associate General Partner was
purchased by Presidio.
In December 1994, Richard Ader, the Associate General Partner of Registrant
previously associated with Integrated, notified Registrant of his withdrawal as
Associate General Partner. The withdrawal became effective on February 28, 1995.
Upon the effective date, Presidio AGP Corp. ("Presidio AGP"), a Delaware
corporation, became the Associate General Partner. The Administrative General
Partner is also a general partner in several other limited partnerships which
are controlled by Presidio. (The Investment General Partner, Administrative
General Partner and the Associate General Partner are hereinafter collectively
referred to as the "General Partners.")
On August 28, 1997, an affiliate of NorthStar Capital Partners acquired all of
the class B shares of Presidio, the corporate parent of the General Partners.
This acquisition when aggregated with previous acquisitions, caused NorthStar
Capital Partners to acquire indirect control of the General Partners. Effective
July 31, 1998, Presidio is indirectly controlled by NorthStar Capital Investment
Corp. ("NorthStar"), a Maryland corporation.
<PAGE>
Presidio was also party to an Administrative Services Agreement with Wexford
Management LLC ("Wexford") pursuant to which Wexford was responsible for the
day-to-day management of Presidio and among other things, had authority to
designate directors of the General Partners.
On November 2, 1997, the Administrative Services Agreement with Wexford expired.
Effective November 3, 1997, Wexford and Presidio entered into a new
Administrative Services Agreement (the "ASA"), which expired on May 3, 1998.
Under the terms of the ASA, Wexford provided consulting and administrative
services to Presidio and its affiliates including the General Partners and
Registrant. Presidio also entered into a management agreement with NorthStar
Presidio Management Company, LLC ("NorthStar Presidio"). Under the terms of the
management agreement, NorthStar Presidio provides the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates.
Mortgage Investments of Registrant
As of December 31, 1998, the Registrant had investments in four first mortgage
loans in the original aggregate amount of $14,700,000. The following table sets
forth, as of December 31, 1998, the outstanding mortgage loan investments made
by Registrant:
<TABLE>
<CAPTION>
Mortgage loans as of December 31, 1998
----------------------------------------------------------------------------------------
Original Current
Mortgage Carrying Date Maturity Interest
Sq. Ft. Amount Value Funded Date Rate
------- ------ ----- ------ ---- ----
<S> <C> <C> <C> <C> <C>
Shopping Center
---------------
DVL, Inc. N/A $ 2,000,000 $ 13,267 (2) 2/97 2/00 12.0%
Lucky Supermarket
Buena Park, California 47,000 2,200,000 2,233,963 5/88 5/05 10.0% (1)
Hotel
-----
Crowne Plaza Hotel
Cincinnati, Ohio 200,000 6,500,000 6,413,761 10/97 10/00 11%
Office Building
---------------
Lionmark Corporate
Ctr. Columbus, Ohio 79,415 4,000,000 3,870,903 6/93 6/03 8.5%
--------------- -----------
$ 14,700,000 $12,531,894
=============== ===========
</TABLE>
<PAGE>
(1) In addition to fixed interest, Registrant 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.
(2) In January 1999, the DVL note was repaid in its entirety.
On December 21, 1992, the Investment General Partner, on behalf of Registrant,
foreclosed on the property securing the Garfinkel Loan. On December 9, 1993,
Registrant foreclosed on the mortgage securing the Groton Shopping Center (the
"Groton Loan"). On September 30, 1997, Registrant received a deed-in-lieu of
foreclosure on the property underlying the Xerox loan and subsequently sold such
property during March 1998. See Item 2, "Properties."
On April 10, 1997, Registrant entered into a settlement agreement with the Santa
Ana borrower in which, among other things, the borrower gave to Registrant a
deed-in-lieu of foreclosure on the property securing this loan. On April 30,
1997, Registrant sold this property for net proceeds of $3,213,908. See
"Mortgage Transactions and Defaults" below.
On February 28, 1997, Registrant funded an additional promissory note in the
original principal amount of $2,000,000 which was subsequently repaid in full.
On October 31, 1997, Registrant funded a first mortgage loan to Oliveye Hotel
Limited Partnership in the principal amount of $6,500,000. In addition, during
1997, Registrant received $8,129,181 in full satisfaction of the Medford Village
loan. In June 1998, Registrant received the full contractual balance on the Bank
of California Loan. Also in June of 1998, the Avon Market Center Loan was
prepaid in its entirety. For additional information regarding Registrant's
mortgage investments see "Mortgage Transactions and Defaults" below.
For the year ended December 31, 1998, the Bank of California loan generated
approximately 86% of Registrant's mortgage interest revenue.
Recent Mortgage Transactions
Bank of California, Seattle Loan
Bank of California Loan, in the principal amount of $8,500,000 ("Wrap Loan"),
was secured by, among other things, the interest of Gum Loong Limited
Partnership ("Gum Loong") in land (the "Land") located in downtown Seattle,
Washington. The building situated on the Land was commonly known as the Bank of
California Building (the "Building"). The Land was subject to a long-term ground
lease (the "Ground Lease"). Concurrently with the closing of the Wrap Loan, Gum
Loong acquired the lessor's interest under the Ground Lease and Continental
Seattle Partners L.P. ("CSP"), an affiliate of Gum Loong, acquired the lessee's
interest under the Ground Lease and the fee interest in the Building. CSP also
acquired the lessor's interest under a master (net) sublease with the Bank of
California for the entire Building. A first mortgage on the land ("Land Loan")
in the amount of $8,000,000 was held by Anchor National Life Insurance Company
("Anchor"). Under the provisions of the Wrap Loan, Gum Loong was required to
make the payments required under both the Land Loan and the Wrap Loan to
Registrant on a monthly basis. Registrant, in turn, then paid Anchor the amounts
due under the Land Loan on a monthly basis. The Wrap Loan was secured by a
Wraparound Deed of Trust dated May 2, 1988 in the amount of $16,500,000 between
Registrant and Gum Loong. The Building was encumbered by a loan ("Building
Loan") between the Bank of Tokyo Trust Company (Seattle Branch) ("BOT") and CSP,
in the amount of $48,000,000, secured by a first mortgage on the Building and a
third mortgage on the Land. This loan was also guaranteed by Gum Loong.
Registrant's collateral for the Wrap Loan was the Land, the Ground Lease, and,
subject to the BOT's lien, the Building.
<PAGE>
Registrant received a letter dated April 22, 1993 stating that BOT had commenced
a foreclosure action against CSP for failure to repay the Building Loan which
matured on March 26, 1992. An Option Agreement entered into at the time the Wrap
Loan was made gave BOT the right, after commencing a foreclosure action, to
exercise an option to have purchased either (i) the Land Loan and the Wrap Loan
from Anchor and Registrant or (ii) the Land from Gum Loong subject to the Land
Loan and the Wrap Loan. On July 9, 1993, Registrant received notice from BOT
that it intended to exercise the option to purchase the Land.
Gum Loong did not make timely payment of its scheduled July, August, and
September 1993 installments on the Wrap Loan. Registrant utilized its working
capital reserves to make the required payments on the Land Loan. On July 20,
1993 and again on August 9, 1993, Registrant notified Gum Loong that an event of
default had occurred because of the CSP default on the BOT loan and because of
Gum Loong's failure to make scheduled payments. Both Gum Loong and CSP filed for
bankruptcy protection in August 1993, staying the exercise by BOT of its option
to purchase the Land. On September 27, 1993 Registrant, Anchor and Gum Loong
entered into an Interim Stipulation and Order Concerning Cash Collateral, which
was approved by the bankruptcy court on September 29, 1993. On October 5, 1993
Registrant, Anchor and Gum Loong entered into a Second Interim Stipulation and
Order Concerning Cash Collateral, which was approved by the bankruptcy court on
October 5, 1993. Since October 1993, various Cash Collateral Orders had been
entered into which require Gum Loong to make monthly payments to Registrant. The
September 1993 payment and all monthly contract interest payments due thereafter
under the Cash Collateral Orders had been made, including payments due
subsequent to September 30, 1994. The current Cash Collateral Order had required
Gum Loong to make monthly payments to Registrant through the maturity date of
the loan.
On January 31, 1994, a Proof of Claim was filed in connection with the Gum Loong
Bankruptcy by Registrant as it related to amounts due under the Wraparound
Mortgage, including principal, interest and other amounts due. On January 6,
1995, a Proof of Claim was filed in connection with the CSP bankruptcy by the
Registrant for a contingent and unliquidated claim under the Wraparound
Mortgage. Despite the bankruptcy filings by both Gum Loong and CSP, Registrant
had not reserved for this loan. Registrant believed that the collateral for the
Wrap Loan, the Land as encumbered by the Ground Lease, was of sufficient value
to realize the amount due under the Wrap Loan. If BOT exercised the option to
purchase the Land, it would have been required as a condition of such exercise
to cure any defaults by Gum Loong.
On or about January 3, 1995, the United States Trustee moved to convert the Gum
Loong Bankruptcy to a Chapter 7 case, or to dismiss the Gum Loong case, or to
set a deadline for filing a plan of reorganization. This motion was scheduled
for a hearing on February 3, 1995. This motion had been adjourned pending the
hearing on BOT's proposed disclosure statement and proposed plan. The hearing on
the adequacy of BOT's proposed disclosure statement was scheduled for April 6,
1995. The Third Amended Disclosure Statement was approved on May 31, 1995.
Thereafter, BOT sought confirmation of various amended plans to which Registrant
successfully objected. Such plans included provisions that were adverse to
Registrant's interests. Registrant's objections, and the Bankruptcy Court's
rulings thereon, prompted BOT to make various amendments and revisions to the
proposed plan of reorganization and withdraw various provisions that were
<PAGE>
objectionable to Registrant. After extended confirmation hearings on BOT's
proposed plans, the Bankruptcy Court approved the revised Fifth Amended Plan in
September 1995. As part of the approved plan, in September 1995 approximately
$335,000 was paid to Registrant. This amount consisted of approximately $266,000
of interest payments due Registrant which resulted from two missed interest
payments in 1993, and late charges and interest related to these payments of
approximately $69,000.
The plan called for, among other things, a Court appointed liquidating agent to
manage the building securing Registrant's loan, and to pay the installments due
under Registrant's loan. The liquidating agent was also required to sell the
building and the property by June 1998 in a sale that must have been approved by
the Bankruptcy Court, and to which Registrant did not object, or at a court
approved auction in which the Registrant could bid.
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 Registrant's
books was $8,500,000. Registrant 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 income.
DVL Negotiable Promissory Note
On February 28, 1997, Registrant 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, Registrant 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 is able to
be prepaid 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 February 28, 1997.
On July 30, 1997, DVL sold one of the properties underlying the Note and made a
$1,075,000 prepayment to Registrant. 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 Registrant. $467,787 was applied towards the
principal balance of the Note and the remainder was applied to interest and
yield maintenance fee.
In January 1999, the DVL Note was repaid in its entirety.
<PAGE>
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. This loan was accounted for
under the investment method.
In March 1997, the Xerox loan matured in accordance with its terms. On September
30, 1997, Registrant 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, Registrant 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.
On March 10, 1998, Registrant sold this property for $1,550,000, exclusive of
closing costs of approximately $93,000. At the 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.
Avon Market Center Loan
On March 19, 1993, Registrant 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. Registrant received
$3,694,492 of which $3,638,804 was applied towards principal and $55,688 to
interest.
FOR ADDITIONAL INFORMATION REGARDING REGISTRANT'S MORTGAGE INVESTMENTS, SEE ITEM
8, "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA", NOTE 4.
Competition
To the extent Registrant reinvests any funds received from loan repayments or
property sales, Registrant will be in competition with other companies which are
engaged in the business of making loans and selling properties. Registrant's
competition would include a large number of lenders, many of whom have resources
substantially larger than those of Registrant. The principal competitive factor
in Registrant's business is the effective rate charged for loans and the
loan-to-value ratio.
<PAGE>
In addition, the properties which secure Registrant's mortgage loans may face
competition from similar properties in the vicinity. To the extent such
competition reduces the gross revenue from the operation of such properties
and/or decreases any appreciation in the value of such properties, such
competition will reduce any contingent interest otherwise payable to Registrant.
Because Presidio (including its affiliates) is the parent of other entities in
addition to the General Partners, such General Partners are or may become
affiliated with other entities which are engaged in businesses that are, or may
in the future be, in direct competition with Registrant.
Employees
Registrant does not have any employees. Certain services are currently performed
by the General Partners and/or their affiliates for Registrant in connection
with the servicing of the Mortgage Loans pursuant to a mortgage servicing
agreement. NorthStar Presidio currently performs accounting, secretarial,
transfer and administrative services for Registrant and Registrant pays its pro
rata portion of such services. NorthStar Presidio also performs similar services
for other affiliates of the General Partners. See Item 10, "Directors and
Executive Officers of Registrant," Item 11, "Executive Compensation" and Item
13, "Certain Relationships and Related Transactions."
Item 2. Properties
On December 21, 1992, through a foreclosure auction, Registrant acquired fee
simple title to the Garfinkel property by bidding $3,200,000 of the mortgage
indebtedness owed to it. The Garfinkel property is located in Landover, Maryland
and is part of a regional shopping center known as Landover Mall. The parcel of
land comprises approximately 4.93 acres. The building is a two-story retail
facility consisting of 93,384 rentable square feet of space.
The building contains asbestos-containing material and, on January 27, 1992,
Registrant received $450,000 from the former property owner in exchange for a
release of a personal guarantee which obligated the owner to reimburse
Registrant for asbestos removal to a maximum of $500,000. During June 1992,
$6,950 was paid for remedial cleaning in connection with the asbestos removal
and at December 31, 1998, the unexpended asbestos reserve aggregated $443,050.
Registrant does not presently plan to commence removal of the asbestos until a
purchaser or tenant for the property is identified. As of March 1, 1999,
Registrant has been unable to sell or lease the property, and the building
remains vacant.
On December 9, 1993, through a foreclosure auction, Registrant acquired fee
simple title to the Groton Shopping Center property. The shopping center is
located in Groton, Connecticut. The parcel of land comprises approximately 17
acres. The property is a neighborhood strip shopping center containing a gross
leasable area of 118,938 square feet. In addition, the strip center has a
parking area for approximately 450 automobiles. As of March 1, 1999, the Groton
Shopping Center was approximately 78% occupied.
On December 9, 1993, Registrant entered into a supervisory management agreement
with Resources Supervisory Management Corp. ("RSMC"), also an affiliate of
Presidio, to perform certain functions related to supervising the management of
the Groton property. As such, RSMC is entitled to receive as compensation the
greater of 6% of annual gross revenues when leasing services are performed or 3%
of gross revenues 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 Registrant. The terms of the agreement are
substantially the same as the agreement entered into between Registrant and
RSMC. There was no fee earned by RSMC for the year ended December 31, 1998.
The Xerox property, located in Arlington, Texas, was acquired via a deed-in-lieu
of foreclosure on September 30, 1997. The property had been recorded at its
estimated net realizable value of $1,500,000 at such date. On March 10, 1998 the
property was sold for approximately $1,457,000, net of closing costs. Registrant
operated this property for the period through sale in 1998.
<PAGE>
Item 3. Legal Proceedings
For a discussion of Legal Proceedings, see Item 8, "Financial Statements and
Supplementary Data," Note 9, ("Commitments and Contingencies") to the Financial
Statements.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Securities and Related Security
Holder Matters
There is no established public trading market for the Units of Registrant. From
time to time however, tender offers have been or are presently being made. For
further information, see Item 8, "Financial Statements and Supplementary Data.",
Note 3, (Conflicts of Interest and Transactions with Related Parties) to the
Financial Statements.
There are certain restrictions set forth in the Partnership Agreement which may
limit the ability of a limited partner to transfer Units. Such restrictions
could impair the ability of a limited partner to liquidate its investment in the
event of an emergency or any other reason.
As of March 1, 1999, there were approximately 4,600 limited partners of
Registrant, owning an aggregate of 5,690,843 Units.
Distributions per Unit during 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Distribution with
Respect to Quarter Ended Amount of Distribution Per Unit
------------------------ -------------------------------
1998 1997
<S> <C> <C>
March 31 $ .11 $ .11
June 30 $6.11 $ .11
September 30 $ - $ .11
December 31 $ - $ .11
</TABLE>
- ------------
There are no material legal restrictions upon Registrant's present or future
ability to make distributions from operations in accordance with the provisions
of Registrant's Amended and Restated Certificate of Limited Partnership and
Partnership Agreement ("Partnership Agreement"). The Partnership Agreement
provided that through April 1, 1998 Disposition Proceeds received were required
to be reinvested or held as reserves, but not distributed. For a further
discussion of factors which may affect distributions see Item 7 in Part II of
this Form 10-K.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
(dollars in thousands except per unit amounts)
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 12,103 (4) $ 5,335 $ 4,748 $ 4,130 $ 3,824
Net Income $ 10,339 (4) $ 4,033 (2) $ 1,244 (1) $ 254 (3) $ 1,864
Net Income Per Unit $ 1.80 (4) $ .70 (2) $ .22 (1) $ .04 (3) $ .32
Distributions Per Unit $ 6.22 $ .44 $ .44 $ .24 $ .28
Total Assets $ 23,786 $ 50,793 $ 48,916 $ 49,731 $ 50,607
Partner's equity $ 23,036 $ 48,451 $ 46,947 $ 48,232 $ 49,358
</TABLE>
(1) Net of provision for loan losses of $1,547,830 or $.27 per Unit.
(2) Net of recovery for loan losses of $721,946 or $.13 per Unit.
(3) Net of write-down for impairment of $1,860,000 or $.32 per Unit.
(4) Includes interest income of $8,455,560, or $1.47 per Unit, upon the
repayment of the Bank of California, Seattle Loan.
<PAGE>
Item 7. 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 Registrant. However, at the
inception of Registrant, the General Partners' equity account was credited with
only the actual capital contributed in cash, $1,000. Registrant's management
determined that this accounting did not appropriately reflect the Limited
Partners' and the General Partners' relative participations in Registrant's net
assets, since it did not reflect the General Partners' 1% equity interest in
Registrant. Thus, Registrant had restated its financial statements to reallocate
$541,390 (1% of the gross proceeds raised at Registrant's formation) of the
partners' equity to the General Partners' equity account. This reallocation was
made as of the inception of Registrant. The reallocation had no impact on
Registrant's financial position, results of operations, cash flows,
distributions to partners, or the partners' tax basis capital accounts.
Registrant's public offering commenced on May 15, 1986 and terminated on
February 12, 1988 generating gross proceeds of $56,907,425, including $699,565
through Registrant's Reinvestment Plan. Registrant initially made ten permanent
investments, consisting of nine first mortgage loans and one wraparound mortgage
loan, in which Registrant had funded a total of $49,300,000 or 100% of its net
proceeds available for investment.
On June 30, 1997 the Medford loan was prepaid in its entirety. Registrant
received $8,129,181, of which $8,000,000 was applied toward the outstanding
principal balance of the loan and the remainder was applied to interest.
On February 28, 1997, Registrant funded a Note to DVL, in the principal amount
of $2,000,000, at an annual interest rate of 12%, with interest payable monthly.
In addition, Registrant was entitled to receive payments equal to DVL's excess
cash flow (as defined) from the mortgages underlying DVL's collateral
assignment, which was to be applied as a reduction of principal. The Note was to
mature on February 27, 2000 and was able to be prepaid during the first two
years without penalty. The Note was secured by (among other things) a collateral
assignment of DVL's interest in certain promissory notes payable to DVL.
On July 30, 1997, DVL sold one of the properties underlying the promissory notes
and made a $1,075,000 prepayment of the Note. Approximately $1,032,000 of the
prepayment was applied toward the principal balance of the Note and the
remainder was applied to interest and a yield maintenance fee.
On April 1, 1998, DVL sold another one of the properties underlying the Note and
made a $500,000 prepayment to Registrant. $467,787 was applied towards the
principal balance of the Note and the remainder was applied to interest and
yield maintenance fee.
In January 1999, the DVL Note was repaid in its entirety.
On April 10, 1997, Registrant entered into a settlement agreement with the Santa
Ana borrower in which, among other things, the borrower gave Registrant a
deed-in-lieu of foreclosure on the property. On April 30, 1997, Registrant sold
this property for net proceeds of $3,213,908. The net carrying value of the
Santa Ana loan at that time was $2,491,962, necessitating a recovery of loan
loss of $721,946 which was recorded in the first quarter of 1997.
<PAGE>
In March 1997, the Xerox loan matured. On September 30, 1997 Registrant 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,
Registrant 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 property was sold for approximately $1,457,000, net of
closing costs.
On October 31, 1997, Registrant funded a first mortgage loan to Oliveye Hotel
Limited Partnership, in the principal amount of $6,500,000. This loan has an
annual interest rate of 11% and is payable monthly. The loan is secured by the
Crowne Plaza Hotel located in Cincinnati, Ohio, and matures in October 2000.
In June 1998, the Bankruptcy Court approved settlement of the Bank of California
Loan in its entirety. At that time, the net carrying value of the loan on
Registrant's books was $8,500,000. Registrant 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.
On June 3, 1998, Registrant received approximately $3,700,000 in prepayment of
the Avon Market Center Loan.
As of December 31, 1998, Registrant has funded an aggregate of $14,700,000 to
the mortgagors in four first mortgage loans which are outstanding.
If necessary, Registrant has the right to establish reserves either from
disposition proceeds or from cash flow.
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 received
in 1998 and prior years. For the year ended December 31, 1998 as compared to
1997, cash distributions increased. At December 31, 1998, working capital
reserves were approximately $15,800,000. This represents an increase of
approximately $1,100,000 from December 31, 1997 primarily as a result of placing
undistributed cash flow from operations into working capital reserves and as a
result of the payoffs of the Medford, Santa Ana and DVL loans only partially off
set by the funding of the balance of the DVL and the Crowne Plaza loan.
Currently, the foreclosed property which formerly secured the Garfinkel Loan is
vacant. Funds which are necessary to lease up the property, to remedy deferred
maintenance conditions at the Garfinkel's property and for capital improvements
will be supplied from Registrant's working capital reserves. Registrant
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
repaid. 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>
Real Estate Market
The real estate market has begun to recover from the effects of the recent
recession which included a substantial decline in the market value of existing
properties. However, high vacancy rates continue to exist in many areas. As a
result, Registrant's potential for realizing the full value of its investment in
mortgages is at increased risk.
Allowance for Loan Losses and Write-Down for Impairment
A provision for loan losses is established based upon a periodic review of each
mortgage loan and property in Registrant's portfolio. Real estate property is
carried at the lower of cost or net realizable value. In performing its 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 senior debt, if any, 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 December 31,
1998.
Provisions and write-downs are inherently subjective and are based on
management's best estimate of current conditions and assumptions about expected
future conditions. Registrant may provide for additional provisions and
write-downs in subsequent years which could be material.
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. Registrant and NorthStar Presidio recognize the
importance of ensuring that its business operations are not disrupted as a
result of Year 2000 related computer system and software issues.
NorthStar Presidio is in the process of assessing its internal computer
information systems and is taking the steps necessary to remediate these systems
so that they will be Year 2000 compliant. In connection therewith, NorthStar
Presidio has installed a new fully compliant accounting and reporting system.
NorthStar Presidio is also reviewing its other internal systems and programs,
along with those of its unaffiliated third party service providers, in order to
ensure compliance.
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, NorthStar Presidio does not believe that these costs will
have a material adverse effect on Registrant's business, financial condition or
results. However, it is possible that there could be adverse consequences to
Registrant as a result of Year 2000 issues that are outside Registrant's
control. NorthStar Presidio is in the preliminary stages of evaluating these
issues and will be developing contingency plans.
<PAGE>
Results of Operations
1998 as Compared to 1997
Net income increased for the year ended December 31, 1998 as compared to the
year ended December 31, 1997. The increase is primarily due to the increase in
revenues as a result of the payoff of the Bank of California and Avon Market
Center loans offset by an increase in costs and expenses.
Revenues increased for the year ended December 31, 1998 compared to the same
period in the prior year primarily due to an increase in mortgage loans interest
income as a result of the Bank of California and Avon Market Center loan payoffs
in June 1998. Operating income - real estate decreased as a result of a decrease
in rental income from Groton shopping center. Short-term investment interest
decreased as a result of a decrease in cash available for short-term investment.
Other income decreased as a result of a decrease in transfer fee income.
Costs and expenses increased for the year ended December 31, 1998 compared to
the same period in the prior year principally due to the recovery of loan losses
recognized in 1997. There was no recovery of or provision for loan losses in
1998. Mortgage servicing and management fees decreased primarily due to a
decrease in the net asset value as well as a decrease in the principal balance
of loans outstanding on which such fees are calculated. Operating expenses
decreased as a result of the disposition of the office building by Registrant in
March 1998. General and administrative expenses increased primarily due to legal
and investor relation expenses.
1997 as Compared to 1996
Net income increased for the year ended December 31, 1997 compared to the same
period in the prior year. The increase is primarily due to the recovery of loan
loss related to the Santa Ana loan during 1997 in the amount of $721,946,
compared to a provision for loan losses recorded during 1996 in the amount of
$1,547,830 and an increase in mortgage interest income due to the Xerox Loan.
Revenues increased primarily due to an increase in short-term investment income,
mortgage interest income and operating income partially offset by a decrease in
other income. Short-term investment income increased due to an increase in cash
and cash equivalents available for short-term investments. Operating income
increased primarily due to the income generated from the Xerox property during
1997. Mortgage interest income increased as a result of recording of the
interest income relating to the Xerox Loan. Other income decreased primarily as
a result of legal reimbursement related to the Bank of California loan which was
recorded in 1996.
Costs and expenses decreased primarily due to the recovery of loan loss recorded
on the Santa Ana loan in 1997 compared with a provision for loan loss recorded
in 1996, as well as decreases in general and administrative expenses, and
mortgage servicing fees partially offset by an increase in operating expenses.
General and administrative expenses decreased primarily due to a decrease in
payroll costs. Mortgage servicing fees decreased as a result of a decrease in
the principal balance of loans outstanding in 1997, on which the fee is based.
Operating expenses increased as a result of the addition of the Xerox property
and the expenses related to it.
<PAGE>
Inflation
Inflation has not had a material effect on Registrant's operations and financial
position during the last three years 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
Registrant's loans being prepaid prior to maturity and Registrant receiving
decreased revenues on any reinvestment of such funds.
Legal Proceedings
HEP Action
On or about May 11, 1993, three public real estate partnerships (the "HEP
Partnerships") including High Equity Partners, L.P. - Series 86, in which the
Administrative General Partner is also a General Partner, were advised of the
existence of an action (the "HEP Action") filed in the Superior Court for the
State of California for the County of Los Angeles, by Mark Erwin, Trustee, Mark
Erwin Sales, Inc. Defined Benefit Plan; Nancy Cooper, Trustee of Nancy Cooper
Individual Retirement Account; and Leonard Drescher, Trustee of Drescher Family
Trust Account individually and purportedly on behalf of a class consisting of
all of the purchasers of limited partnership interests in the HEP Partnerships
(the "Plaintiffs"). The HEP Action names as defendants the Administrative
General Partner and several individuals who are general partners of the former
Associate General Partner, among others.
On November 30, 1995, the original plaintiffs and the intervening plaintiffs
filed a Consolidated Class and Derivative Action Complaint ("Consolidated
Complaint") against the General Partners of the HEP Partnerships alleging, among
other things, breach of fiduciary duties, breach of contract, and negligence.
On or about January 31, 1996, the parties to the HEP Action agreed upon a
revised settlement, which would be significantly more favorable to the
Plaintiffs than the previously proposed settlement. The revised settlement
proposal, like the previous proposal, involves the reorganization of the HEP
Partnerships. Upon the effectuation of the revised settlement, the HEP Action
would be dismissed with prejudice.
On July 18, 1996, the Court preliminarily approved the revised settlement. In
August 1996, the Court approved the form and method of notice regarding the
revised settlement which was sent to the HEP limited partners.
Only approximately 2.5% of the limited partners of the HEP Partnerships elected
to "opt out" of the revised settlement. Despite this, following the submission
of additional briefs, the Court entered an order on January 14, 1997 rejecting
the revised settlement and concluding that there had not been an adequate
showing that the settlement was fair and reasonable. Thereafter, the Plaintiffs
filed a motion seeking to have the Court reconsider its order. However, the
defendants withdrew the revised settlement and at a hearing on February 24,
1997, the Court denied the Plaintiffs' motion. Also at the February 24, 1997
hearing, the Court granted the request of one of the Plaintiffs' law firm to
withdraw as class counsel.
<PAGE>
Thereafter, in June 1997, the Plaintiffs again amended their complaint ("Amended
Complaint"). The Amended Complaint asserts substantially the same claims as the
Consolidated Complaint, except that it no longer contains causes of action for
fraud, except on behalf of the two original Plaintiffs, or for negligence. In
February 1998, the Court certified three Plaintiffs classes consisting of
current unit holders in each of the three HEP Partnerships. On March 11, 1998,
the Court stayed the action through June 30, 1998 to permit the parties to
engage in renewed settlement discussions.
In September 1998, the parties in the lawsuit entered into a Memorandum of
Understanding with respect to a settlement of the lawsuit. The Memorandum of
Understanding provided, among other things, for the preparation of definitive
documentation in the form of a Stipulation of Settlement and related documents
("Stipulation"). The Stipulation was executed by the parties in December 1998,
and submitted to the Court for preliminary approval early in January 1999. After
hearing and receipt of a report from the Court's designated independent expert,
the Court entered an order on February 1, 1999, wherein it gave its preliminary
approval to the settlement and directed that notice of the proposed settlement
be sent to the previously certified class. A hearing is scheduled for April 14,
1999. The settlement is subject to a number of conditions. There can be no
assurance that such conditions will be fulfilled.
The Administrative General Partner believes that each of the claims asserted in
the Amended Complaint is meritless and intends to vigorously defend the HEP
Action if the settlement is not finally approved and/or consummated. It is
impossible at this time to predict what the defense of this lawsuit will cost
the Administrative General Partner and whether such costs could adversely effect
the Administrative General Partners' ability to perform its obligations to
Registrant.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
Not applicable
<PAGE>
Item 8. Financial Statements and Supplementary Data
RESOURCES PENSION SHARES 5, L.P.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
INDEX
Page
Number
------
Independent Auditor's Report F-1
Financial statements - Years ended
December 31, 1998, 1997 and 1996
Balance sheets F-2
Statements of income F-3
Statement of partners' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 through F-27
Schedule:
II - Valuation and Qualifying Accounts F-28
III - Real Estate and Accumulated Depreciation F-29
All other schedules have been omitted because they are inapplicable or the
information is included in the financial statements or notes thereto.
<PAGE>
To the Partners
Resources Pension Shares 5, L.P.
Greenwich, Connecticut
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Resources Pension Shares 5,
L.P. (a limited partnership) as of December 31, 1998 and 1997, and the related
statements of income, partners' equity and cash flows for each of the three
years in the period ended December 31, 1998. Our audits also included the
financial statement schedules listed in the Index at Item 14(a)2. These
financial statements and financial statement schedules are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Resources Pension Shares 5,
L.P. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ Hays & Company
- ------------------
Hays & Company
February 16, 1999
New York, New York
F-1
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
BALANCE SHEETS
December 31,
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans ................... $12,531,894 $25,448,823
Cash and cash equivalents ....................... 3,427,496 15,725,616
Real estate - net ............................... 7,581,505 9,232,074
Other assets .................................... 133,656 181,635
Interest receivable - mortgage loans ............ 105,751 126,512
Interest receivable - other ..................... 6,098 78,593
----------- -----------
$23,786,400 $50,793,253
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses ........... $200,278 $779,912
Distributions payable ........................... -- 632,316
Other liabilities ............................... 441,604 608,438
Due to affiliates ............................... 108,573 321,525
----------- -----------
Total liabilities ............................ 750,455 2,342,191
----------- -----------
Commitments and contingencies (Notes 3, 4, 5, and 8)
Partners' equity
Limited partners' equity (5,690,843 units issued
and outstanding) ............................. 22,805,596 47,966,562
General partners' equity ........................ 230,349 484,500
----------- -----------
Total partners' equity ....................... 23,035,945 48,451,062
----------- -----------
$23,786,400 $50,793,253
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF INCOME
Year ended December 31,
--------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Mortgage loans interest income ........ $10,583,585 $3,267,488 $3,050,689
Short-term investment interest ........ 474,013 757,945 459,974
Operating income - real estate ........ 982,971 1,191,478 979,454
Other income .......................... 62,134 118,139 251,964
Additional contingent interest ........ -- -- 6,000
----------- ----------- -----------
12,102,703 5,335,050 4,748,081
----------- ----------- -----------
Costs and expenses
Management fees ....................... 604,275 847,690 775,060
Operating expenses - real estate ...... 473,562 654,978 553,598
General and administrative expenses ... 321,383 160,296 286,180
Depreciation and amortization expense . 227,793 234,259 209,047
Mortgage servicing fees ............... 47,144 65,122 76,184
Property management fees .............. 60,920 61,203 55,920
Loss on disposition of real estate .... 28,156 -- --
(Recovery of) provision for loan losses -- (721,946) 1,547,830
----------- ----------- -----------
1,763,233 1,301,602 3,503,819
----------- ----------- -----------
Net income ................................. $10,339,470 $4,033,448 $1,244,262
=========== =========== ===========
Net income attributable to
Limited partners ...................... $10,236,075 $3,993,114 $1,231,819
General partners ...................... 103,395 40,334 12,443
----------- ----------- -----------
$10,339,470 $4,033,448 $1,244,262
=========== =========== ===========
Net income per unit of limited partnership
interest (5,690,843 units outstanding) $1.80 $.70 $.22
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
-------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1996 $482,308 $47,749,571 $48,231,879
Net income - 1996 ....................... 12,443 1,231,819 1,244,262
Distributions to partners
($.44 per limited partnership unit) (25,292) (2,503,971) (2,529,263)
-------- ----------- -----------
Balance, December 31, 1996 469,459 46,477,419 46,946,878
Net income - 1997 ....................... 40,334 3,993,114 4,033,448
Distributions to partners
($.44 per limited partnership unit) (25,293) (2,503,971) (2,529,264)
-------- ----------- -----------
Balance, December 31, 1997 .............. 484,500 47,966,562 48,451,062
Net income - 1998 ....................... 103,395 10,236,075 10,339,470
Distributions to partners
($6.22 per limited partnership unit) (357,546) (35,397,041) (35,754,587)
-------- ----------- -----------
Balance, December 31, 1998 .............. $230,349 $22,805,596 $23,035,945
======== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
STATEMENTS OF CASH FLOWS
Year ended December 31,
INCREASE (DECREASE) IN CASH AND ------------------------------------------------
CASH EQUIVALENTS 1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ......................................... $10,339,470 $4,033,448 $1,244,262
Adjustments to reconcile net income to net
cash provided by operating activities
(Recovery of) provision for loan losses ..... -- (721,946) 1,547,830
Depreciation and amortization expense ....... 227,793 234,259 209,077
Interest earned on Xerox loan ............... -- (400,000) --
Amortization of origination and
acquisition fees ............................ (9,224) 119,919 127,705
Deferred interest receivable ................ -- -- (75,463)
Loss on disposition of real estate .......... 28,156 -- --
Stepped lease rentals ....................... 31,460 (63,245) (18,510)
Changes in assets and liabilities
Interest receivable - mortgage loans ............ 20,761 147,882 (46,886)
Interest receivable - other ..................... 72,495 -- --
Other assets .................................... (1,641) 6,437 (52,130)
Accounts payable and accrued expenses ........... (579,634) 111,118 216,984
Other liabilities ............................... (166,834) 165,388 --
Due to affiliates ............................... (212,952) 96,809 22,768
------------ ------------ ------------
Net cash provided by operating activities 9,749,850 3,730,069 3,175,637
------------ ------------ ------------
Cash flows from investing activities
Investments in mortgage loans ...................... -- (8,500,000) --
Proceeds from disposition of real estate ........... 1,456,844 -- --
Mortgage loan repayments received .................. 12,926,153 12,695,141 397,167
Loan origination fees received ..................... -- 113,750 --
Additions to real estate ........................... (44,064) (159,972) (90,488)
------------ ------------ ------------
Net cash provided by investing activities 14,338,933 4,148,919 306,679
------------ ------------ ------------
Cash flows from financing activities
Distributions to partners .......................... (36,386,903) (2,529,264) (2,299,330)
------------ ------------ ------------
Net (decrease) increase in cash and
cash equivalents ................................... (12,298,120) 5,349,724 1,182,986
Cash and cash equivalents, beginning of year ............ 15,725,616 10,375,892 9,192,906
------------ ------------ ------------
Cash and cash equivalents, end of year .................. $3,427,496 $15,725,616 $10,375,892
============ ============ ============
</TABLE>
<PAGE>
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.
F-5
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1 ORGANIZATION
Resources Pension Shares 5, L.P., a Delaware limited partnership (the
"Partnership"), was formed under the Delaware Revised Uniform Limited
Partnership Act on February 11, 1986 for the purpose of investing
primarily in participating mortgage loans and, to a lesser extent, land
sale-leaseback transactions on improved, income-producing real estate.
The Partnership will terminate on December 31, 2010, or sooner, in
accordance with the terms of the Amended and Restated Agreement of
Limited Partnership (the "Limited Partnership Agreement").
The Partnership registered 16,000,000 units of limited partnership
interests at $10 per unit with the Securities and Exchange Commission,
6,000,000 of which were for the Partnership's Reinvestment Plan. On
February 12, 1988, the Partnership terminated its offering of limited
partnership units, having raised $56,907,425 from approximately 5,800
investors (including $699,565 from limited partnership units issued
pursuant to the Reinvestment Plan). After the payment of a
nonaccountable expense reimbursement to the Administrative General
Partner, the Partnership had approximately $54,238,000, including
evaluation and acquisition fees paid or payable to the Administrative
General Partner, available for investment and reserves.
Limited partners' units were issued at a stated value of $10 per unit.
A total of 5,690,843 units of limited partnership were issued,
including 100 units to the initial limited partner, for an aggregate
capital contribution of $56,908,426. The General Partners collectively
contributed $1,000 to the Partnership.
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 recognizes 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.
F-6
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Loan origination and acquisition fees
Fees received and costs associated with the funding of mortgage loans
are included in investments in mortgage loans and amortized over the
life of the mortgage loan. Amortization is included in interest income.
Allowance for loan losses
A provision for loan losses is established based upon a periodic review
of each of the mortgage loans in the Partnership's portfolio. In
performing this 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 at each
year end. Accordingly, the Partnership may provide additional losses in
subsequent years and such provisions could be material.
Write-down for impairment
The Partnership provides write-downs for impairment based upon a
periodic 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 year
end. Accordingly, the Partnership may record additional write-downs in
subsequent years and such write-downs could be material.
F-7
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation
Depreciation on properties acquired by the Partnership as a result of a
loan default is computed using the straight-line method over the useful
life of the property, which is estimated to be 40 years. The initial
cost of property represents the lower of the loan principal or the fair
market value of the property at the time of acquisition. Repairs and
maintenance are charged to operations as incurred.
Financial statements
The financial statements include only those assets, liabilities and
results of operations which relate to the business of the Partnership.
Cash and cash equivalents
For the purpose of the statements of cash flows, the Partnership
considers all short-term investments which have original maturities of
three months or less to be cash equivalents.
Principally all of the Partnership's cash and cash equivalents are held
at one financial institution.
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.
Net income and distributions per unit of limited partnership interest
Net income and distributions per unit of limited partnership interest
are computed based upon the number of units outstanding (5,690,843) for
the year.
Income taxes
No provisions have been made for federal, state and local income taxes,
since they are the personal responsibility of the partners.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could
result in adjustments to Partnership income or losses, which changes
could affect the income tax liability of the individual partners.
F-8
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
Certain reclassifications have been made to the financial statements
shown for the prior years in order to conform to the current year's
classifications.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
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"). Resources Pension Advisory and Resources Capital Corp.
were, until November 3, 1994, wholly-owned subsidiaries of Integrated
Resources Inc., ("Integrated"). On November 3, 1994, as a result of the
reorganization plan relating to Integrated's bankruptcy, indirect
ownership of the Administrative General Partner, the Investment General
Partner and the Associate General Partner was purchased by Presidio.
As of February 28, 1995, the Associate General Partner of the
Partnership is Presidio AGP Corp., a Delaware corporation ("Presidio
AGP"), which replaced Richard H. Ader, formerly an executive officer of
Integrated. Presidio AGP is a wholly-owned subsidiary of Presidio. 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. The Investment General
Partner, Administrative General Partner and Associate General Partner
are collectively referred to as the "General Partners."
Presidio controls the Partnership through its direct and indirect
ownership of the General Partners. Presidio was also party to an
Administrative Services Agreement with Wexford Management LLC
("Wexford") pursuant to which Wexford was responsible for the
day-to-day management of Presidio and among other things, had authority
to designate directors of the General Partners.
F-9
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
On August 28, 1997, an affiliate of NorthStar Capital Partners acquired
all of the Class B shares of Presidio. This acquisition, when
aggregated with previous acquisitions, caused NorthStar Capital
Partners to acquire indirect control of the General Partners. Effective
July 31, 1998, Presidio is indirectly controlled by NorthStar Capital
Investment Corp. ("NorthStar"), a Maryland corporation.
On November 2, 1997, the Administrative Services Agreement with Wexford
expired. Effective November 3, 1997, Wexford and Presidio entered into
a new Administrative Services Agreement (the "ASA"), which expired on
May 3, 1998. Under the terms of the ASA, Wexford provided consulting
and administrative services to Presidio and its affiliates, including
the General Partners and the Partnership. Presidio also entered into a
management agreement with NorthStar Presidio Management Company, LLC
("NorthStar Presidio"). Under the terms of the management agreement,
NorthStar Presidio provides the day-to-day management of Presidio and
its direct and indirect subsidiaries and affiliates. During the years
ended December 31, 1998 and 1997, amounts paid to NorthStar Presidio
and Wexford for administrative services rendered aggregated to $21,869
and $22,667, respectively.
Effective November 3, 1997, the officers and employees of Wexford that
had served as officers and/or directors of the General Partners
tendered their resignations. On the same date, the Board of Directors
of Presidio appointed new individuals to serve as officers and/or
directors of the General Partners.
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 years ended December 31,
1998, 1997 and 1996, the Administrative General Partner earned
$604,275, $847,690 and $775,060, respectively, for its management
services. Amounts due to the Administrative General Partner at December
31, 1998 and 1997, for management services amounted to $99,243 and
$307,397, respectively, and is included in due to affiliates.
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
years ended December 31, 1998, 1997 and 1996, the Investment General
Partner earned $47,144, $65,122 and $76,184, respectively, for mortgage
servicing fees. Amounts due to the Investment General Partner at
December 31, 1998 and 1997, for mortgage servicing fees amounted to
$9,330 and $14,128, respectively, and is included in due to affiliates.
F-10
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
On December 9, 1993, the Partnership 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 years ended
December 31, 1998, 1997 and 1996. Management fees earned by the
unaffiliated local management company amounted to $60,920, $61,203 and
$55,920 for the years ended December 31, 1998, 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.
As of December 31, 1998, affiliates of Presidio have acquired
1,413,256.475 units of limited partnership interest of the Partnership.
These units represent approximately 24.8% of the issued and outstanding
limited partnership units, and entitled the purchaser to approximately
$8,690,973 and $236,000 in distributions for the years ended December
31, 1998 and 1997, respectively.
4 INVESTMENTS IN MORTGAGE LOANS
As of December 31, 1998, the Partnership had four outstanding first
mortgage loans representing an aggregate mortgage amount advanced of
$14,700,000. During 1998 the Partnership was repaid its entire
outstanding balance on two of its mortgage loans (Bank of California
Loan and Avon Market Center Loan). A discussion of these events, as
well as a description of the Partnership's other mortgage investments
is described below. During 1997, the Partnership was repaid its entire
outstanding balance on one of its mortgage investments (Medford Village
Loan); received a property in lieu of foreclosure which was
subsequently sold for net proceeds of $3,213,908 (Santa Ana Square
Loan); acquired a property in lieu of foreclosure which the Partnership
sold during 1998 (Xerox Loan); and funded two additional mortgage loans
(DVL Loan and Oliveye Loan).
F-11
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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"). The land was
subject to a long-term ground lease (the "Ground Lease"). Concurrently
with the closing of the Wrap Loan, Gum Loong acquired the lessor's
interest under the Ground Lease and Continental Seattle Partners, L.P.
("CSP"), a partnership related to Gum Loong, acquired the lessee's
interest under the Ground Lease. CSP also acquired the lessor's
interest under a master (net) sublease with The Bank of California for
a substantial portion of the Building. A first mortgage on the land
("Land Loan") in the principal amount of $8,000,000, was held by Anchor
National Life Insurance Company ("Anchor"). Under the provisions of the
Wrap Loan, Gum Loong was required to make the payments required under
both the Land Loan and the Wrap Loan to the Partnership on a monthly
basis. The Partnership, in turn, then paid Anchor the amounts due under
the Land Loan on a monthly basis.
The Wrap Loan was secured by a Wraparound Deed of Trust, Security
Agreement, Financing Statement and Assignment of Lessor's Interest in
Ground Lease dated May 5, 1988 in the amount of $16,500,000, between
the Partnership and Gum Loong. The Building was encumbered by a loan
("Building Loan"), which matured on March 26, 1992, between The Bank of
Tokyo Trust Company (Seattle Branch) ("BOT") and CSP, in the principal
amount of $48,000,000, secured by a first mortgage on the Building and
a third mortgage on the land. This loan was also guaranteed by Gum
Loong. The Partnership's collateral for the Wrap Loan was the land, the
lessor's interest in the Ground Lease and subject to the Ground Lease,
BOT's lien, the Building, the rents and profit and proceeds therefrom.
The Partnership received a letter dated April 22, 1993, stating that
BOT had commenced a foreclosure action against CSP for failure to repay
the Building Loan which matured on March 26, 1992. An Option Agreement
entered into at the time the Wrap Loan was made gave BOT the right,
after commencing a foreclosure action, to exercise an option to
purchase either (i) the Land Loan and the Wrap Loan from Anchor and the
Partnership or (ii) the land from Gum Loong subject to the Land Loan
and the Wrap Loan. On July 9, 1993 the Partnership received notice from
BOT that it intended to exercise its option to purchase the land.
F-12
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Bank of California Loan (continued)
Gum Loong did not make timely payments of its scheduled July, August,
and September 1993 debt service on the Wrap Loan. The Partnership
utilized its working capital reserves to make the required payments on
the Land Loan. On July 20, 1993, and again on August 9, 1993, the
Partnership notified Gum Loong that an event of default had occurred
because of the CSP default on the BOT loan and because of Gum Loong's
failure to make its scheduled payments. Both Gum Loong and CSP filed
for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code in August 1993, staying BOT's foreclosure action. On
September 27, 1993 the Partnership, Anchor and Gum Loong entered into
an Interim Stipulation and Order Concerning Cash Collateral, which was
approved by the Bankruptcy Court on September 29, 1993. Since October
1993, various Cash Collateral Orders had been entered into which
required Gum Loong to make its monthly payments to the Partnership. The
September 1993 payment and all monthly contract interest payments due
thereafter under the Cash Collateral Orders had been made. The current
Cash Collateral Order required Gum Loong to make monthly payments to
the Partnership through the maturity date of the loan.
On January 31, 1994, a Proof of Claim was filed in connection with the
Gum Loong Bankruptcy by the Partnership as it related to amounts due
under the Wrap Loan, including principal, interest and other amounts
due. On January 6, 1995, a Proof of Claim was filed in connection with
the CSP bankruptcy by the Partnership for a contingent and unliquidated
claim under the Wrap Loan. Despite the bankruptcy filings by both Gum
Loong and CSP, the Partnership had not provided for an allowance for
loan loss on this loan. The Partnership believed that the collateral
for the Wrap Loan, the land as encumbered by the Ground Lease, was of
sufficient value to realize the amount due under the Wrap Loan. If BOT
exercised its option to purchase the land, it would have been required,
as a condition of such exercise, to cure any defaults by Gum Loong.
On or about January 3, 1995, the United States Trustee moved to convert
the Gum Loong Chapter 11 Bankruptcy to a Chapter 7 Bankruptcy or to
dismiss the Gum Loong Case, or to set a deadline for filing a plan of
reorganization. This motion was scheduled for a hearing on February 9,
1995. This motion had been adjourned pending the hearing on its
proposed disclosure statement and proposed plan. The hearing on the
adequacy of BOT's proposed disclosure statement was set for April 6,
1995. The Third Amended Disclosure Statement was approved on May 31,
1995.
F-13
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Bank of California Loan (continued)
Thereafter, BOT sought confirmation of various amended plans to which
the Partnership successfully objected. Such plans included provisions
that were adverse to the Partnership's interests. The Partnership's
objections, and the Bankruptcy Court's rulings thereon, prompted BOT to
make various amendments and revisions to its proposed plan of
reorganization and withdraw various provisions that were objectionable
to the Partnership. After extended confirmation hearings on BOT's
proposed plans, the Bankruptcy Court approved the revised Fifth Amended
Plan in September 1995. As part of the approved plan, in September
1995, approximately $335,000 was paid to the Partnership. This amount
consisted of approximately $266,000 of interest payments due the
Partnership which resulted from two missed interest payments in 1993,
and late charges and interest related to these payments of
approximately $69,000.
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 must have been approved by the Bankruptcy Court and to which the
Partnership may object, or at a court approved auction in which the
Partnership could bid. In connection with the plan of reorganization,
in September 1996, the Partnership was reimbursed $216,000 for legal
expenses relating to the bankruptcy which amount is included in the
accompanying statement of income as other income.
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 income.
F-14
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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. The loan did not provide for any
accrued or contingent interest. The Partnership received a
non-refundable origination fee in the amount of $35,500 along with a
non-refundable application fee of $2,000. The loan was secured by a
shopping center located in Eagle County, Colorado which consists of
approximately 70,211 square feet of net rentable area and parking for
approximately 352 automobiles. The shopping center's major tenant is a
Wal-Mart Discount Store which occupies 53,318 square feet of retail
space. There is also a separate retail center which consists of 16,893
square feet of retail space. The shopping center is located in the
commercial area of the town of Avon which is located close to Beaver
Creek, a well-known ski resort. This development serves as a
convenience-center for the neighboring communities as well as the
near-by resorts, including Vail.
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.
Lionmark Corporate Center Loan
On June 15, 1993, the Partnership funded a first mortgage loan in the
principal amount of $4,000,000 at an annual interest rate of 8.5%,
payable in monthly installments of principal and interest (based on a
35-year amortization schedule). The loan is for a ten year period and
may not be prepaid during the first two years and may be prepaid
thereafter without penalty. The loan is with recourse to principals of
the borrower if at any time the borrower files a petition under the
United States Bankruptcy Code. The loan is secured by a one story
campus type office/flexible use building which is part of a larger
office park. The building is located in Columbus, Ohio and consists of
approximately 79,000 square feet of net rentable area and parking for
approximately 357 automobiles. The office building's major tenants
include Star Bank Services, GDE Systems, Inc. and TransAmerica. In
connection with issuing the commitment, the Partnership received
application and commitment fees aggregating $40,000.
F-15
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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 is
able to be prepaid 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.
On April 1, 1998, DVL sold another one 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.
In January 1999, the DVL Note was repaid in its entirety.
Medford Village Loan
On July 25, 1995, the Partnership purchased a first mortgage loan in
the principal amount of $8,612,500 for approximately $8,700,000 in
cash. In addition, the Partnership incurred $45,469 of consulting fees
with respect to this loan. The loan had a floating interest rate,
capped at 10%, based on the Eurodollar rate for each quarterly interest
period plus 280 basis points. The loan was payable in quarterly
installments of principal and interest, maturing on April 22, 1998,
with a balloon payment of $7,737,500, plus any accrued interest due.
The borrower had the right to two, one year extensions for a fee of
$23,500 each year, provided the loan to value ratio at the time did not
exceed 60%. The loan was collateralized by a guarantee from the
borrower's principals, should the borrower have defaulted, and was
secured by a 121,660 square foot shopping center known as the Medford
Village Outlet Center located in Medford, Minnesota.
On June 30, 1997, the Medford loan was repaid 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.
F-16
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
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 interest. This loan matured
during March 1997.
As a result of an economic decline in the surrounding area, the tenancy
at the Santa Ana Shopping Center had been slowly shifting from
regional, credit tenants to local, non-credit tenants. Consequently,
although the cash flow from the operation of the center had not
declined, its value had been eroded due to the shift in tenancy. During
1996, 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
analysis of the projected cash flow from the center using a 13%
capitalization rate and market comparables indicating a value of
approximately $78 per square foot, the fair value of the center was
estimated to be approximately $2,500,000. The net carrying value of the
loan at that time was $4,047,830, necessitating a provision of
$1,547,830 which was recorded by the Partnership during 1996.
Additionally, the Partnership ceased accruing interest on this loan.
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 at that time
was $2,491,962, necessitating a recovery of loan losses of $721,946.
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 reduced
its investments in mortgage loans by the carrying value of the
F-17
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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.
On March 10, 1998, the Partnership sold this property for $1,550,000,
exclusive 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.
Oliveye Loan
On October 31, 1997, the Partnership funded a first mortgage loan to
Oliveye Hotel Limited Partnership in the principal amount of
$6,500,000. The loan has an annual interest rate of 11% and is payable
monthly. The loan is secured by the Crowne Plaza Hotel located in
Cincinnati, Ohio, and matures in October 2000. In connection with the
funding of this loan, the Partnership received $113,750 in loan
origination fees.
F-18
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
Information with respect to the Partnership's investments in mortgage
loans is summarized below:
<TABLE>
<CAPTION>
Interest Contractual
Interest Rate Mortgage Recognized Balance
---------------------------- Maturity Amount Dec. 31, Dec. 31,
Description Current % Accrued % Date Advanced 1998 1998 (2)
----------- --------- --------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Shopping Centers
----------------
Santa Ana Square
Santa Ana, CA (3) 10.91 1.29 - 0 March 1997 $ 2,600,000 $ - $ -
Lucky Supermarket
Buena Park, CA (4) 8.41-10.00 1.82 - 0 May 2005 2,200,000 221,539 2,491,953
Avon Market Ctr.
Avon, CO (3) 8.35 - April 2003 3,750,000 144,433 -
Medford Village Outlet Center
Medford, MN (3) 8.55 - April 1998 8,612,500 - -
DVL, Inc. (3) 12.00 - February 2000 2,000,000 37,971 13,267
Hotel
-----
Crowne Plaza Hotel (3)
Cincinnati, Ohio 11.00 - October 2000 6,500,000 752,536 6,413,761
Office Buildings
----------------
Bank of California
Seattle, WA (4) 9.36 - 10.24 3.0 - 0 May 1998 8,500,000 9,096,966 -
Xerox
Arlington, TX (4) 4.55 10.38 - 11.47 March 1997 1,100,000 - -
Lionmark Corp. Ctr.
Columbus, OH (3) 8.5 - June 2003 4,000,000 330,140 3,870,903
----------- ---------- -----------
$39,262,500 $10,583,585 $12,789,884
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carrying Carrying
Value Value
Dec. 31, Dec. 31,
1998 (1) 1997 (1)
-------- --------
<S> <C> <C>
Shopping Centers
----------------
Santa Ana Square
Santa Ana, CA (3) $ - $ -
Lucky Supermarket
Buena Park, CA (4) 2,233,963 2,239,257
Avon Market Ctr.
Avon, CO (3) - 3,647,740
Medford Village Outlet Center
Medford, MN (3) - -
DVL, Inc. (3) 13,267 746,801
Hotel
-----
Crowne Plaza Hotel (3)
Cincinnati, Ohio 6,413,761 6,392,569
Office Buildings
----------------
Bank of California
Seattle, WA (4) - 8,523,399
Xerox
Arlington, TX (4) - -
Lionmark Corp. Ctr.
Columbus, OH (3) 3,870,903 3,899,057
------------ -----------
$ 12,531,894 $25,448,823
============ ===========
</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. These loans are accounted for under the investment method.
F-19
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
4 INVESTMENTS IN MORTGAGE LOANS (continued)
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Investment Interest
Method Method Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 ............ $11,982,857 $20,270,069 $32,252,926
Interest recognized ................. 1,409,349 1,641,340 3,050,689
Amortization of loan principal ...... -- (397,167) (397,167)
Provision for loan losses ........... -- (1,547,830) (1,547,830)
Cash received inclusive of
current interest accruals ......... (1,472,368) (1,630,563) (3,102,931)
------------ ------------ ------------
Balance, December 31, 1996 .......... 11,919,838 18,335,849 30,255,687
Investments in mortgage loans ....... -- 8,500,000 8,500,000
Interest recognized ................. 2,010,754 1,256,734 3,267,488
Amortization of loan principal ...... -- (449,565) (449,565)
Recovery of provision for loan losses -- 721,946 721,946
Loan payoffs/foreclosure ............ (1,500,000) (3,213,908) (4,713,908)
Loan origination fees received ...... -- (113,750) (113,750)
Cash received inclusive of
current interest accruals ......... (1,667,936) (10,351,139) (12,019,075)
------------ ------------ ------------
Balance, December 31, 1997 .......... 10,762,656 14,686,167 25,448,823
Interest recognized ................. 9,318,505 1,265,080 10,583,585
Amortization of loan principal ...... -- (319,562) (319,562)
Cash received inclusive of
current interest accruals ......... (17,847,198) (5,333,754) (23,180,952)
------------ ------------ ------------
Balance, December 31, 1998 .......... $2,233,963 $10,297,931 $12,531,894
============ ============ ============
</TABLE>
F-20
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
5 REAL ESTATE - NET
A summary of the Partnership's real estate is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
------------ -------------
<S> <C> <C>
Land ................................. $1,902,000 $2,202,000
Buildings and improvements ........... 6,724,226 7,880,162
------------ ------------
8,626,226 10,082,162
Less accumulated depreciation ........ (1,044,721) (850,088)
------------ ------------
$7,581,505 $9,232,074
============ ============
</TABLE>
Landover, Maryland
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.
The Partnership paid real estate taxes for this property during the
years ended December 31, 1998, 1997 and 1996 in the amount of $39,135,
$44,024 and $48,926, respectively. Such amounts are included in
operating expenses - real estate in the statements of income.
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, which is included in other liabilities in
the accompanying balance sheets at December 31, 1998 and 1997. The
Partnership does not presently plan to commence removal of the asbestos
until a purchaser or tenant for the property is identified.
F-21
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
5 REAL ESTATE - NET (continued)
Landover, Maryland (continued)
Additionally, 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. However, 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).
The Garfinkel's property has been vacant since the foreclosure by the
Partnership.
Groton, Connecticut
The Groton loan, in the original principal amount of $8,000,000, was
collateralized by a shopping center in Groton, Connecticut. On
September 20, 1991, Groton Associates, the borrower, filed a voluntary
petition for reorganization pursuant to the provisions of Chapter 11 of
the United States Bankruptcy Code.
The Investment General Partner, on behalf of the Partnership, obtained
an order from the Bankruptcy Court on July 27, 1993 permitting it to
proceed with a foreclosure against the property and directing Groton
Associates to turn over all cash collateral and provide an accounting
for rents. In addition, beginning with the rents due on August 1, 1993,
the Partnership began to collect rents directly. The Partnership
commenced a foreclosure action in Connecticut and on December 9, 1993
foreclosed on the shopping center.
At the foreclosure, the estimated net realizable value of the shopping
center was determined to be $6,500,000 based on the third party
appraisal of the shopping center previously received by the
Partnership. All reserves previously recorded on the loan were written
off after the foreclosure and the remaining balance of $6,500,000 was
transferred to real estate on the Partnership's balance sheet.
Occupancy at the shopping center has declined from approximately 82% at
the time of foreclosure to approximately 78% at December 31, 1998. The
anticipated lease-up of the vacant space has not occurred as of
F-22
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
5 REAL ESTATE - NET (continued)
Landover, Maryland (continued)
December 31, 1998 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.
Arlington, Texas
As discussed in Note 4, this property was acquired by the Partnership
via a deed-in-lieu of foreclosure on September 30, 1997. The property
had been recorded at its estimated net realizable value of $1,500,000
at such date. On March 10, 1998, the property was sold for
approximately $1,457,000, net of closing costs.
6 DISTRIBUTIONS PAYABLE
Distributions payable represent distributions of adjusted cash flows
from operations as defined in the Limited Partnership Agreement.
Distributions payable to limited partners of $625,993 for the quarter
ended December 31, 1997, were paid in the first quarter of 1998.
Distributions of $6,323 payable to the general partners for the quarter
ended December 31, 1997, were also paid in the first quarter of 1998.
No distributions were declared for the quarter ending December 31,
1998.
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 did not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it did not reflect the General Partners' 1% equity
interest in the Partnership. During 1997 the Partnership had 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
retroactively as of the inception of the Partnership. The reallocation
had no impact on the Partnership's financial position, results of
operations, cash flows, distributions to partners, or the partners' tax
basis capital accounts.
F-23
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
8 COMMITMENTS AND CONTINGENCIES
HEP Action
On or about May 11, 1993, three public real estate partnerships (the
"HEP Partnerships") including High Equity Partners, L.P. Series 86, in
which the Administrative General Partner is also a General Partner,
were advised of the existence of an action (the "HEP Action") filed in
the Superior Court for the State of California for the County of Los
Angeles, by Mark Erwin, Trustee, Mark Erwin Sales, Inc. Defined Benefit
Plan; Nancy Cooper, Trustee of Nancy Cooper Individual Retirement
Account; and Leonard Drescher, Trustee of Drescher Family Trust Account
individually and purportedly on behalf of a class consisting of all of
the purchasers of limited partnership interests in the HEP Partnerships
(the "Plaintiffs"). The HEP Action names as defendants the
Administrative General Partner and several individuals who are general
partners of the former Associate General Partner, among others.
On November 30, 1995, the original plaintiffs and the intervening
plaintiffs filed a Consolidated Class and Derivative Action Complaint
("Consolidated Complaint") against the General Partners of the HEP
Partnerships alleging, among other things, breach of fiduciary duties,
breach of contract, and negligence.
On or about January 31, 1996, the parties to the HEP Action agreed upon
a revised settlement, which would be significantly more favorable to
the Plaintiffs than the previously proposed settlement. The revised
settlement proposal, like the previous proposal, involves the
reorganization of the HEP Partnerships. Upon the effectuation of the
revised settlement, the HEP Action would be dismissed with prejudice.
On July 18, 1996, the Court preliminarily approved the revised
settlement. In August 1996, the Court approved the form and method of
notice regarding the revised settlement which was sent to the HEP
limited partners.
Only approximately 2.5% of the limited partners of the HEP Partnerships
elected to "opt out" of the revised settlement. Despite this, following
the submission of additional briefs, the Court entered an order on
January 14, 1997 rejecting the revised settlement and concluding that
there had not been an adequate showing that the settlement was fair and
reasonable. Thereafter, the Plaintiffs filed a motion seeking to have
the Court reconsider its order. However, the defendants withdrew the
revised settlement and at a hearing on February 24, 1997, the Court
denied the Plaintiffs' motion.
F-24
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Also at the February 24, 1997 hearing, the Court granted the request of
one of the Plaintiffs' law firm to withdraw as class counsel.
Thereafter, in June 1997, the Plaintiffs again amended their complaint
("Amended Complaint"). The Amended Complaint asserts substantially the
same claims as the Consolidated Complaint, except that it no longer
contains causes of action for fraud, except on behalf of the two
original Plaintiffs, or for negligence. In February 1998, the Court
certified three Plaintiffs classes consisting of current unit holders
in each of the three HEP Partnerships. On March 11, 1998, the Court
stayed the action through June 30, 1998 to permit the parties to engage
in renewed settlement discussions.
In September 1998, the parties in the lawsuit entered into a Memorandum
of Understanding with respect to a settlement of the lawsuit. The
Memorandum of Understanding provided, among other things, for the
preparation of definitive documentation in the form of a Stipulation of
Settlement and related documents ("Stipulation"). The Stipulation was
executed by the parties in December 1998, and submitted to the Court
for preliminary approval early in January 1999. After hearing and
receipt of a report from the Court's designated independent expert, the
Court entered an order on February 1, 1999, wherein it gave its
preliminary approval to the settlement and directed that notice of the
proposed settlement be sent to the previously certified class. A
hearing is scheduled for April 14, 1999. The settlement is subject to a
number of conditions. There can be no assurance that such conditions
will be fulfilled.
The Administrative General Partner believes that each of the claims
asserted in the Amended Complaint is meritless and intends to
vigorously defend the HEP Action if the settlement is not finally
approved and/or consummated. It is impossible at this time to predict
what the defense of this lawsuit will cost the Administrative General
Partner and whether such costs could adversely effect the
Administrative General Partners' ability to perform its obligations to
Registrant.
9 RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX BASIS
The Partnership recognizes interest income on all of its investments in
mortgage loans for tax purposes using the interest method. For
financial statement purposes mortgage loans accounted for under the
investment method recognize income as described in Note 2.
F-25
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
9 RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX BASIS (continued)
A reconciliation of net income per financial statements to the tax
basis of accounting is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net income per financial statements $ 10,339,470 $ 4,033,448 $ 1,244,262
Difference in (recovery of) provision for
loan losses - (721,946) 1,547,830
Difference in income recognized on
mortgage investments (8,491,987) (22,741) 745,403
Difference in reserves - (144,000) 144,000
Tax loss on disposition of real estate
in excess of financial statement (464,753) - -
Tax write-off of loan in excess of
financial statement - (933,092) -
Tax depreciation in excess of
financial statement depreciation (19,701) (25,175) (20,717)
-------------- ------------- -------------
Net income per tax basis $ 1,363,029 $ 2,186,494 $ 3,660,778
============= ============= =============
</TABLE>
F-26
<PAGE>
RESOURCES PENSION SHARES 5, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
10 RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX BASIS (continued)
The differences between the Partnership's net assets per financial
statements to the tax basis of accounting are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net assets per financial statements .... $23,035,945 $48,451,062
Deferred interest receivable ........... 237,817 9,210,601
Acquisition and origination fees ....... (5,395) (16,217)
Allowance for impairments .............. 1,860,000 1,860,000
Syndication costs ....................... 2,669,697 2,669,697
Cumulative tax depreciation in excess of
financial statement depreciation .. (115,199) (100,720)
----------- -----------
Net assets per tax basis ............... $27,682,865 $62,074,423
=========== ===========
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
------------------------------
Balance at Charged to Charged Balance at
Beginning of Costs and to Other End of
Description Period Expenses Accounts Deductions Period
----------- ------ -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Write-down for impairment:
Groton Shopping Center
Groton, Connecticut $ 1,860,000 (A) $ - $ - $ - $ 1,860,000
=========== =========== ====== =========== ===========
YEAR ENDED DECEMBER 31, 1997
Write-down for impairment:
Groton Shopping Center
Groton, Connecticut $ 1,860,000 (A) $ - $ - $ - $ 1,860,000
=========== =========== ====== ============ ===========
Allowance for loan losses:
Santa Ana Loan
Santa Ana, California $ 1,547,830 (B) $ - $ - $ (1,547,830) (B) $ -
=========== =========== ====== ============ ===========
YEAR ENDED DECEMBER 31, 1996
Write-down for impairment:
Groton Shopping Center
Groton, Connecticut $ 1,860,000 (A) $ - $ - $ - $ 1,860,000
=========== =========== ====== ============ ===========
Allowance for loan losses:
Santa Ana Loan
Santa Ana, California $ - (B) $ 1,547,830 $ - $ - $ 1,547,830
=========== =========== ====== ============ ===========
</TABLE>
(A) Represents a write-down for impairment on the Groton Shopping Center
provided during 1995.
(B) Represents a provision for loan losses on the Santa Ana Loan provided
during 1996 which was reversed during 1997 upon receipt by the Partnership
and subsequent sale of the property underlying the loan.
F-28
<PAGE>
<TABLE>
<CAPTION>
RESOURCES PENSION SHARES 5, L.P.
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
COSTS CAPITALIZED GROSS AMOUNT AT
INITIAL COST TO SUBSEQUENT TO CLOSE OF
PARTNERSHIP (1) ACQUISITION PERIOD
------------------------- ------------------------- ---------------------------
BUILDINGS BUILDINGS
AND CARRYING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS
----------- ------------ ---- ------------ ------------ ----- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
LANDOVER MALL
LANDOVER, MARYLAND $ - $ 640,000 $ 2,560,000 $ - $ 84,404 $ 640,000 $ 2,644,404
XEROX OFFICE BUILDING
ARLINGTON, TEXAS (2) - 300,000 1,200,000 - - - -
GROTON SHOPPING CENTER
GROTON, CONNECTICUT - 1,820,000 4,680,000 701,822 - 1,820,000 5,381,822
-------- ---------- ----------- -------- -------- ---------- -----------
TOTAL $ - $ 2,760,00 $ 8,440,000 $701,822 $ 84,404 $ 2,460,00 $ 8,026,226
========= ========== =========== ======= ======== ========== ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
WRITE-DOWN LATEST INCOME
FOR ACCUMULATED DATE OF DATE STATEMENTS
DESCRIPTION IMPAIRMENT TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
----------- ---------- ----- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
LANDOVER MALL
LANDOVER, MARYLAND $ - $ 3,284,404 $ 397,360 N/A 12/21/92 40 YEARS
Straight-line
method
XEROX OFFICE BUILDING
ARLINGTON, TEXAS (2) - - - N/A 9/30/97 40 YEARS
Straight-line
method
GROTON SHOPPING CENTER
GROTON, CONNECTICUT (1,860,000) 5,341,822 647,361 N/A 12/9/93 40 YEARS
----------- ----------- ----------- Straight-line
method
TOTAL $(1,860,000) $ 8,626,22 $ 1,044,721
=========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------
(A) RECONCILIATION OF REAL ESTATE OWNED 1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year . $10,082,162 $ 8,422,190 $ 8,331,702
Dispositions ............. (1,500,000) -- --
Additions during year:
Building ................. -- 1,200,000 --
Land ..................... -- 300,000 --
Improvements ............. 44,064 159,972 90,488
------------ ------------ ------------
Balance at end of year ....... $ 8,626,226 $ 10,082,162 $ 8,422,190
============ ============ ============
<CAPTION>
Year ended December 31,
-------------------------------------------------------------
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION 1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year .................... $ 850,088 $ 645,032 $ 450,608
Additions during year
Depreciation expense ........................ 209,633 205,056 194,424
Dispositions ................................ (15,000) -- --
---------- ---------- ----------
Balance at end of year ......................... $1,044,721 $ 850,088 $ 645,032
========== ========== ==========
</TABLE>
(1) Aggregate cost for income tax purposes is $10,486,226.
(2) The property was sold on March 10, 1998. See Note 4.
F-29
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant
There are no officers or directors of Registrant. The Administrative General
Partner is responsible for all administrative functions of Registrant and the
Investment General Partner is responsible for Registrant's investments in
mortgage loans and land sale-leasebacks. The Associate General Partner will not
devote any material amount of its business time and attention to the affairs of
Registrant.
Based on a review of Forms 3 and 4 and amendments thereto furnished to
Registrant pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), during its most recent fiscal year and Forms 5
and amendments thereto furnished to Registrant with respect to its most recent
fiscal year and written representations received pursuant to Item 405(b)(2)(i)
of Regulation S-K, none of the directors or officers of the General Partners, or
beneficial owners of more than 10% of the Units failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal or prior fiscal years. However, no written representations were received
from the partners of the former Associate General Partner.
As of March 1, 1999, the executive officers and directors of the Administrative,
Investment and Associate General Partners were as follows:
<TABLE>
<CAPTION>
Name Age Position Held Has served as a
Director and/or
Officer since
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
W. Edward Scheetz 34 Director November 1997
David Hamamoto 39 Director November 1997
Dallas E. Lucas 36 Director August 1998
David King 36 Executive Vice President and Assistant November 1997
Treasurer, Director
Lawrence R. Schachter 42 Senior Vice President and Chief January 1998
Financial Officer
J. Peter Paganelli 40 Senior Vice President, Secretary and March 1998
Treasurer
Allan B. Rothschild 37 President and Director December 1997
Marc Gordon 34 Vice President November 1997
Charles Humber 25 Vice President November 1997
Adam Anhang 25 Vice President November 1997
Gregory Peck 24 Assistant Secretary November 1997
</TABLE>
- ------------
There are no family relationships between or among any of the directors and/or
executive officers of the Administrative, Investment and Associate General
Partner.
W. Edward Scheetz co-founded NorthStar Capital Partners LLC with David Hamamoto
in July 1997, From 1993 through 1997, Mr. Scheetz was a partner at Apollo Real
Estate Advisors L.P. From 1989 to 1993, Mr. Scheetz was a principal with
Trammell Crow Ventures.
<PAGE>
David Hamamoto co-founded NorthStar Capital Partners LLC with W. Edward Scheetz
in July 1997. From 1988 to 1997, Mr Hamamoto was a partner and a co-head of the
real estate principal investment area at Goldman, Sachs & Co.
Dallas E. Lucas joined Northstar Capital Partners LLC in August 1998. From 1994
until then he was the Chief Financial Officer of Crescent Real Estate Equities
Company. Prior to that he was a financial consulting and audit manager in the
real estate services group of Arthur Anderson LLP.
David King joined NorthStar Capital Partners LLC in November 1997. From 1990 to
1997, Mr. King was associated with Olympia & York Companies (USA) where he held
the position of Senior Vice President of Finance. Prior to that Mr. King was
employed with Bankers Trust in its real estate finance group.
Lawrence R. Schachter joined NorthStar Presidio in January 1998 From 1996 to
1998, Mr. Schachter was Controller at CB Commercial/Hampshire LLC. From 1995 to
1996, Mr. Schachter was Controller at Goodrich Associates. From 1992 to 1995,
Mr. Schachter was Controller at Greenthal/Harlan Realty Services Co.
J. Peter Paganelli joined NorthStar Presido in March 1998. From 1997 to 1998,
Mr. Paganelli was Director of Asset Management at Argent Ventures LLC, a private
real estate company. From 1994 to 1997, Mr. Paganelli was a Vice President at
Starwood Capital Group, LLC in its Asset Management Group. From 1986 to 1994,
Mr. Paganelli was an Associate Director at Cushman & Wakefield, Inc. in its
Financial Services and Asset Services Groups.
Allan B. Rothschild joined NorthStar Presidio in December 1997. From 1995 to
1997, Mr. Rothschild was Senior Vice President and General Counsel of Newkirk
Limited Partnership. From 1987 to 1995, Mr. Rothschild was associated with the
law firm of Proskauer, Rose LLP in its real estate group.
Marc Gordon joined NorthStar Capital Partners LLC in October 1997 From 1993 to
1997, Mr. Gordon was Vice President in the real estate investment banking group
at Merrill Lynch. Prior to that, Mr. Gordon was associated with the law firm of
Irell & Manella in its real estate and banking group.
Charles Humber joined NorthStar Capital Partners LLC in September 1997. From
1996 to 1997, Mr Humber was employed with Merrill Lynch in its real estate
investment banking group. Prior to that, Mr. Humber was a student at Brown
University.
Adam Anhang joined NorthStar Capital Partners LLC in August 1997. From 1996 to
1997, Mr. Anhang was employed by The Athena Group as part of its Russia and
former Soviet Union development team. Prior to that, Mr. Anhang was a student at
the Wharton School of the University of Pennsylvania.
Gregory Peck joined NorthStar Capital Partners LLC in July 1997. From 1996 to
1997, Mr. Peck was employed by Morgan Stanley as part of Morgan Stanley Realty
Real Estate Funds (MSREF) and Morgan Stanley's Real Estate Investment Banking
Group. From 1994 to 1996, Mr. Peck worked for Lazard Freres & Co. LLC in the
Real Estate Investment Banking Group.
Many of the above officers and directors of the Administrative, Investment and
Associate General Partners are also officers and/or directors of the general
partners of other public partnerships affiliated with Presidio or of various
subsidiaries of Presidio.
<PAGE>
Item 11. Executive Compensation
Registrant is not required to and did not pay remuneration to the executive
officers and directors of the Administrative General Partner, the Investment
General Partner or the former Associate General Partner. Certain officers and
directors of the Investment General Partner and the Administrative General
Partner receive compensation from Presidio or its affiliates (but not from
Registrant) for services performed for various affiliated entities, which may
include services performed for Registrant; however, the Administrative and
Investment General Partners believe that any compensation attributable to
services performed for Registrant is not material. See Item 13, "Certain
Relationships and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1999, only the following entity was known by Registrant to be the
beneficial owner of more than 5% of Registrant's Units:
<TABLE>
<CAPTION>
Amount of Percentage of
Name and Address of Beneficial Beneficial
Title of Class Beneficial Owner Ownership Ownership
-------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Limited Partnership Presidio Partnership II Corp. 552,505.862 9.7%
Units 411 West Putnam Avenue
Greenwich, CT 06830
Limited Partnership Presidio RPS Acquisition Corp. 860,750.613 15.1%
Units 411 West Putnam Avenue
Greenwich, CT 06830
</TABLE>
- --------------
As of March 1, 1999, neither the General Partners nor their officers and
directors were known by Registrant to beneficially own Units or shares of
Presidio, the parent of the General Partners.
To the knowledge of the Registrant, the following sets forth certain information
regarding ownership of the Class A shares of Presidio as of March 11, 1998
(except as otherwise noted) by: (i) each person or entity who owns of record or
beneficially five percent or more of the Class A shares, (ii) each director and
executive officer of Presidio, and (iii) all directors and executive officers of
Presidio as a group. To the knowledge of Presidio, each of such share-holders
has sole voting and investment power as to the shares shown unless otherwise
noted.
All outstanding shares of Presidio are owned by Presidio Capital Investment
Company, LLC ("PCIC"), a Delaware limited liability company. The interests in
PCIC (and beneficial ownership in Presidio) are held as follows:
<PAGE>
Percentage Ownership in PCIC
and Percentage Beneficial
Ownership
Name of Beneficial Owner Presidio
------------------------ --------
Five Percent Holders:
---------------------
NorthStar Presidio Capital Holding Corp.(1) 71.93%
AG Presidio Investors, LLC (2) 14.12%
DK Presidio Investors, LLC (3) 8.45%
Stonehill Partners, L.P. (4) 5.50%
The holdings of the directors and executive officers of Presidio are as
follows:
Directors and Officers:
-----------------------
Adam Anhang (5) 0%
Marc Gordon (5) 0%
David Hamamoto (5) 71.93%
Charles Humber (5) 0%
David King (5) 0%
Gregory Peck (5) 0%
Dallas Lucas (5) 0%
Allan Rothschild (5) 0%
J. Peter Paganelli (5) 0%
Lawrence Schachter (5) 0%
W. Edward Scheetz (5) 71.93%
Directors and Officers as a group: 71.93%
----------------------------------
(1) NorthStar Presidio Captial Holding Corp. ("NS Presidio) is a Delaware
corporation whose address is c/o NorthStar Capital Investment Corp.,
527 Madison Avenue, 16th Floor, New York, New York, 10022. NS Presidio
has three shareholders: (1) NorthStar Partnership, L.P., a Delaware
limited partnership whose address is c/o Northstar Capital Investment
Corp., 527 Madison Avenue, 16th Floor, New York, New York 10022, holds
99% of the common stock (non-voting); (ii) David T. Hamamoto holds 0.5%
of the common stock (voting); and (iii) W. Edward Scheetz holds 0.5% if
the common stock (voting).
<PAGE>
(2) Each of Angelo, Gordon & Co., L.P., as sole manager of AG Presidio
Investors, LLC and John M. Angelo and Michael L. Gordon, as general
partners of the general partner of Angelo, Gordon & Co., L.P., may be
deemed to beneficially own for purposes of Rule 13d-3 of the Exchange
Act the securities beneficially owned by AG Presidio Investors, LLC.
Each of John M. Angelo and Michael L. Gordon disclaims such beneficial
ownership. The business address for such persons is c/o Angelo, Gordon
& Co., L.P., 245 Park Avenue, 26th Floor, New York, New York 10167.
(3) M.H. Davidson & Company, as sole manager of DK Presidio Investors, LLC,
may be deemed to beneficially own for purposes of Rule 13d-3 of the
Exchange Act the securities beneficially owned by DK Presidio
Investors, LLC. The business address for such persons is c/o M.H.
Davidson & Company, 885 Third Avenue, New York, New York 10022.
(4) Includes shares of PCIC beneficially owned by Stonehill Offshore
Partners Limited and Stonehill Institutional Partners, L.P. John A.
Motulsky is a managing general partner of Stonehill Partners, L.P., a
managing member of the investment advisor to Stonehill Offshore
Partners Limited and a general partner of Stonehill Institutional
Partners L.P. John A. Motulsky disclaims beneficial ownership of the
shares held by these entities. The business address for such persons is
c/o Stonehill Investment Corporation, 110 East 59th Street, New York,
New York 10022.
(5) The business address for such person is 527 Madison Avenue, 16th Floor,
New York, New York 10022.
<PAGE>
Item 13. Certain Relationships and Related Transactions
During Registrant's fiscal year ended December 31, 1998, the General Partners
earned or received compensation or payments for services from Registrant as
follows:
<TABLE>
<CAPTION>
Name of Recipient Capacity in Which Served Compensation
----------------- ------------------------ ------------
<S> <C> <C>
Resources Capital Corp. Administrative General Partner $954,669 (1)
Resources Pension Advisory Corp. Investment General Partner $ 50,720 (2)
Presidio AGP Corp. Associate General Partner 3,576 (3)
</TABLE>
- -------------------
(1) This amount includes the following:
(a) A Partnership Management Fee of $604,275 for managing the
affairs of Registrant.
(b) $350,394 as the Administrative General Partner's share of
the General Partners' 1% distribution of Adjusted Cash From
Operations.
(2) This amount includes the following:
(a) A Mortgage Servicing Fee of $47,144 for servicing the
mortgage loan portfolio of Registrant.
(b) $3,576 as the Investment General Partner's share of the
General Partners' 1% distribution of Adjusted Cash From
Operations.
(3) This amount represents the Associate General Partner's share of the
General Partner's 1% distribution of Adjusted Cash from Operations.
(4) Pursuant to Registrant's Partnership Agreement, for the year ended
December 31, 1998, the General Partners were allocated taxable loss as
follows: $2,717 to the administrative General Partner and $28 to each
of the Investment and Associate General Partners.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements: See Item 8.
(2) Financial Statement Schedules: See Item 8.
(3) Exhibits:
3 Amended and Restated Certificate of Limited Partnership and Partnership
Agreement, incorporated by reference to Exhibit A to Registrant's
Prospectus dated May 15, 1986, filed pursuant to Rule 424(b) under the
Securities Act of 1933 (File No. 33-3572).
10(a) Services Agreement, incorporated by reference to Exhibit 10B to
Registrant's Registration Statement (No. 33-3572).
10(b) Agreement with Associate General Partner incorporated by reference to
Exhibit 10C to Registrant's Registration Statement (No. 33-3572).
10(c) Supervisory Management Agreement dated as of December 9, 1993 between
Registrant and Resources Supervisory Management Corporation
incorporated by reference to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.
10(d) Mortgage Note between M G Medford Limited Partnership and Tokyo Leasing
(U.S.A.) Inc. dated as of April 22, 1993, purchased by Registrant on
July 12, 1995.
10(e) Negotiable Promissory Note between DVL, Inc. and Registrant, dated
February 28, 1997.
10(f) Loan agreement between Oliveye Hotel Limited Partnership and
Registrant, dated October 31, 1997.
(b) Reports on Form 8-K filed during the last quarter of the fiscal year:
None.
* Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 29th day of March 1999.
RESOURCES PENSION SHARES 5, L.P.
By: RESOURCES CAPITAL CORP.
Administrative General Partner
DATE
By: /s/ Allan B. Rothschild March 29, 1999
-----------------------
Allan B. Rothschild
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in their
capacities as directors and/or officers (with respect to the Administrative and
Investment General Partners) on the date indicated below.
Signature Title Date
/s/ Lawrence R. Schachter Senior Vice President, March 29, 1999
- ------------------------- (Principal Financial Officer
Lawrence R. Schachter and Principal Accounting Officer)
/s/ Allan B. Rothschild Director and President March 29, 1999
- -----------------------
Allan B. Rothschild
/s/ David King Director, Executive Vice
- -------------- President and Assistant Treasurer March 29, 1999
David King
/s/ Dallas Lucas Director March 29, 1999
- ----------------
Dallas Lucas
<PAGE>
EXHIBIT INDEX
Page
Exhibits Number
- -------- ------
3 Amended and Restated Certificate of Limited Partnership and
Partnership Agreement, incorporated by reference to Exhibit A
to Registrant's Prospectus dated May 15, 1986, filed pursuant
to Rule 424(b) under the Securities Act of 1933 (File No.
33-3572).
10(a) Services Agreement, incorporated by reference to Exhibit 10B
to Registrant's Registration Statement (No. 33-3572).
10(b) Agreement with Associate General Partner incorporated by
reference to Exhibit 10C to Registrant's Registration
Statement (No. 33-3572).
10(c) Supervisory Management Agreement dated as of December 9, 1993
between Registrant and Resources Supervisory Management
Corporation incorporated by reference to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
10(d) Mortgage Note between M G Medford Limited Partnership and
Tokyo Leasing (U.S.A.) Inc. dated as of April 22, 1993,
purchased by Registrant on July 12, 1995.
10(e) Negotiable Promissory Note between DVL, Inc. and Registrant,
dated February 28, 1997.
10(f) Loan Agreement between Oliveye Hotel Limited Partnership and
Registrant, dated October 31, 1997.
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information from the Financial Statements of the
December 31, 1998 Form 10-K of Resources Pension Shares 5, L.P. and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,427,496
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,561,152
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,786,400
<CURRENT-LIABILITIES> 308,851
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,035,945
<TOTAL-LIABILITY-AND-EQUITY> 23,786,400
<SALES> 0
<TOTAL-REVENUES> 12,102,703
<CGS> 0
<TOTAL-COSTS> 1,535,440
<OTHER-EXPENSES> 227,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,339,470
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,339,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,349,470
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
