UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 2000
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: 0-18076
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 04-3038480
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(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 |_|.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
BALANCE SHEETS
April 30, 2000 and July 31, 1999 (Unaudited)
(In thousands)
ASSETS
------
April 30 July 31
-------- -------
Investments in Debt Securities:
Mortgage-Backed Securities
available for sale $ - $ 2,715
Participating Insured Mortgage Loans
available for sale 10,637 17,930
--------- ---------
10,637 20,645
Cash and cash equivalents 693 1,420
Interest and other receivables 76 145
Deferred expenses, net 25 177
--------- ---------
$ 11,431 $ 22,387
========= =========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable - affiliates $ - $ 25
Accounts payable and accrued expenses 27 39
Partners' capital 11,404 22,323
--------- ---------
$ 11,431 $ 22,387
========= =========
See accompanying notes.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three and nine months ended April 30, 2000 and 1999 (Unaudited)
(In thousands, except per Unit data)
Three Months Ended Nine Months Ended
April 30, April 30,
------------------ -----------------
2000 1999 2000 1999
Revenues: ---- ---- ---- ----
Interest income - Debt Securities $ 236 $ 430 $ 1,059 $ 1,315
Interest income - Money Market 67 21 116 74
------- ------- -------- -------
303 451 1,175 1,389
Expenses:
Management fees - 47 90 143
General and administrative 105 61 207 152
Amortization expense 45 43 133 132
------- ------- -------- -------
150 151 430 427
------- ------- -------- -------
Operating income 153 300 745 962
Gain on sale of Mortgage-Backed
Securities 16 - 16 -
Gain on sale of Participating
Insured Mortgage Loan - - 519 -
------- ------- -------- -------
Net income 169 300 1,280 962
Other comprehensive income (loss):
Unrealized holding gains (losses)
on debt securities (61) (2) 331 (122)
Reclassification adjustment for
gain on sale of debt securities
included in net income (16) - (535) -
------- ------- -------- -------
(77) (2) (204) (122)
------- ------- -------- -------
Comprehensive income $ 92 $ 298 $ 1,076 $ 840
======= ======= ======== =======
Net income per Unit of
Depositary Receipt $ 0.30 $ 0.54 $ 2.29 $ 1.73
======= ====== ======= ======
Cash distributions per Unit of
Depositary Receipt $ 20.11 $ 3.35 $ 21.72 $ 5.70
======= ====== ======= ======
The above net income and cash distributions per Unit of Depositary Receipt
are based upon the 551,604 Units outstanding for each period.
See accompanying notes.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended April 30, 2000 and 1999 (Unaudited)
(In thousands)
Corporate Limited
General Partner and
Partner Unitholders
------- -----------
Balance at July 31, 1998 $ (4) $ 24,764
Comprehensive income:
Net income 10 952
Net unrealized holding losses
on debt securities - (122)
------ --------
10 830
Cash distributions (12) (2,796)
------ --------
Balance at April 30, 1999 $ (6) $ 22,798
====== ========
Balance at July 31, 1999 $ (6) $ 22,329
Comprehensive income:
Net income 13 1,267
Net unrealized holding gain
on debt securities - 331
Reclassification adjustment for
gain on sale of debt securities
included in net income - (535)
------ --------
13 1,063
Cash distributions (7) (11,988)
------ --------
Balance at April 30, 2000 $ - $ 11,404
====== ========
See accompanying notes.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
STATEMENTS OF CASH FLOWS
For the nine months ended April 30, 2000 and 1999
Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
(In thousands)
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 1,280 $ 962
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sale of Mortgage-Backed Securities (16) -
Gain on sale of Participating Insured
Mortgage Loan (519) -
Amortization expense 133 132
Amortization of discount/premium on
debt securities 35 46
Changes in assets and liabilities:
Interest and other receivables 69 10
Accounts payable - affiliates (25) -
Accounts payable and accrued expenses (12) (7)
-------- --------
Total adjustments (335) 181
-------- --------
Net cash provided by operating activities 945 1,143
-------- --------
Cash flows from investing activities:
Principal collections on Mortgage-Backed
Securities 340 1,080
Principal collections on Participating Insured
Mortgage Loans 64 68
Net proceeds from sale of Mortgage-Backed
Securities 2,307 -
Net proceeds from sale of Participating
Insured Mortgage Loan 7,612 -
-------- --------
Net cash provided by investing activities 10,323 1,148
-------- --------
Cash flows from financing activities:
Distributions to Unitholders and partners (11,995) (2,808)
-------- --------
Net decrease in cash and cash equivalents (727) (517)
Cash and cash equivalents, beginning of period 1,420 1,702
-------- --------
Cash and cash equivalents, end of period $ 693 $ 1,185
======== ========
See accompanying notes.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
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 July 31, 1999. 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 April 30, 2000 and July 31, 1999 and revenues and expenses
for each of the three- and nine-month periods ended April 30, 2000 and 1999.
Actual results could differ from the estimates and assumptions used.
As previously reported, the Partnership has been analyzing potential
disposition strategies for its remaining investments. As discussed further in
Note 3, on January 26, 2000 the Partnership received total consideration of
approximately $7,747,000 for the sale of its Participating Insured Mortgage Loan
secured by the Quarter Mill Apartments, a 266-unit facility located in Richmond,
Virginia. Subsequent to the disposition of the Partnership's Quarter Mill
investment, management began the process of liquidating the Partnership's
portfolio of non-participating mortgage-backed securities through secondary
market sale transactions. As discussed further in Note 2, such sales were
completed in late February 2000, with the Partnership receiving total proceeds
of $2,318,000. In addition, the Partnership continues to evaluate the current
economic benefits it would receive if the owner of the Emerald Cove Apartments
was to prepay its Participating Loan in the near term. During the quarter ended
April 30, 2000, the Partnership reached an agreement with the Emerald Cove
property owner regarding what the Partnership would accept from a sale
transaction as repayment in full of the Participating Insured Mortgage Loan,
provided that such a sale transaction is completed by June 30, 2000. If a near
term prepayment of the Emerald Cove investment is not completed, in all
likelihood, the Partnership will conduct a secondary market sale process similar
to the one completed for Quarter Mill. Under either scenario, management now
expects to be able to complete a liquidation of the Partnership by the end of
fiscal year 2000. There are no assurances, however, that the disposition of the
remaining asset and a liquidation of the Partnership will be completed within
this time frame.
2. Mortgage-Backed Securities
- ------------------------------
At July 31, 1999, the Partnership held non-participating mortgage-backed
securities ("MBS") backed by single-family or multi-family mortgage loans issued
or originated in connection with the housing programs of the Government National
Mortgage Association ("GNMA"), and guaranteed by GNMA, as follows (in
thousands):
July 31, 1999
-----------------------------
Estimated
Market Face Amortized
Description Value Value Cost
----------- ----- ----- ----
9.5% GNMA Pool $ 1,056 $ 986 $ 982
9.0% GNMA Pool 78 76 79
8.0% GNMA Pool 1,469 1,437 1,480
7.5% GNMA Pool 112 112 111
------- ------- -------
$ 2,715 $ 2,611 $ 2,652
======= ======= =======
The Partnership's investments in MBS were carried at fair value as of July
31, 1999. Investments in MBS were valued based on quoted market prices. The
amortized cost of the MBS represented the face value of the securities net of
unamortized premium or discount. Beginning in fiscal 1998, the premiums and
discounts were being amortized on a straight-line basis over the expected
remaining holding periods of the investments of three years. Prior to fiscal
1998, the premium and discounts were being amortized over an original estimated
holding period of fifteen years. Investments in non-participating MBS were
limited to no more than 30% of the original net offering proceeds per the terms
of the Partnership's offering prospectus. The loans included in these GNMA pool
programs could be prepaid, without penalty, at any time.
As discussed in Note 1, subsequent to the sale of the Quarter Mill
Participating Insured Mortgage Loan, on January 26, 2000 (see Note 3), the
Partnership began the process of liquidating its portfolio of non-participating
mortgage-backed securities through secondary market sale transactions. In
February 2000, the Partnership received total proceeds of $2,318,000 in
connection with these sale transactions, which included accrued interest of
$11,000. The 9.5% MBS, which were purchased at a discount on December 14, 1988,
carried a coupon interest rate of 9.5% per annum and included loans with
scheduled maturities between June 2009 and December 2009. The 9.5% MBS were sold
at a premium with a settlement date of February 22, 2000. The 9.0% MBS, which
were purchased at a premium on November 16, 1989, carried a coupon interest rate
of 9.0% per annum and included loans with scheduled maturities between June 2001
and September 2002. The 9.0% MBS were sold at par with a settlement date of
February 17, 2000. The 8.0% MBS, which were purchased at a premium on July 30,
1992, carried a coupon interest rate of 8.0% per annum and included loans with
scheduled maturities in June 2022. The 8.0% MBS were sold at a slight premium
with a settlement date of February 22, 2000. The 7.5% MBS, which were purchased
at a discount on October 30, 1992, carried a coupon interest rate of 7.50% per
annum and included loans with scheduled maturities in March 2022. The 7.5% MBS
were sold at a discount with a settlement date of February 22, 2000. The net
proceeds of the MBS sale transactions were included in a Special Distribution to
the Unitholders which was paid on March 3, 2000. The Partnership recognized a
net gain of $16,000 on these MBS sale transactions in the third quarter of
fiscal 2000.
3. Investments in Participating Insured Mortgage Loans
- -------------------------------------------------------
Participating Insured Mortgage Loans secured by GNMA securities
outstanding at April 30, 2000 and July 31, 1999 are comprised of the following
(in thousands):
April 30, 2000 July 31, 1999
-------------------- --------------------
GNMA Estimated Estimated
Certificate Interest Market Amortized Market Amortized
Number Property Rate Value Cost Value Cost
------ -------- ---- ----- ---- ----- ----
279985 Quarter Mill 8.50% $ - $ - $ 7,236 $ 7,094
279119 Emerald Cove 8.75% 10,637 10,446 10,694 10,504
------- ------- ------- -------
$10,637 $10,446 $17,930 $17,598
======= ======= ======= =======
The Partnership's investments in Participating Insured Mortgage Loans are
carried at fair value as of April 30, 2000 and July 31, 1999. Investments in
Participating Insured Mortgage Loans, for which quoted market prices are not
available, are valued by a pricing service which determines the valuations based
on a comparison of recent secondary market trades of securities with similar
characteristics. Because of the inherent uncertainty of valuations, estimated
values, as reflected herein, may differ from the values that would have been
used had a ready market for the securities existed and may be different than
what the Partnership would realize from a prepayment of the Participating
Insured Mortgage Loan in accordance with its terms. Descriptions of the
properties financed by the Partnership's loans and the loan agreements
themselves are summarized below:
Quarter Mill Apartments
-----------------------
The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 266-unit apartment complex known as Quarter Mill Apartments located
in Richmond, Virginia (the "Virginia Project"). Construction of the Virginia
Project was completed in November of 1990. Initial closing of this Participating
Insured Mortgage loan took place on August 2, 1989. The project owner is Amurcon
Corporation. The Base Component of this Participating Insured Mortgage Loan was
coinsured by FHA and represented by GNMA Securities with an initial face value
of $7,316,600, which GNMA Securities bore interest at the rate of 10.25% during
construction of the Virginia Project and 8.50% thereafter. Effective May 1,
1991, the construction loan was converted to a permanent loan with a principal
balance of $6,525,000. On June 21, 1991 an additional $791,600 was funded,
completing the Partnership's investment of $7,316,600. Monthly payments of
principal and interest totalling approximately $53,553 were due through
maturity, on October 15, 2031.
As discussed in Note 1, on January 26, 2000, the Partnership received
total consideration of approximately $7,747,000 for the sale of its
Participating Insured Mortgage Loan secured by the Quarter Mill Apartments. The
Quarter Mill Participating Insured Mortgage Loan consisted of a GNMA Certificate
with an 8.5% coupon interest rate and a subordinated note securing the
Contingent Component of the Partnership's interest in the Quarter Mill property.
The Contingent Component of the Participating Insured Mortgage Loan provided for
the payment of Contingent Interest equal to 30% of the Net Project Cash Flow, if
any, and 25% of the Net Project Residuals, if any, derived from the applicable
Project. The face value of the GNMA Certificate as of the date of the sale was
approximately $7,074,000. The excess of the total proceeds over the face amount
of the GNMA Certificate reflected a premium of $108,000 on the GNMA Certificate
itself, accrued interest of $40,000 through the date of the sale and a value of
$525,000 attributed to the Contingent Component. As previously reported, the
Partnership had engaged the services of a nationally recognized mortgage
brokerage firm to market the Quarter Mill Participating Loan for sale. Initial
marketing materials were distributed to over 100 buyers of these types of
investments in the secondary market. All offers were due by January 19, 2000 and
a sale was expected to close shortly thereafter if the offers equaled or
exceeded a specified minimum price. As a result of these marketing efforts,
several offers were received and the minimum sale price was exceeded. The
winning bidder funded a non-refundable deposit of $105,000 on January 20, and
the remainder of the proceeds were received on January 26. The Partnership paid
a commission of $95,000 to the mortgage broker in connection with this sale
transaction. As a result of this transaction, the Partnership no longer has any
interest in the Quarter Mill property. As a result of the disposition on January
26, 2000 of the Partnership's investments secured by the Quarter Mill
Apartments, the Partnership made a Special Distribution of the net proceeds of
this transaction to the Unitholders on March 3, 2000. The Partnership recognized
a gain of $519,000 on the sale of the Quarter Mill Participating Insured
Mortgage Loan.
Emerald Cove Apartments
-----------------------
The Partnership acquired a Participating Insured Mortgage Loan with
respect to a 276-unit apartment complex known as Emerald Cove Apartments in
Charlotte, North Carolina (the "North Carolina Project"). Initial closing of
this Participating Insured Mortgage Loan took place on October 16, 1989. The
project owners are Ronald Curry and Ralph Abercia. The Base Component of this
Participating Insured Mortgage Loan is coinsured by FHA and represented by GNMA
Securities with an initial face value of $10,783,900 at closing, which GNMA
Securities bore interest at the rate of 10.25% during construction of the North
Carolina Project and 8.75% thereafter. During fiscal 1992, the Partnership
funded its remaining commitment on the investment of approximately $1,184,000
and, effective May 1, 1992, the investment was converted to a permanent loan
with a principal balance of $10,776,500. The Partnership paid a premium of
$107,840 to the GNMA issuer to obtain the original loan commitment due to the
fact that the permanent loan interest rate was higher than comparable market
rates at the time of the initial closing. Prior to fiscal 1998, the premium had
been amortized on the straight-line method over a 15-year amortization period.
Beginning in fiscal 1998, the amortization rate has been increased to reflect a
reduction in the expected remaining holding period of the investment. Monthly
payments of principal and interest totalling approximately $81,141 are due
through maturity, on August 15, 2031. Scheduled principal repayments of $327,784
have been received through April 30, 2000.
4. Related Party Transactions
- ------------------------------
Management fees earned by the General Partner and its affiliates for
services rendered in managing the business of the Partnership aggregated $90,000
and $143,000 for the nine months ended April 30, 2000 and 1999, respectively.
Included in these two amounts is $15,000 and $24,000, respectively, representing
additional asset management fees paid to PWPI which are based on the
Partnership's cash distributions of operating income, as discussed further in
the Partnership's Annual Report. Accounts payable - affiliates at July 31, 1999
consisted of management fees payable to the General Partner and its affiliates.
Included in general and administrative expenses for the nine months ended
April 30, 2000 and 1999 is $76,000 and $73,000, respectively, representing
reimbursements to an affiliate of the General Partner for providing certain
financial, accounting and investor communication services to the Partnership.
Also included in general and administrative expenses for the nine-month
period ended April 30, 2000 and 1999 is $2,000 and $4,000, respectively,
representing fees earned by an affiliate, Mitchell Hutchins Institutional
Investors, Inc., for managing the Partnership's cash assets.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
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 July 31, 1999 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 previously reported, the Partnership has been analyzing potential
disposition strategies for its remaining investments. As part of these efforts,
on January 26, 2000 the Partnership received total consideration of
approximately $7,747,000 for the sale of its Participating Insured Mortgage Loan
secured by the Quarter Mill Apartments, a 266-unit facility located in Richmond,
Virginia. The Quarter Mill Participating Insured Mortgage Loan consisted of a
GNMA Certificate with an 8.5% coupon interest rate and a subordinated note
securing the Contingent Component of the Partnership's interest in the Quarter
Mill property. The Contingent Component of the Participating Insured Mortgage
Loan provided for the payment of Contingent Interest equal to 30% of the Net
Project Cash Flow, if any, and 25% of the Net Project Residuals, if any, derived
from the applicable Project. The face value of the GNMA Certificate as of the
date of the sale was approximately $7,074,000. The excess of the total proceeds
over the face amount of the GNMA Certificate reflected a premium of $108,000 on
the GNMA Certificate itself, accrued interest of $40,000 through the date of the
sale and a value of $525,000 attributed to the Contingent Component. As
previously reported, the Partnership had engaged the services of a nationally
recognized mortgage brokerage firm to market the Quarter Mill Participating Loan
for sale. Initial marketing materials were distributed to over 100 buyers of
these types of investments in the secondary market. All offers were due by
January 19, 2000 and a sale was expected to close shortly thereafter if the
offers equaled or exceeded a specified minimum price. As a result of these
marketing efforts, several offers were received and the minimum sale price was
exceeded. The winning bidder funded a non-refundable deposit of $105,000 on
January 20, 2000 and the remainder of the proceeds were received on January 26.
The Partnership paid a commission of $95,000 to the mortgage broker in
connection with this sale transaction. As a result of this transaction, the
Partnership no longer has any interest in the Quarter Mill property. As a result
of the disposition on January 26, 2000 of the Partnership's investments secured
by the Quarter Mill Apartments, the Partnership made a Special Distribution of
the net proceeds of this transaction to the Unitholders on March 3, 2000.
Subsequent to the sale of the Quarter Mill Participating Insured Mortgage
Loan, the Partnership began the process of liquidating its portfolio of
non-participating mortgage-backed securities, which carried coupon interest
rates ranging from 7.5% to 9.5%. In February 2000, the entire portfolio of MBS
was sold at a small net premium. The Partnership received total proceeds of
$2,318,000 in connection with these sale transactions, which included accrued
interest of $11,000. The net proceeds of the MBS sale transactions were included
in a Special Distribution to the Unitholders which was paid on March 3, 2000.
In addition to the transactions described above, the Partnership continues
to evaluate the current economic benefits it would receive if the owner of the
Emerald Cove Apartments were to prepay their participating loan in the near
term. The current strength of the national real estate market makes the prospect
of a prepayment transaction a potentially attractive option for the property
owner. During fiscal year 1999, the Partnership continued to have discussions
with the owner of the Emerald Cove Apartments about the possibility of a
prepayment of its loan before the end of calendar year 1999 or in early calendar
year 2000. During the quarter ended April 30, 2000, the Partnership reached an
agreement with the Emerald Cove property owner regarding what the Partnership
would accept from a sale transaction as repayment in full of the Participating
Insured Mortgage Loan, provided that such a sale transaction is completed by
June 30, 2000. If a near term prepayment of the Emerald Cove investment is not
completed, in all likelihood, the Partnership will conduct a secondary market
sale process similar to the one completed for Quarter Mill. Under either
scenario, management now expects to be able to complete a liquidation of the
Partnership by the end of fiscal year 2000. There are no assurances, however,
that the disposition of the remaining asset and a liquidation of the Partnership
will be completed within this time frame.
As previously reported, based on a decline in the rate of principal
prepayments on the Partnership's GNMA mortgage-backed securities and the
expectation that this decline would continue in the future, the Partnership had
reduced the regular quarterly distribution rate effective for the payment made
on June 13, 1997 for the third quarter of fiscal 1997. The distribution rate
declined from 8.25% per annum to 6.5%. During fiscal 1998 and fiscal 1999,
however, actual principal prepayment levels were higher than projected resulting
in an increase in cash flows from investing activities. As a result, the
Partnership made a special capital distribution of excess cash totalling
approximately $552,000, or $10.00 per original $1,000 investment, to the
Unitholders on March 13, 1998 concurrent with the regular quarterly distribution
for the period ended January 31, 1998. During fiscal 1999 a special distribution
of $25.00 per original $1,000 investment was paid to Unitholders of record as of
January 31, 1999. This special capital distribution, which was made on March 15,
1999 and totalled approximately $1,379,000, represented Partnership reserves
that exceeded expected future requirements. During the current quarter,
management reassessed its future cash reserve requirements in light of the
Quarter Mill and non-participating MBS sale transactions and included a capital
distribution of excess cash reserves in the amount of approximately $700,000, or
$12.69 per original $1,000 investment, as part of the Special Distribution paid
to the Unitholders on March 3, 2000 from the proceeds of the aforementioned sale
transactions. Distributions continued to be made at a rate of 6.5% per annum on
remaining invested capital through the payment made on March 3, 2000 for the
quarter ended January 31, 2000. However, since the Partnership expects to be
liquidated in the near term, no future regular quarterly distributions are
planned. The Partnership's final distribution would include the net proceeds
from the disposition of the Emerald Cove Participating Insured Mortgage Loan
along with the Partnership's remaining cash reserves after the payment of all
liquidation-related expenses.
At April 30, 2000, the Partnership had cash and cash equivalents of
approximately $693,000. Such cash and cash equivalents will be utilized for
distributions to the Unitholders and for the working capital requirements of the
Partnership. The source of future liquidity and distributions to the Unitholders
is expected to be primarily through interest income and principal repayments
from the Partnership's remaining debt security, money-market interest income
from invested cash reserves, and to a lesser extent from Contingent Interest
from the remaining Participating Insured Mortgage Loan and Net Project Residuals
from the sale or refinancing of the property securing the remaining
participating mortgage loan investment.
Results of Operations
Three Months Ended April 30, 2000
- ---------------------------------
The Partnership reported net income of $169,000 for the three months ended
April 30, 2000, as compared to net income of $300,000 for the same period in the
prior year. This decrease in net income was mainly the result of a decline of
$194,000 in interest income from debt securities and an increase of $44,000 in
general and administrative expenses for the current three-month period. The
decrease in interest income from debt securities resulted from a reduction in
the average outstanding principal balances of Participating Insured Mortgage
Loans and non-participating MBS due to scheduled principal amortization on all
of the debt securities, prepayments on the MBS, the sale of the MBS portfolio in
February 2000 and the sale of the Quarter Mill loan on January 26, 2000. General
and administrative expenses increased primarily due to an increase in certain
required professional fees incurred during the current period in connection with
the potential liquidation of the Partnership. The decrease in interest income
from debt securities and the increase in general and administrative expenses
were partially offset by a decrease of $47,000 in management fee expense, an
increase of $46,000 in money market interest income and the gain of $16,000
realized in the current period on the sale of the MBS portfolio. Management fee
expense declined due to a decrease in the outstanding balances of the debt
securities upon which such fees are partially based and due to the suspension of
the Partnership's quarterly distribution payments effective for the third
quarter of fiscal 2000. Money market interest income increased due to the
receipt and temporary investment of the proceeds received from the sale of the
Quarter Mill loan in January 2000 and the sale of the MBS portfolio in February
2000 prior to the Special Distribution to the Unitholders which was paid on
March 3, 2000.
Nine Months Ended April 30, 2000
- --------------------------------
The Partnership reported net income of $1,280,000 for the nine months
ended April 30, 2000, as compared to net income of $962,000 for the same period
in the prior year. This increase in net income was primarily the result of the
$519,000 gain realized in the current period on the sale of the Participating
Insured Mortgage Loan secured by the Quarter Mill Apartments. In addition, the
Partnership recognized a gain of $16,000 in the current period on the sale of
the MBS portfolio. The gains realized on the Quarter Mill and MBS sales were
partially offset by a $217,000 decrease in operating income. This decrease in
operating income resulted from a decrease in total revenues of $214,000 and an
increase in total expenses of $3,000. The decrease in revenues was the result of
a $256,000 decline in interest income from debt securities which was partially
offset by a $42,000 increase in money market interest income. The decrease in
interest income from debt securities resulted from a reduction in the average
outstanding principal balances of Participating Insured Mortgage Loans and
non-participating MBS due to scheduled principal amortization on all of the debt
securities, prepayments on the MBS, the sale of the MBS portfolio in February
2000 and the sale of the Quarter Mill loan on January 26, 2000. Money market
interest income was higher in the current period due to the receipt and
temporary investment of the proceeds received from the sale of the Quarter Mill
loan in January 2000 and the sale of the MBS portfolio in February 2000 prior to
the Special Distribution to the Unitholders which was paid on March 3, 2000. The
increase in total expenses was the result of a $55,000 increase in general and
administrative expenses. General and administrative expenses increased primarily
due to an increase in certain required professional fees incurred during the
current period in connection with the potential liquidation of the Partnership.
The increase in general and administrative expenses was partially offset by a
decrease in management fee expense of $53,000. Management fee expense declined
due to a decrease in the outstanding balances of the debt securities upon which
such fees are partially based and due to the suspension of the Partnership's
quarterly distribution payments effective for the third quarter of fiscal 2000.
PART II
Other Information
Item 1. through 5. NONE
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Item 6. Exhibits and Reports on Form 8-K
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(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.
PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
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 INSURED MORTGAGE PARTNERS 1-B, L.P.
By: FIRST INSURED MORTGAGE PARTNERS, INC.
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Managing General Partner
Date: June 7, 2000 By: /s/ Walter V. Arnold
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Walter V. Arnold
Senior Vice President and
Chief Financial Officer