UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number : 0-17148
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 04-2921780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 439-8118
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 the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X. No .
<PAGE>
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, 1997 and September 30, 1996 (Unaudited)
(In thousands)
ASSETS
March 31 September 30
-------- ------------
Investments in joint ventures $ 318 $ -
Cash and cash equivalents 649 433
Accounts receivable - 1
Other assets - 9
------- -----
$ 967 $ 443
======= =====
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued expenses $ 36 $ 43
Equity in losses of joint ventures in
excess of investments and advances - 810
Partners' capital (deficit) 931 (410)
------- ------
$ 967 $ 443
======= ======
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the six months ended March 31, 1997 and 1996 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at September 30, 1995 $ (595) $(19,596)
Net loss (20) (1,898)
------ --------
Balance at March 31, 1996 $ (615) $(21,494)
====== ========
Balance at September 30, 1996 $ (387) $ (23)
Net income 14 1,327
------ -------
Balance at March 31, 1997 $ (373) $ 1,304
====== =======
See accompanying notes.
<PAGE>
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 1997 and 1996
(Unaudited)
(In thousands, except per Unit data)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Hotel revenues $ - $2,268 $ - $4,217
Interest and other income 9 17 17 37
------ ------ ------ ------
9 2,285 17 4,254
Expenses:
Hotel operating expenses - 1,474 - 2,865
Interest expense - 1,012 - 2,303
Depreciation and amortization - 209 - 449
General and administrative 74 68 142 159
------ ------ ------ ------
74 2,763 142 5,776
------ ------ ------ ------
Operating loss (65) (478) (125) (1,522)
Partnership's share of
ventures' losses (201) (259) (355) (396)
Partnership's share of gain on
sale of operating investment
property 477 - 477 -
------ ------ ------ ------
Income (loss) before
extraordinary gain 211 (737) (3) (1,918)
Partnership's share of
extraordinary gain from
forgiveness of indebtedness 1,344 - 1,344 -
------ ------ ------ ------
Net income (loss) $ 1,555 $ (737) $1,341 $(1,918)
======= ====== ====== =======
Per 1,000 Limited Partnership Units:
Income (loss) before
extraordinary gain $ 5.91 $(20.50) $ (0.05) $(53.38)
Extraordinary gain from
forgiveness of
indebtedness 37.41 - 37.41 -
-------- ------- -------- -------
Net income (loss) per 1,00
Limited Partnership Units $ 43.32 $(20.50) $ 37.36 $(53.38)
======== ======= ======== =======
The above per 1,000 Limited Partnership Units information is based upon the
35,548,976 Limited Partnership Units outstanding during each period.
See accompanying notes.
<PAGE>
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
For the six months ended March 31, 1997 and 1996 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $1,341 $(1,918)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Interest expense on loan payable
to Marriott Corporation - 323
Partnership's share of ventures' losses 355 396
Depreciation and amortization - 449
Gain on sale of operating investment property (477) -
Extraordinary gain from forgiveness of
indebtedness (1,344) -
Changes in assets and liabilities:
Accounts receivable 1 (178)
Due to/from Marriott Corporation - 895
Inventories - 8
Other assets 9 (1)
Accounts payable and accrued expenses (7) 30
Accrued interest payable - 41
------ ------
Total adjustments (1,463) 1,963
------ ------
Net cash (used in) provided by
operating activities (122) 45
------ ------
Cash flows from investing activities:
Distributions from joint ventures 358 -
Additional investments in joint ventures (20) (77)
Additions to operating investment property - (76)
Net withdrawals from capital expenditure reserve - (116)
------- ------
Net cash provided by (used in)
investing activities 338 (269)
------- ------
Net increase (decrease) in cash and cash equivalents 216 (224)
Cash and cash equivalents, beginning of period 433 1,362
------- ------
Cash and cash equivalents, end of period $ 649 $1,138
======= ======
Cash paid during the period for interest $ - $1,939
======= ======
See accompanying notes.
<PAGE>
PAINEWEBBER INCOME PROPERTIES
EIGHT LIMITED PARTNERSHIP
Notes to Financial Statements
(Unaudited)
1. General
The accompanying financial statements, footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in
the Partnership's Annual Report for the year ended September 30, 1996. In the
opinion of management, the accompanying financial statements, which have not
been audited, reflect all adjustments necessary to present fairly the results
for the interim period. All of the accounting adjustments reflected in the
accompanying interim financial statements are of a normal recurring nature.
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles which requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of March 31, 1997 and September 30, 1996
and revenues and expenses for the three- and six-month periods ended March
31, 1997 and 1996. Actual results could differ from the estimates and
assumptions used.
2. Foreclosure of Operating Investment Property
The Partnership acquired a 100% interest in the Marriott Suites Hotel
located in Newport Beach, California from the Marriott Corporation
("Marriott") on August 10, 1988. The Hotel consists of 254 two-room suites
encompassing 201,606 square feet located on approximately 4.8 acres of land.
The Hotel was managed for the Partnership by Marriott and its affiliates (the
"Manager"), as described below. The Partnership purchased the operating
investment property for approximately $39,946,000, including an acquisition
fee paid by Marriott to the Adviser of $580,000 and a $325,000 guaranty fee
paid to Marriott. The Hotel was acquired subject to a first mortgage loan
with an initial principal balance of $29,400,000. In addition, the
Partnership provided an initial working capital reserve of approximately
$554,000 to the Manager for Hotel operations.
From the time of its acquisition, the Hotel experienced substantial
recurring losses after debt service. Through September 30, 1991, the Hotel's
cash flow deficits were funded by Marriott under the terms of a guaranty
agreement. After Marriott had fulfilled its obligation to fund deficits, the
Partnership and the lender reached an agreement, which was finalized in
fiscal 1993, to modify the terms of the first mortgage loan. During fiscal
1995, the Partnership reached the limit on the debt service deferrals imposed
by the 1993 loan modification agreement. On February 19, 1996, the first
mortgage loan secured by the Newport Beach Marriott Suites Hotel was
purchased by a new lender, and the Partnership subsequently received formal
notice of default from this new lender. Subsequently, the Partnership
received a notice of a foreclosure sale scheduled for August 7, 1996, at
which time title to the Newport Beach Marriott Suites Hotel was transferred
to the mortgage lender. The transfer of the Hotel's title to the lender was
accounted for as a troubled debt restructuring in accordance with Statement
of Financial Accounting Standards No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings." As a result, the Partnership
recorded an extraordinary gain from settlement of debt obligation of
$23,459,000 and a loss on transfer of assets at foreclosure of $137,000 in
the fourth quarter of fiscal 1996. The extraordinary gain resulted from the
fact that the balance of the mortgage loan and related accrued interest
exceeded the estimated fair market value of the Hotel investment and other
assets transferred to the lender at the time of the foreclosure. The loss on
transfer of assets resulted from the fact that the net carrying value of the
Hotel exceeded its estimated fair value at the time of the foreclosure.
<PAGE>
The following is a summary of Hotel revenues and operating expenses for
the three and six months ended March 31, 1996 (in thousands):
Three Months Ended Six Months Ended
March 31, 1996 March 31, 1996
------------------ ----------------
Revenues:
Guest rooms $ 1,749 $3,232
Food and beverage 406 772
Other revenue 113 213
------- ------
$ 2,268 $4,217
======= ======
Operating expenses:
Guest rooms $ 440 $ 860
Food and beverage 381 691
Other operating expenses 452 990
Management fees - Manager 45 84
Selling, general and
administrative 69 69
Real estate taxes 87 171
------- ------
$1,474 $2,865
====== ======
The operating expenses of the Hotel noted above included significant
transactions with the Manager. All Hotel employees were employees of the
Manager and the related payroll costs were allocated to the Hotel operations
by the Manager. A majority of the supplies and food purchased during the
prior period were purchased from an affiliate of the Manager. In addition,
the Manager also allocates employee benefit costs, advertising costs and
management training costs to the Hotel.
3. Investments in Joint Venture Partnerships
As of September 30, 1996, the Partnership had investments in four joint
ventures which owned five operating properties as more fully described in the
Partnership's Annual Report. On March 17, 1997, Spinnaker Bay Associates, a
joint venture comprised of two operating properties, Spinnaker Landing
Apartments and Bay Club Apartments, located in Des Moines, Washington, sold
both of its operating investment properties to an unrelated third party for
$5.5 million. The gross sales price for the two apartment properties was
below the outstanding balance of Spinnaker Bay Associate's first mortgage
debt. However, under the terms of a Property Disposition Agreement between
the mortgage lender and the joint venture, the Partnership was eligible to
receive a payment of $100,000 from the net sale proceeds. The venture
recognized a gain on the sale of $505,000 for the amount by which the sale
price, net of certain closing costs, exceeded the net carrying values of the
operating investment properties. The venture also recognized an extraordinary
gain from forgiveness of indebtedness of $1,422,000 which represented the
difference between the outstanding obligations and the amount accepted by the
lender in full satisfaction of the first mortgage loans secured by the
operating investment properties. The joint ventures are accounted for under
the equity method in the Partnership's financial statements because the
Partnership does not have a voting control interest in the ventures. Under
the equity method, the investment in a joint venture is carried at cost
adjusted for the Partnership's share of the venture's earnings, losses and
distributions.
Summarized operations of the joint ventures for the three and six months
ended March 31, 1997 and 1996 are as follows:
<PAGE>
Condensed Combined Summary of Operations
For the three and six months ended March 31, 1997 and 1996
(in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
Rental revenues and expense
reimbursements $ 870 $ 887 $1,857 $1,854
Other income 71 20 95 42
------ ------ ------ ------
941 907 1,952 1,896
Property operating expenses 536 552 1,070 1,102
Interest expense 336 377 717 767
Depreciation and amortization 219 229 435 456
------ ------ ------ ------
1,091 1,158 2,222 2,325
------ ------ ------ ------
Operating loss (150) (251) (270) (429)
Gain on sale of operating
investment property 505 - 505 -
Extraordinary gain from
forgiveness of
indebtedness 1,422 - 1,422 -
------ ------ ------ ------
Net income (loss) $1,777 $ (251) $ 1,657 $ (429)
====== ====== ======= ======
Net income (loss):
Partnership's share of
combined income (loss) $1,661 $ (199) $ 1,539 $ (333)
Co-venturers' share of
combined income (loss) 116 (52) 118 (96)
------ ------ ------- ------
$1,777 $ (251) $ 1,657 $ (429)
====== ====== ======= ======
Reconciliation of Partnership's Share of Operations
Partnership's share of
combined income (loss),
as shown above $1,661 $ (199) $ 1,539 $ (333)
Amortization of excess
basis (41) (60) (73) (63)
------ ------ ------- ------
Partnership's share of
ventures' net income
(loss) $1,620 $ (259) $ 1,466 $ (396)
====== ====== ======= ======
The Partnership's share of ventures' net income (loss) is presented as
follows on the accompanying statements of operations (in thousands):
Partnership's share of
ventures' losses $ (201) $ (259) $ (355) $ (396)
Partnership's share of
gain on sale of
operating investment
property 477 - 477 -
Partnership's share of
extraordinary gain
from forgiveness of
indebtedness 1,344 - 1,344 -
------ ------ ------- -------
$1,620 $ (259) $ 1,466 $ (396)
====== ====== ======= =======
4. Related Party Transactions
Included in general and administrative expenses for the six months ended
March 31, 1997 and 1996 is $45,000 and $47,000, respectively, representing
reimbursements to an affiliate of the Managing General Partner for providing
certain financial, accounting and investor communication services to the
Partnership.
Also included in general and administrative expenses for each of the six
months ended March 31, 1997 and 1996 is $1,000 of fees paid to an affiliate,
Mitchell Hutchins Institutional Investors, Inc., for managing the
Partnership's cash assets.
<PAGE>
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
As previously reported, the loans secured by the Spinnaker Landing and Bay
Club Apartments were scheduled to mature in December 1996. Due to semi-annual
real estate tax payments made during the third quarter of fiscal 1996, as
well as the payment of ongoing operating expenses, the monthly cash flow
available from the properties was insufficient to pay the minimum debt
service required in May 1996. A notice of default was issued by the mortgage
lender in the fourth quarter of fiscal 1996. The estimated combined fair
value of the properties, while higher than their net carrying values, was
significantly less than this debt balance at the time of the loan default. In
light of these circumstances, effective in September 1996 the venture
partners entered into a Property Disposition Agreement with the lender. Under
the terms of the agreement, the lender agreed to delay foreclosure of the
properties in order to provide the venture with an opportunity to complete a
sale. In December 1996, the Spinnaker Bay joint venture executed a purchase
and sale agreement with an unrelated third party to sell the properties for
an amount less than the total debt obligation. Nonetheless, the Partnership
was eligible to receive a nominal payment out of the net sale proceeds under
the terms of the Property Disposition Agreement if this transaction was
successfully consummated. On March 17, 1997, Spinnaker Bay Associates sold
its operating investment properties, located in Des Moines, Washington, to an
unrelated third party for $5.5 million. The sale generated net proceeds of
$100,000 to the Partnership in accordance with the Property Disposition
Agreement. The joint venture realized a gain on the sale of $505,000 for the
amount by which the sale price, net of certain closing costs, exceeded the
net carrying values of the operating investment properties. After the
application of the net proceeds to the mortgage balance, the joint venture
realized an extraordinary gain from forgiveness of indebtedness of
$1,422,000. The Partnership's share of the gain on the sale and the gain from
the debt forgiveness was $477,000 and $1,344,000, respectively.
Together with the prior foreclosure losses of the Newport Beach and Atlanta
Marriott Suites Hotels, which represented a combined 63% of the Partnership's
original investment portfolio, the sale of the Spinnaker Landing and Bay Club
Apartments for an amount which yielded only a nominal return of the
Partnership's investment in those properties means that the Partnership will
be unable to return any significant portion of the original capital
contributed by the Limited Partners. The amount of capital which will be
returned will depend upon the proceeds recovered from the final liquidation
of the remaining investments. The amount of such proceeds will ultimately
depend upon the value of the underlying investment properties at the time of
their final disposition, which, for the most part, cannot presently be
determined. Nonetheless, at the present time the Partnership's interest in
The Meadows in the Park Apartments is the only investment with any
significant value to the Partnership based on the estimated current market
values of the underlying properties. The status of the remaining investments
is discussed in more detail below.
During the first quarter of fiscal 1997, the Partnership's co-venture
partner in the Maplewood joint venture made a request for the Partnership to
fund 70% of the $95,000 principal payment on the venture's mortgage loan
which was due on December 2, 1996. Based on its current analysis, management
concluded that it would not be in the Partnership's best interests to
continue to fund its share of the Maplewood venture's cash flow deficits.
Accordingly, management informed the co-venture partner that the Partnership
would not be making the requested capital contribution. In January 1997, the
co-venture partner contributed 100% of the funds required to make the
aforementioned principal payment. The mortgage debt secured by the Maplewood
Park Apartments was provided with tax-exempt revenue bonds issued by a local
housing authority. The bonds are secured by a standby letter of credit issued
to the joint venture by a bank. The letter of credit, which is scheduled to
expire in October 1998, is secured by a first mortgage on the venture's
operating property. The revenue bonds bear interest at a floating rate that
is determined daily by a remarketing agent based on comparable market rates
for similar tax-exempt obligations. In addition, the venture is obligated to
pay a letter of credit fee, a remarketing fee and a housing authority fee
under the terms of the financing agreement. The operating property produces
excess net cash flow after the debt service and related fees due under the
terms of the bond financing arrangement because of the low tax-exempt
interest rate paid on the bonds. However, as part of the joint venture
agreement the Partnership's co-venture partner receives a guaranteed cash
distribution on a monthly basis to the extent that the interest cost of the
venture's debt is less than 8.25% per annum. Conversely, the co-venture
partner is obligated to contribute funds to the venture to the extent that
the interest cost exceeds 8.25%. Over the past three years, the interest rate
differential distributions to the co-venturer under the foregoing arrangement
have averaged $189,000 per year. As of March 31, 1997, the Partnership and
the co-venturer were not in agreement regarding the cumulative cash flow
distributed to the co-venturer pursuant to this interest rate differential
calculation. The Partnership believes that the co-venturer has received an
additional $79,000 over the amount it is entitled to under the terms of the
joint venture agreement through December 31, 1996. The ultimate resolution of
this dispute cannot be determined at the present time.
Since all of the economic benefits of the Maplewood joint venture currently
accrue to the co-venture partner in the form of the interest rate
differential payments described above, management concluded that continued
funding of the venture's annual cash flow deficits would not be prudent.
Subsequently, management made a proposal to the co-venture partner to sell
the Partnership's interest in the joint venture, but no agreement has been
reached to date. The current estimated market value of the Maplewood
property, while higher than the property's carrying value, may be at or only
slightly above the amount of the outstanding principal balance owed on the
first mortgage loan as of March 31, 1997. As a result, it is unlikely that
the letter of credit underlying the mortgage loan will be renewed upon its
expiration in October 1998. The net carrying value of the Partnership's
investment in the Maplewood joint venture was $373,000 as of March 31, 1997.
Management believes that this net carrying value may be recoverable if a sale
agreement can be reached with the co-venture partner. If, however, a sale
agreement or letter of credit extension cannot be achieved and a foreclosure
of the operating property results, the Partnership would recognize a loss
equal to its remaining investment balance. The ultimate outcome of this
situation cannot be determined at the present time.
The Norman Crossing Shopping Center, which comprises 52,086 square feet of
leasable space located in Charlotte, North Carolina, was 100% leased as of
March 31, 1997. In October 1993, the sole anchor tenant of the Norman
Crossing Shopping Center vacated the center to relocate its operations. The
tenant, which had occupied 26,752 square feet of the property's net leasable
area, is a national credit grocery store chain which is still obligated under
the terms of its lease which runs through the year 2007. To date, all rents
due from this tenant have been collected. During the last quarter of fiscal
1995, the former anchor tenant reached an agreement to sub-lease its space to
a new tenant. This new sublease tenant which opened for business in February
1996, is a health club operator which occupies 20,552 square feet of the
former anchor's space and plans to sublease the remaining 6,200 square feet.
Despite being 100% leased, the Norman Crossing property does not currently
generate positive cash flow after debt service and leasing expenses. The
Partnership has funded the operating deficits of the Norman Crossing joint
venture to date. However, given the Partnership's limited capital resources,
the Partnership cannot fund such deficits indefinitely. Consequently, the
Partnership may look to sell the operating property or its interest in the
joint venture in the near future. At the present time, market values for
retail shopping centers in certain markets are being adversely impacted by
the effects of overbuilding and consolidations among retailers which have
resulted in an oversupply of space and by the generally flat rate of growth
in retail sales. Based on the current estimated fair value of the Norman
Crossing Shopping Center, a sale under the existing market conditions would
not result in any significant proceeds above the mortgage loan balance. In
light of the above circumstances and a resulting reassessment of the
Partnership's likely remaining holding period for the Norman Crossing
investment, the Partnership recorded an allowance for possible investment
loss of $588,000 in fiscal 1996 to write down the net carrying value of the
equity interest to management's estimate of its current net realizable value.
As stated above, the Meadows in the Park Apartments is the only one of the
Partnership's investments which would appear to have any significant value
above the related mortgage loan obligations based on current estimated market
values. During the quarter ended March 31, 1997, the Partnership and its
co-venture partner received interest from some prospective purchasers
regarding a possible sale of The Meadows in the Park Apartments. Management
is currently reviewing the potential for selling the property. In addition,
as discussed further above, the Partnership is focusing on potential
disposition strategies for its Maplewood and Norman Crossing investments as
well. Although no assurances can be given, it is currently contemplated that
the dispositions of the Partnership's remaining investments could be
completed within the next two years.
At March 31, 1997, the Partnership had available cash and cash equivalents
of $649,000. Such cash and cash equivalents will be utilized as needed for
Partnership requirements such as the payment of operating expenses and the
funding of joint venture capital improvements or operating deficits, to the
extent economically justified. The source of future liquidity and
distributions to the partners is expected to be through cash generated from
operations of the Partnership's income-producing investment properties and
proceeds received from the sale or refinancing of such properties. If the
Partnership is able to dispose of its remaining investments and complete a
liquidation within the next two years, as discussed further above, the
Partnership should have sufficient liquidity to meet its obligations.
Results of Operations
Three Months Ended March 31, 1997
- ---------------------------------
The Partnership recognized net income of $1,555,000 for the three months
ended March 31,1997, as compared to a net loss of $737,000 for the same
period in the prior year. The primary reason for this favorable change in net
operating results is the sale of the operating investment properties owned by
Spinnaker Bay Associates on March 17, 1997. As discussed further above, the
sale transaction resulted in a gain on sale and an extraordinary gain from
forgiveness of indebtedness, the Partnership's shares of which amounted to
$477,000 and $1,344,000, respectively. The Partnership also had decreases in
operating loss of $413,000 and in its share of ventures' losses of $58,000.
The decrease in operating loss can be attributed to the foreclosure of the
Newport Beach Marriott Suites Hotel on August 7, 1996. The Hotel had been
generating sizable operating losses prior to its foreclosure. The
Partnership's share of ventures' losses decreased mainly as a result of an
increase in other income from the Maplewood joint venture, a decline in
interest expense at the Meadows joint venture and small decreases in repairs
and maintenance expenses at the Maplewood Apartments and the Norman Crossing
Shopping Center. In addition, the prior period results include an additional
one-half month of operating losses of the Spinnaker Bay joint venture as a
result of the March 17, 1997 sale transaction.
Six Months Ended March 31, 1997
- -------------------------------
The Partnership recognized net income of $1,341,000 for the six months
ended March 31,1997, as compared to a net loss of $1,918,000 for the same
period in the prior year. The primary reason for this favorable change in net
operating results is the gains totalling $1,821,000 which were realized from
the sale of the Spinnaker Landing and Bay Club apartment properties, as
discussed further above. The Partnership also had decreases in operating loss
of $1,397,000 and in its share of ventures' losses of $41,000. The decrease
in operating loss can be attributed to the foreclosure of the Newport Beach
Marriott Suites Hotel on August 7, 1996. The Hotel had been generating
sizable operating losses prior to its foreclosure. The Partnership's share of
ventures' losses decreased mainly as a result of an increase in rental
revenues at The Meadows joint venture and due to increases in other income
and decreases in repairs and maintenance expenses at the Maplewood Apartments
and the Norman Crossing Shopping Center. In addition, the prior period
results include an additional one-half month of operating losses of the
Spinnaker Bay joint venture as a result of the March 17, 1997 sale
transaction.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings
As previously disclosed, the Partnership's General Partners were named as
defendants in a class action lawsuit against PaineWebber Incorporated
("PaineWebber") and a number of its affiliates relating to PaineWebber's sale of
70 direct investment offerings, including the offering of interests in the
various limited partnership investments and REIT stocks, including those offered
by the Partnership. In January 1996, PaineWebber signed a memorandum of
understanding with the plaintiffs in the class action outlining the terms under
which the parties have agreed to settle the case. Pursuant to that memorandum of
understanding, PaineWebber irrevocably deposited $125 million into an escrow
fund under the supervision of the United States District Court for the Southern
District of New York to be used to resolve the litigation in accordance with a
definitive settlement agreement and a plan of allocation. On July 17, 1996,
PaineWebber and the class plaintiffs submitted a definitive settlement agreement
which provides for the complete resolution of the class action litigation,
including releases in favor of the Partnership and PWPI, and the allocation of
the $125 million settlement fund among investors in the various partnerships and
REITs at issue in the case. As part of the settlement, PaineWebber also agreed
to provide class members with certain financial guarantees relating to some of
the partnerships and REITs. The details of the settlement are described in a
notice mailed directly to class members at the direction of the court. A final
hearing on the fairness of the proposed settlement was held in December 1996,
and in March 1997 the court announced its final approval of the settlement. As
part of the settlement agreement, PaineWebber has agreed not to seek
indemnification from the related partnerships and real estate investment trusts
at issue in the litigation (including the Partnership) for any amounts that it
is required to pay under the settlement. In addition, in December 1996
PaineWebber agreed to settle the Abbate and Bandrowski actions discussed further
in the Annual Report. Final releases and dismissals with regard to these actions
were received subsequent to the quarter ended March 31, 1997. Based on the
settlement agreements discussed above covering all of the outstanding
unitholder litigation, management does not expect that the resolution of these
matters will have a material impact on the Partnership's financial statements,
taken as a whole.
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
Current Report on Form 8-K was filed by the registrant on April 3, 1997
reporting the March 17, 1997 sale of Spinnaker Landing Apartments and Bay Club
Apartments.
<PAGE>
PAINEWEBBER INCOME PROPERTIES EIGHT LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAINEWEBBER INCOME PROPERTIES
EIGHT LIMITED PARTNERSHIP
By: Eighth Income Properties, Inc.
Managing General Partner
By: /s/ Walter V. Arnold
---------------------
Walter V. Arnold
Senior Vice President and Chief
Financial Officer
Dated: May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's audited financial statements for the six months ended March 31,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 649
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 649
<PP&E> 318
<DEPRECIATION> 0
<TOTAL-ASSETS> 967
<CURRENT-LIABILITIES> 36
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 931
<TOTAL-LIABILITY-AND-EQUITY> 967
<SALES> 0
<TOTAL-REVENUES> 494
<CGS> 0
<TOTAL-COSTS> 142
<OTHER-EXPENSES> 355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,344
<CHANGES> 0
<NET-INCOME> 1,341
<EPS-PRIMARY> 37.36
<EPS-DILUTED> 37.36
</TABLE>
