FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended June 30, 1996
Commission file number 0-11068
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
State of California 95-3643693
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5850 San Felipe, Suite 500
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (713) 706-6271
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>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are submitted in the next pages:
Page number
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 4
Consolidated Statements of Operations - For the Six Months
Ended June 30, 1996 and 1995 and the Three Months Ended
June 30, 1996 and 1995 5
Consolidated Statements of Changes in Partners' Equity - From
February 13, 1981 (inception of Partnership) to December 31,
1995 and For the Six Months Ended June 30, 1996 6
Consolidated Statements of Cash Flows - For the Six Months Ended
June 30, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) OVERVIEW
The following discussion should be read in conjunction with the Partnership's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Form 10-Q.
The Partnership currently owns a 81.13% interest in the Sierra Creekside
Partnership, which operates the Sierra Creekside property.
(b) RESULTS OF OPERATIONS
Revenues for the first six months of the year increased by $97,000, or 35%, when
compared to the corresponding period in the prior year, due primarily to an
increase in occupancy from 77% at June 30, 1995 to 100% at June 30, 1996. One
new tenant, whose lease commenced October 1, 1995, accounted for an increase in
leased square footage of 5,071, or 11% of the rentable square footage of the
Property. Another significant tenant increased their square footage March 1,
1995 by 2,846, or 6% of the rentable square footage of the Property.
2
Operating expenses for the first six months of the year decreased by $14,000, or
5%, due to lower administrative costs and other expense cutting measures
implemented by management. Operating expenses for the three months ended June
30, 1996 increased by $8,000, or 5%, due to higher utility costs in the second
quarter of 1996. Depreciation and amortization expenses for the same period
increased by $35,000, or 17%, primarily due to depreciation and amortization on
additional tenant improvements associated with the increased occupancy of the
Property.
The funds necessary to build out new tenant space and pay leasing commissions
were provided by the proceeds of a mortgage loan funded in June 1995. Interest
expense increased due to the funding of this loan.
(c) LIQUIDITY AND CAPITAL RESOURCES
A loan in the amount of $1,850,000 was funded in June 1995. This loan is secured
by a trust deed on the Property. The proceeds of this loan were used to pay
delinquent property taxes, commissions, and other accrued liabilities. The
remainder is being used to fund capital improvements and tenant build-out. A
secondary source of cash is available through advances from the minority owner
of the Property, Sierra Mira Mesa Partners.
The Partnership's primary capital requirements will be for construction of new
tenant space and compliance with the Americans with Disabilities Act ("ADA") or
other yet unknown changes in building codes. The majority of the work required
to comply with ADA has been completed at June 30, 1996. As a result of funding a
loan on the Property in 1995, the Partnership has sufficient cash reserves to
meet all foreseeable future capital requirements.
3
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
June 30, December 31,
1996 1995
---------- ----------
ASSETS
Cash and cash equivalents ................ $ 240,744 $ 787,269
Receivables:
Unbilled rent ......................... 78,779 63,362
Billed rent ........................... 15,331 10,564
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,932,448 and $3,737,823,
respectively .......................... 3,322,303 3,422,035
Other assets ............................. 654,806 271,628
---------- ----------
Total Assets ............................. $4,311,963 $4,554,858
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ............ 68,901 $ 102,994
Note payable ............................. 1,821,220 1,838,747
---------- ----------
Total Liabilities ........................ 1,890,121 1,941,741
---------- ----------
Minority interest in consolidated
joint venture ......................... 440,743 476,836
---------- ----------
Partners' equity:
General Partner ........................ 0 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding ....................... 1,981,099 2,136,281
---------- ----------
Total Partners' equity ................... 1,981,099 2,136,281
---------- ----------
Total Liabilities and Partners' equity ... $4,311,963 $4,554,858
========== ==========
Unaudited
See Accompanying Notes
4
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
AND FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ..................... $ 372,584 $ 275,413 $ 197,300 $ 143,404
Interest income ................... 7,328 0 2,283 0
--------- --------- --------- ---------
Total revenues ...................... 379,912 275,413 199,583 143,404
--------- --------- --------- ---------
EXPENSES:
Operating expenses .............. 255,607 269,983 152,197 144,281
Depreciation and amortization ... 233,295 198,720 119,490 103,182
Interest ........................ 82,286 228 41,044 228
--------- --------- --------- ---------
Total costs and expenses ............ 571,188 468,931 312,731 247,691
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS (191,276) (193,518) (113,148) (104,287)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS ... 36,094 45,767 14,703 24,664
--------- --------- --------- ---------
NET LOSS ............................ $(155,182) $(147,751) $ (98,445) $ (79,623)
========= ========= ========= =========
Net loss per limited partnership unit $ (5.29) $ (5.03) $ (3.35) $ (2.71)
========= ========= ========= =========
</TABLE>
Unaudited
See Accompanying Notes
5
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FROM FEBRUARY 13, 1981 (INCEPTION OF PARTNERSHIP) TO DECEMBER 31, 1995
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Limited Partners Total
-------------------------- General Partners'
Per Unit Total Partner Equity
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Proceeds from sale of
partnership units ............... $ 500.00 $ 14,677,000 -- $ 14,677,000
Underwriting commissions
and other organization expenses . (60.29) (1,769,862) -- (1,769,862)
Cumulative net income (loss)
(to December 31, 1995) ......... (200.18) (5,876,384) $ 14,600 (5,861,784)
Cumulative distributions
from operations
(to December 31, 1995) ......... (51.25) (1,504,086) (14,600) (1,518,686)
Cumulative distributions
from dispositions of assets
(to December 31, 1995) ......... (115.50) (3,390,387) -- (3,390,387)
---------- ------------ ----------- ------------
Partners' equity - January 1, 1996 72.78 2,136,281 0 2,136,281
Net loss - year to date ........... (5.29) (155,182) -- (155,182)
---------- ------------ ----------- ------------
Partners' equity - June 30, 1996 . $ 67.49 $ 1,981,099 $ 0 $ 1,981,099
========== ============ =========== ============
</TABLE>
Unaudited
See Accompanying Notes
6
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $(155,182) $ (147,751)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization .................. 233,295 198,720
Minority interest's share of consolidated
joint venture loss ........................... (36,094) (45,767)
Increase in rent receivable .................... (20,184) (13,778)
Decrease in other receivables .................. 0 10,795
Increase in other assets ....................... (414,176) (193,106)
Decrease in accrued and other liabilities ...... (34,093) (306,058)
--------- -----------
Net cash used in operating activities .......... (426,434) (496,945)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................. (102,564) (64,391)
--------- -----------
Net cash used in investing activities ............ (102,564) (64,391)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Funding of note payable secured by property ...... -- 925,000
Principal payments on note payable ............... (17,527) 0
Contributions from minority investor ............. 0 190,000
--------- -----------
Net cash (used in) provided by
financing activities ............................ (17,527) 1,115,000
--------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............................ (546,525) 553,664
CASH AND CASH EQUIVALENTS
Beginning of period ............................ 787,269 38,957
--------- -----------
CASH AND CASH EQUIVALENTS
End of period ................................. $ 240,744 $ 592,621
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ........ $ 82,418 $ 0
========= ===========
Unaudited
See Accompanying Notes
7
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
In February 1994, the Partnership created a general partnership (Sierra
Creekside Partners) with Sierra Mira Mesa Partners ("SMMP") to facilitate cash
contributions by SMMP for the continued development and operation of the Sierra
Creekside property. The Partnership Agreement of Sierra Creekside Partners (the
"Agreement") was amended effective January 1, 1995 to consider both
contributions and distributions when calculating each partners' percentage
interest at January 1 of each year as called for by the Agreement. As a result
of this Amendment, the Partnership's percentage interest in Sierra Creekside
Partners increased from 72.62% to 81.13%. The effect of this change on the
minority interest share of consolidated joint venture loss for the three months
ended March 31, 1996 was recognized in the second quarter.
2. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements include
the accounts of the Partnership and Sierra Creekside Partners, a majority owned
joint venture at June 30, 1996. All significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of the Partnership's management, these unaudited financial
statements reflect all adjustments which are necessary for a fair presentation
of its financial position at June 30, 1996 and results of operations and cash
flows for the periods presented. All adjustments included in these statements
are of a normal and recurring nature. These financial statements should be read
in conjunction with the financial statements and notes thereto contained in the
Annual Report of the Partnership for the year ended December 31, 1995.
3. RELATED PARTY TRANSACTIONS
In 1994, all of the common stock of S-P Properties, Inc., the General Partner of
the Partnership, was purchased by Finance Factors, Inc. from Carlsberg
Management Company ("CMC"). CMC continued to manage the affairs of the
Partnership through March 31, 1995.
UNAUDITED
8
Sierra Pacific Development Fund
Notes to Consolidated Financial Statements
Page two
Included in the financial statements for the six months ended June 30, 1996 and
1995 are affiliate transactions as follows:
June 30
--------------------------
1996 1995
--------- ---------
Management fees ............................ $14,041 $12,367
Administrative fees ........................ $17,342 $ 7,246
Leasing fees ............................... $20,031 $ 0
Construction fees .......................... $ 7,470 $ 0
4. PARTNERS' EQUITY
Equity and net loss per limited partnership unit is determined by dividing the
Limited Partners' share of the Partnership's equity and net loss by the number
of limited partnership units outstanding, 29,354.
UNAUDITED
9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K.
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
SIERRA PACIFIC DEVELOPMENT FUND
a Limited Partnership
S-P PROPERTIES, INC.
General Partner
Date: AUGUST 9, 1996 /S/ THOMAS N. THURBER
Thomas N. Thurber
President and Director
Date: AUGUST 9, 1996 /S/ MICHELE E. JOHNSON
Michele E. Johnson
Chief Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC DEVELOPMENT FUND JUNE 30, 1996 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 240,744
<SECURITIES> 0
<RECEIVABLES> 94,110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 256,075
<PP&E> 7,254,751
<DEPRECIATION> 3,932,448
<TOTAL-ASSETS> 4,311,963
<CURRENT-LIABILITIES> 68,901
<BONDS> 1,821,220
0
0
<COMMON> 0
<OTHER-SE> 1,981,099
<TOTAL-LIABILITY-AND-EQUITY> 4,311,963
<SALES> 372,584
<TOTAL-REVENUES> 379,912
<CGS> 0
<TOTAL-COSTS> 255,607
<OTHER-EXPENSES> 233,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,286
<INCOME-PRETAX> (155,182)
<INCOME-TAX> 0
<INCOME-CONTINUING> (155,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,182)
<EPS-PRIMARY> (5.29)
<EPS-DILUTED> (5.29)
</TABLE>
