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 JUNE 30, 1998
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: 0-17881
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 04-2985890
- --------------------------------------------------------------------------------
(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 EQUITY PARTNERS THREE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and March 31, 1998 (Unaudited)
(In thousands)
ASSETS
June 30 March 31
------- --------
Operating investment properties, at cost:
Land $ 3,769 $ 3,769
Building and improvements 12,926 12,926
---------- ---------
16,695 16,695
Less accumulated depreciation (4,181) (4,061)
---------- ---------
12,514 12,634
Investments in unconsolidated ventures, at equity 6,347 6,513
Cash and cash equivalents 6,031 5,746
Accrued interest and other receivables 61 97
Prepaid expenses 53 7
Deferred expenses, net 104 104
---------- ---------
$ 25,110 $ 25,101
========== =========
LIABILITIES AND PARTNERS' CAPITAL
Notes payable and deferred interest, including
amounts in default $ 13,780 $ 13,432
Accounts payable and accrued expenses 67 140
Tenant security deposits 19 10
Accrued real estate taxes 80 13
Advances from consolidated ventures 175 103
Partners' capital 10,989 11,403
---------- ---------
$ 25,110 $ 25,101
========== =========
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, 1998 and 1997 (Unaudited)
(In thousands, except per Unit data)
1998 1997
---- ----
Revenues:
Rental income and expense
reimbursements $ 542 $ 592
Interest income 85 68
-------- ---------
627 660
Expenses:
Interest expense 449 397
Property operating expenses 110 108
Real estate taxes 40 40
General and administrative 54 47
Depreciation and amortization 120 127
-------- ---------
773 719
-------- ---------
Operating loss (146) (59)
Partnership's share of unconsolidated
ventures' income 50 9
-------- ---------
Net loss $ (96) $ (50)
======== =========
Net loss per Limited Partnership Unit $ (1.88) $ (0.98)
======== =========
Cash distributions per
Limited Partnership Unit $ 6.25 $ 6.25
======== =========
The above per Limited Partnership Unit information is based upon the
50,468 Limited Partnership Units outstanding during each period.
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended June 30, 1998 and 1997 (Unaudited)
(In thousands)
General Limited
Partners Partners
-------- --------
Balance at March 31, 1997 $ (234) $ 21,073
Cash distributions (3) (315)
Net loss (1) (49)
------ --------
Balance at June 30, 1997 $ (238) $ 20,709
====== ========
Balance at March 31, 1998 $ (248) $ 11,651
Cash distributions (3) (315)
Net loss (1) (95)
------ --------
Balance at June 30, 1998 $ (252) $ 11,241
====== ========
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended June 30, 1998 and 1997 (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
1998 1997
---- ----
Cash flows from operating activities:
Net loss $ (96) $ (50)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Partnership's share of unconsolidated
ventures' income (50) (9)
Depreciation and amortization 120 126
Amortization of deferred loan costs 2 2
Interest expense on zero coupon loan 359 308
Changes in assets and liabilities:
Accrued interest and other receivables 36 (35)
Prepaid expenses (46) 2
Deferred expenses (2) -
Accounts payable and accrued expenses (73) (32)
Accrued real estate taxes 67 4
Tenant security deposits 9 3
Advances from consolidated ventures 72 (22)
------- --------
Total adjustments 494 347
------- --------
Net cash provided by operating activities 398 297
------- --------
Cash flows from investing activities:
Distributions from unconsolidated joint
ventures 216 307
------- --------
Cash flows from financing activities:
Cash distributions to partners (318) (318)
Payments of principal on notes payable (11) (10)
------- --------
Net cash used in financing activities (329) (328)
------- --------
Net increase in cash and cash equivalents 285 276
Cash and cash equivalents, beginning of period 5,746 4,615
------- --------
Cash and cash equivalents, end of period $ 6,031 $ 4,891
======= ========
Cash paid during the period for interest $ 88 $ 87
======= ========
See accompanying notes.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
Notes to Consolidated 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 March 31, 1998. 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 results of operations
for the three months ended June 30, 1997 have been revised from what was
previously reported due to the retroactive reflection of an adjustment recorded
in the fourth quarter of fiscal 1998.
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 June 30, 1998 and March 31, 1998 and revenues and expenses
for each of the three-month periods ended June 30, 1998 and 1997. Actual results
could differ from the estimates and assumptions used.
2. Related Party Transactions
--------------------------
Included in general and administrative expenses for both of the three-month
periods ended June 30, 1998 and 1997 is $24,000, 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 the three-month
periods ended June 30, 1998 and 1997 is $1,000 and $6,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
3. Investments in Unconsolidated Joint Venture Partnerships
--------------------------------------------------------
As of June 30, 1998, the Partnership had an investments in one
unconsolidated joint venture partnership (two at June 30, 1997) which owns an
operating property as more fully described in the Partnership's Annual Report.
The unconsolidated joint venture is accounted for by using the equity method
because the Partnership does not have a voting control interest in this venture.
Under the equity method, the assets, liabilities, revenues and expenses of the
joint ventures do not appear in the Partnership's financial statements. Instead,
the investment is carried at cost adjusted for the Partnership's share of the
venture's earnings, losses and distributions. The Partnership reports its share
of unconsolidated joint venture earnings or losses three months in arrears. On
January 30, 1998, the Richmond Paragon Partnership, which owned the One Paragon
Place Office Building, sold its operating investment property to an unrelated
third party for $16,500,000. The Partnership received net proceeds of
approximately $8,055,000 in connection with the sale after the release of
certain lender escrow accounts totalling approximately $555,000, the assumption
of the outstanding mortgage loan secured by the property of approximately
$8,500,000, closing costs of approximately $400,000 and closing proration
adjustments of approximately $100,000. As a result of the sale of the One
Paragon Place Office Building, a Special Distribution of $160 per original
$1,000 investment was made on February 13, 1998 to Limited Partners of record as
of January 30, 1998.
Summarized operations of the remaining unconsolidated joint venture,
DeVargas Center Joint Venture, for the three months ended March 31, 1998 and for
DeVargas Center Joint Venture and Richmond Paragon Partnership for the three
months ended March 31, 1997, are as follows:
<PAGE>
Condensed Combined Summary of Operations
For the three months ended March 31, 1998 and 1997
(in thousands)
1998 1997
---- ----
Revenues:
Rental revenues and expense recoveries $ 632 $ 1,209
Interest and other income - 15
-------- -------
632 1,224
Expenses:
Property operating expenses 216 454
Real estate taxes 9 37
Interest expense 102 278
Depreciation and amortization 202 438
-------- -------
529 1,207
-------- -------
Net income $ 103 $ 17
======== =======
Net income:
Partnership's share of combined income $ 54 $ 14
Co-venturers' share of combined income 49 3
-------- -------
$ 103 $ 17
======== =======
Reconciliation of Partnership's Share of Operations
For the three months ended June 30, 1998 and 1997 (in thousands)
1998 1997
---- ----
Partnership's share of operations,
as shown above $ 54 $ 14
Amortization of excess basis (4) (5)
-------- -------
Partnership's share of
unconsolidated ventures' income $ 50 $ 9
======== =======
4. Operating Investment Properties
-------------------------------
The Partnership has investments in two consolidated joint venture
partnerships which own operating investment properties as more fully described
in the Partnership's Annual Report. The consolidated ventures have December 31
year-ends for both tax and financial reporting purposes. Accordingly, the
Partnership's policy is to report the financial position, results of operations
and cash flows of these ventures on a three-month lag. All material transactions
between the Partnership and these joint ventures have been eliminated upon
consolidation, except for lag-period cash transfers. Such lag period cash
transfers are accounted for as advances from consolidated ventures on the
accompanying balance sheets.
As discussed in the Partnership's Annual Report, the Partnership owns a
controlling interest in the Colony Plaza General Partnership, which was formed
to acquire and operate the Colony Plaza Shopping Center located in Augusta,
Georgia. The shopping center, which consists of approximately 217,000 square
feet of leasable retail space, was acquired by the joint venture on January 18,
1990. See Note 5 for a discussion of the current default status of the first
mortgage loan secured by the Colony Plaza property.
On January 27, 1995, the Partnership purchased 99% of its co-venture
partner's interest in Portland Pacific Associates Two for $233,000. The
remaining 1% interest of the co-venturer was assigned to Third Equity Partners,
Inc., the Managing General Partner of the Partnership, in return for a release
from any further obligations or duties called for under the terms of the joint
venture agreement. As a result, the Partnership assumed control over the affairs
of the joint venture. Portland Pacific Associates Two owns the Willow Grove
Apartments, a 119-unit complex located in Beaverton, Oregon.
The following is a combined summary of property operating expenses for the
consolidated joint ventures for the three months ended March 31, 1998 and 1997
(in thousands):
1998 1997
---- ----
Common area maintenance $ 25 $ 30
Utilities 21 21
Management fees 22 22
Administrative and other 42 35
------- -------
$ 110 $ 108
======= =======
<PAGE>
5. Notes payable
-------------
Notes payable and deferred interest at June 30, 1998 and March 31, 1998
consist of the following (in thousands):
June 30 March 31
------- --------
10.5% nonrecourse loan payable by
the Partnership to a finance
company, which is secured by the
Colony Plaza operating investment
property. All interest and
principal was due at maturity, on
December 29, 1996. Interest is
compounded semi-annually. It is not
practicable for management to
estimate the fair value of this
mortgage note payable due to its
current default status (see
discussion below). $ 10,299 $ 9,940
9.59% nonrecourse loan payable by
the consolidated Portland Pacific
Associates Two to a finance company
which is secured by the Willow
Grove operating investment
property. The note requires monthly
principal and interest payments of
$32 from April 1995 through
maturity in March 2002. The fair
value of the mortgage note
approximated its carrying value at
March 31, 1998 and December 31,
1997. 3,481 3,492
-------- --------
$ 13,780 $ 13,432
======== ========
The borrowing secured by Colony Plaza, which is a legal obligation of the
Partnership and not of the Colony Plaza joint venture, matured on December 29,
1996, at which time total principal and accrued interest of $8,290,190 was due
and payable. Management has been engaged in negotiations with the existing
lender regarding an extension and modification of the outstanding first mortgage
loan since the time of the loan maturity. However, due to the substantial
vacancy at the property, the prospects for such negotiations are uncertain at
the present time. During this negotiation period, penalty interest is accruing
on the outstanding principal balance at 15.0% per annum in accordance with the
original loan agreement. If the refinancing or extension of this loan is not
accomplished, the lender could choose to initiate foreclosure proceedings. Under
such circumstances, the Partnership may be unable to hold this investment and
recover the carrying value. The financial statements of the Partnership have
been prepared on a going concern basis which assumes the realization of assets
and the ability to refinance the existing debt. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information Relating to Forward-Looking Statements
- --------------------------------------------------
The following discussion of financial condition includes forward-looking
statements which reflect management's current views with respect to future
events and financial performance of the Partnership. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified in Item 7 of the Partnership's Annual Report on Form 10-K for the
year ended March 31, 1998 under the heading "Certain Factors Affecting Future
Operating Results", which could cause actual results to differ materially from
historical results or those anticipated. The words "believe", "expect",
"anticipate," and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which were made based on facts and conditions as they existed as of
the date of this report. The Partnership undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Liquidity and Capital Resources
- -------------------------------
As discussed further in the Annual Report, as a result of the sale of the
One Paragon Place Office Building on January 30, 1998, a Special Distribution of
$160 per original $1,000 investment was made on February 13, 1998 to Limited
Partners of record as of January 30, 1998. This Special Capital Distribution
represented the net proceeds from the sale of One Paragon Place as rounded up to
the nearest dollar per original $1,000 investment. With the sale of One Paragon
Place, the Partnership's earnings rate has decreased because of the reduction in
cash flow to the Partnership. The annualized earnings rate will change from 2.5%
to 1.75% on a Limited Partner's remaining capital account of $840 per original
$1,000 investment. The annual distribution rate will be adjusted beginning with
the payment to be made on August 14, 1998 for the quarter ended June 30, 1998.
In light of the continued strength in the national real estate market with
respect to multi-family apartment properties and the current liquidity in the
capital markets for investment in real estate in general, management believes
that this may be the opportune time to sell the Partnership's portfolio of
properties. As a result, management is currently focusing on potential
disposition strategies for the remaining investments in the Partnership's
portfolio. Although there are no assurances, it is currently contemplated that
sales of the Partnership's remaining assets could be completed within the next 2
years. The multi-family apartment property in which the Partnership has an
interest continues to experience strong occupancy levels and increasing rental
rates. As discussed further below, marketing efforts for the sale of the Willow
Grove Apartments commenced during the quarter ended June 30, 1998, and the
property is currently under contract for sale. With regard to the two remaining
retail properties, management is currently working with each property's leasing
and management team to develop and implement programs that will protect and
enhance value and maximize cash flow at each property. In addition, as discussed
further below, the Partnership must resolve the current default status of the
zero coupon loan secured by Colony Plaza prior to implementing a disposition
strategy for this asset.
As previously reported, the Partnership's zero coupon loan which is secured
by the Colony Plaza Shopping Center matured on December 28, 1996, at which time
approximately $8,290,000 became due. Although the Partnership did not make the
scheduled payment upon maturity, no formal default notices have been issued by
the lender to date. The Partnership has been engaged in negotiations with the
lender regarding a possible extension and modification agreement since the time
of the loan's maturity. Such negotiations have been complicated by the leasing
status of the Colony Plaza property. As of June 30, 1998, the Colony Plaza
Shopping Center in Augusta, Georgia was 90% leased and 52% occupied. As
previously reported, Wal-Mart closed its 82,000 square foot store at Colony
Plaza in the second quarter of fiscal 1997 to open a "Supercenter" store at a
new location in the Augusta market. Although Wal-Mart remains obligated to pay
rent and its share of operating expenses at Colony Plaza through the term of its
lease, which expires in March 2009, the loss of the Center's principal anchor
tenant has adversely affected the Partnership's ability to retain existing
tenants and to lease vacant space at the center. As a result of the lack of
success to date in obtaining a replacement anchor tenant or tenants for the
Wal-Mart space, the Partnership recorded an impairment loss in fiscal 1998 in
the amount of $1,204,000 to write down the carrying value of the Colony Plaza
operating investment property to management's estimate of its current fair
value. In addition, Food Max, the Center's 47,990 square foot grocery store
tenant, closed its store on December 1, 1996. However, another grocery store
chain, Food Lion, has entered into a sublease agreement with Food Max to open
Food Lion stores in several former Food Max locations, including Colony Plaza.
During the quarter ended June 30, 1998, Food Lion opened its store at Colony
Plaza after spending a significant amount of its own funds to refit the former
Food Max premises for Food Lion's new prototype store in this market. In
anticipation of Food Lion's grand opening, the property's management team had
the Center repainted with a new color scheme. Based on initial responses from
shoppers, these changes are expected to enhance the appeal of the Center. The
increase in occupancy from the opening of the Food Lion store was partially
offset when two tenants with a total of 4,200 square feet closed their stores
and one tenant leasing 1,600 square feet moved from the Center when its lease
expired during the first quarter. Notwithstanding these store closings, the
property's leasing team is confident that, with the opening of the Food Lion
store and the accompanying increase in the number of shoppers visiting the
Center, interest in leasing the available small shop spaces will improve.
Currently, the property's leasing team is in discussions with four prospective
tenants interested in leasing approximately 17,000 square feet. Over the next
year, four leases representing a total of 41,600 square feet will expire. The
largest of the four, Goody's, has a May 1999 lease expiration and represents
35,200 square feet of this total. Management is aware that Goody's is
considering other locations in the Augusta market. Notwithstanding this, the
property's leasing team is discussing lease renewals with all four of these
tenants.
As a result of the current leasing status of the Colony Plaza property,
the stability of the Center's future rental income is uncertain, which may
result in the Partnership being unable to negotiate an economically viable
refinancing agreement with the current lender or to refinance the current loan
balance with a new third-party financing source. Any restructuring or
refinancing transaction is likely to require a significant cash payment by the
Partnership in order to reduce the outstanding obligation to the lender in light
of the current loan-to-value ratio. During the negotiation period, penalty
interest is accruing on the outstanding principal balance at 15% per annum in
accordance with the original loan agreement. If the Partnership is unable to
successfully restructure or refinance the current mortgage loan, management
expects that the lender will likely choose to initiate foreclosure proceedings.
The eventual outcome of this situation cannot be determined at the present time.
The DeVargas Mall was 90% leased as of June 30, 1998, compared to 82% at
the end of the prior quarter. The property's leasing team had been negotiating
with two prospective tenants for the 27,023 square feet formerly occupied by a
soft goods anchor tenant that closed its store in July 1997. During the first
quarter, a lease was signed with one of these prospective tenants, Office Depot,
which will occupy 29,615 square feet. To provide for the larger Office Depot
store size requirements, one tenant formerly occupying 15,000 square feet
downsized its operations by approximately 10,000 square feet and relocated to
another area within the Mall. In addition to finalizing the Office Depot lease,
the property's leasing team successfully negotiated a lease renewal with a
tenant occupying a total of 10,018 square feet. During the remainder of calendar
year 1998, ten leases representing a total of approximately 15,000 square feet,
or approximately 6% of the Mall's total rentable area, come up for renewal. The
property's leasing team expects most of these tenants to renew their leases. As
previously reported, Montgomery Ward closed its store that abuts DeVargas Mall
as part of a Chapter 11 bankruptcy filing made last summer and had undertaken
plans to sell its store and the related land. During the fourth quarter of
fiscal 1998, a major grocery chain which is a 39,000 square foot anchor tenant
at DeVargas Mall purchased the former Montgomery Ward location and plans to
relocate to the Montgomery Ward site. The grocery tenant plans to demolish the
existing Montgomery Ward building and replace it with their new 55,000 square
foot prototypical Super Store which is expected to open in the fall of 1999. The
DeVargas property was unable to accommodate this tenant's expansion plans for a
55,000 square foot store at their current location. Nonetheless, the planned
grocery tenant relocation will result in a unified center because the Montgomery
Ward and DeVargas properties have cross-easements and it is also expected to
have a positive impact on the long-term value of the DeVargas Mall because the
changes should result in additional destination shopper traffic to the Mall, add
an additional retailer to the current tenant mix once the Albertson's space is
re-leased, and allow for the future re-leasing of retail spaces at higher rents
than the rates paid by former tenants. The property's leasing team will work
with Albertson's to secure a new tenant to occupy its space when they close
their store in the fall of 1999. Funding for required tenant improvements for
the leasing activity at DeVargas has been accomplished by means of advances
under certain lines of credit provided by the Partnership's co-venture partner.
At the beginning of fiscal 1998, the co-venture partner had two outstanding
lines of credit with the DeVargas joint venture which permitted the venture to
borrow up to an aggregate amount of $5,553,000. In June 1997, the Partnership
and the co-venturer reached an agreement to consolidate the two lines of credit
into one loan and to modify the terms. The new loan, which allowed the venture
to borrow up to $5,000,000, bore interest at the greater of the prime rate or 9%
per annum and was due to mature on June 1, 1998. On May 26, 1998, the venture
executed a renewal and extension of the loan. Under the terms of the renewal and
extension, the venture may borrow up to $6,500,000 at a rate equal to the lesser
of 9% per annum or the prime rate, and the maturity date was extended to June 1,
1999.
The average occupancy level for the quarter ended June 30, 1998 at the
Willow Grove Apartments in Beaverton, Oregon was 92%. This occupancy level
continues to compare favorably to similar Class A quality properties in the
local market which includes approximately 2,500 units built in the last three
years and located within 4-to-6 miles of the property. The property's leasing
team reports that the number of building permits for apartments in the Beaverton
market in 1997 was down significantly from 1996 and 1995. As new development
appears to be slowing and most new construction is located farther out to the
west of Willow Grove, between 5 and 15 miles away, the local apartment market is
expected to record strong occupancy levels and moderate rental rate growth in
the near term. As previously reported, a light rail station, which is located
within walking distance of the Willow Grove Apartments, is expected to open this
fall. The light rail line is now operating on a test basis. With strong local
market conditions and the pending opening of the rail station, the Partnership
believes it is a good time to sell the Willow Grove property. During the fourth
quarter of fiscal 1998, the Partnership initiated discussions with area real
estate brokerage firms and solicited marketing proposals from several of these
firms. After reviewing their respective proposals and conducting interviews, the
Partnership selected a national brokerage firm that is a leading seller of
apartment properties. Sales materials have been prepared, and an extensive
marketing campaign began in May 1998. As a result of those efforts, ten offers
to purchase Willow Grove were received. The prospective purchasers were then
requested to submit best and final offers. Four of the prospective buyers
submitted best and final offers. After completing an evaluation of these offers
and the relative strength of the prospective purchasers, the Partnership
selected an offer. A purchase and sale agreement was negotiated with an
unrelated third-party prospective buyer subsequent to the quarter-end. This
prospective buyer is expected to complete its due diligence work by August 31,
1998. While there are no assurances that a sale transaction will be completed,
the Partnership hopes to complete the sale of Willow Grove by September 30,
1998.
At June 30, 1998, the Partnership and its consolidated joint ventures had
available cash and cash equivalents of approximately $6,031,000. These funds
will be utilized for the working capital requirements of the Partnership,
distributions to partners, refinancing costs and debt service payments related
to the Partnership's remaining zero coupon loan, if necessary under the terms of
the original zero coupon loan agreement or any future modification thereof, and
to fund capital enhancements and tenant improvements for the operating
investment properties in accordance with the respective joint venture
agreements. The source of future liquidity and distributions to the partners is
expected to be from cash generated by the Partnership's income-producing
properties and from the proceeds received from the sale or refinancing of such
properties. Such sources of liquidity are expected to be sufficient to meet the
Partnership's needs on both a short-term and long-term basis.
Results of Operations
Three months ended June 30, 1998
- --------------------------------
The Partnership reported a net loss of $96,000 for the three months ended
June 30, 1998, as compared to a net loss of $50,000 for the same period in the
prior year. This increase of $46,000 in the Partnership's net loss is
attributable to an increase in the Partnership's operating loss of $87,000 which
was partially offset by an increase in the Partnership's share of unconsolidated
ventures' income of $41,000. The increase in the Partnership's operating loss is
primarily the result of a decrease of $50,000 in rental income and expense
reimbursements from the consolidated Colony Plaza property and an increase of
$52,000 in interest expense related to the Colony Plaza debt obligation, which
is accruing interest at a default rate of 15%, as discussed further above. The
decrease in rental income and expense reimbursements at Colony Plaza was
primarily due to a reduction in shop space occupancy related to the anchor
tenant vacancies discussed further above. The decrease in rental income and
expense reimbursements and the increase in interest expense were partially
offset by an increase of $17,000 in interest income earned on the Partnership's
cash reserves. Interest income increased due to an increase in the average
amount of cash and cash equivalents on hand when compared to the same period in
the prior year. The increase in the Partnership's share of unconsolidated
ventures' income is primarily due to the sale of the One Paragon Place Office
Building on January 30, 1998, as discussed further above. The One Paragon Place
joint venture had a net operating loss of $61,000 during the prior three-month
period. The Partnership's share of the net income from the DeVargas joint
venture declined by $20,000 for the current three-month period, despite an
overall increase in the venture's net income, due to the method of allocating
income in accordance with the joint venture agreement.
<PAGE>
PART II
Other Information
Item 1. Legal Proceedings NONE
Item 2. through 5. NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: NONE
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the registrant during the
quarter for which this report is filed.
<PAGE>
PAINEWEBBER EQUITY PARTNERS THREE 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 EQUITY PARTNERS THREE
LIMITED PARTNERSHIP
By: Third Equity Partners, Inc.
---------------------------
Managing General Partner
By: /s/ Walter V. Arnold
--------------------
Walter V. Arnold
Senior Vice President and
Chief Financial Officer
Dated: August 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Partnership's unaudited financial statements for the quarter ended June 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 6,031
<SECURITIES> 0
<RECEIVABLES> 61
<ALLOWANCES> 0
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