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 September 30, 1998
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Commission file number 0-11068
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SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
State of California 95-3643693
- ------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
- ------------------------------------- -----------------------------------
(Address of principal executive (Zip Code)
offices)
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 - September 30, 1998 and December 31, 1997 4
Consolidated Statements of Operations - For the Nine Months Ended
September 30, 1998 and 1997 and for the Three Months Ended September
30, 1998 and 1997 5
Consolidated Statements of Changes in Partners' Equity - From February
13, 1981 (inception of Partnership) to December 31, 1997 and For the
Nine Months Ended September 30, 1998 6
Consolidated Statements of Cash Flows - For the Nine Months Ended
September 30, 1998 and 1997 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 90.67% interest in the Sierra Creekside
Partnership, which operates the Sierra Creekside property.
(b) RESULTS OF OPERATIONS
Rental income for the nine months ended September 30, 1998 increased by
$148,000, or 27%, when compared to the corresponding period in the prior year.
This increase was primarily the result of a lease buy-out negotiated in May
1998. The majority of the vacated space was re-leased in the second quarter at a
higher rental rate. Rental income for the three months ended September 30, 1998
increased by $13,000, or 6%, principally due to the higher rental rates. The
Property was 96% occupied at September 30, 1998.
2
<PAGE>
Operating expenses for the nine months ended September 30, 1998 decreased by
$20,000, or 5%, when compared to the same period in the prior year, principally
due to a decrease in maintenance and repair costs. This decrease was partially
offset by higher utility expenses incurred during the period. Operating expenses
for the three months ended September 30, 1998 decreased by $6,000, or 5%,
primarily due to the decrease in maintenance and repair costs.
Depreciation and amortization expenses for the nine months ended September 30,
1998 decreased by $37,000, or 12%, primarily due to fully depreciated tenant
improvements. Depreciation and amortization expenses for the three months ended
September 30, 1998 increased by $7,000, or 8%, principally due to amortization
expenses associated with additional leasing costs.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position at September 30, 1998 with cash of
$71,000 and current liabilities of $100,000. A 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 the construction of
new tenant space. It is anticipated that these requirements will be funded from
the operations of the Property.
3
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
- --------------------------------------------------------------------------------
September 30, December 31,
1998 1997
---------- ------------
ASSETS
Cash and cash equivalents ........................ $ 71,249 $ 87,192
Receivables:
Unbilled rent .................................. 45,566 71,309
Billed rent .................................... 0 1,653
Due from affiliates .............................. 122,416 26,916
Income-producing property -net of
accumulated depreciation and valuation
allowance of $3,163,004 and $2,956,254
respectively ................................... 2,841,374 2,980,756
Other assets ..................................... 273,519 268,624
---------- ----------
Total Assets ..................................... $3,354,124 $3,436,450
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities .................... $ 100,422 $ 100,512
Note payable ..................................... 1,731,463 1,763,420
---------- ----------
Total Liabilities ................................ 1,831,885 1,863,932
---------- ----------
Minority interest in consolidated
joint venture ................................. 20,819 25,510
---------- ----------
Partners' equity:
General Partner ................................ 0 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding ............................... 1,501,420 1,547,008
---------- ----------
Total Partners' equity ........................... 1,501,420 1,547,008
---------- ----------
Total Liabilities and Partners' equity ........... $3,354,124 $3,436,450
========== ==========
Unaudited
See Accompanying Notes
4
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1998 and 1997
and for the Three Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ........................................ $ 706,189 $ 557,954 $ 216,120 $ 202,971
--------- --------- --------- ---------
Total revenues ............................... 706,189 557,954 216,120 202,971
--------- --------- --------- ---------
EXPENSES:
Operating expenses ................................... 357,587 377,391 123,719 130,086
Depreciation and amortization ........................ 281,037 317,878 96,379 89,503
Interest ............................................. 117,844 120,606 39,040 39,981
--------- --------- --------- ---------
Total costs and expenses ..................... 756,468 815,875 259,138 259,570
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S
SHARE OF CONSOLIDATED JOINT
VENTURE LOSS ......................................... (50,279) (257,921) (43,018) (56,599)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS ...................... 4,691 12,793 4,014 2,807
--------- --------- --------- ---------
NET LOSS ............................................... $ (45,588) $(245,128) $ (39,004) $ (53,792)
========= ========= ========= =========
Net loss per limited partnership unit .................. $ (1.55) $ (8.35) $ (1.33) $ (1.83)
========= ========= ========= =========
</TABLE>
Unaudited
See Accompanying Notes
5
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
From February 13, 1981 (Inception of Partnership) to December 31, 1997
and for the Nine Months Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners Total
---------------------------- General Partners'
Per Unit Total Partner Equity
------------ ------------ ------------ ------------
<S> <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, 1997) ............ (220.26) (6,465,657) $ 14,600 (6,451,057)
Cumulative distributions
(to December 31, 1997) ............ (166.75) (4,894,473) (14,600) (4,909,073)
------------ ------------ ------------ ------------
Partners' equity - January 1, 1998 .. 52.70 1,547,008 0 1,547,008
Net loss ............................ (1.55) (45,588) (45,588)
------------ ------------ ------------ ------------
Partners' equity - September 30, 1998 $ 51.15 $ 1,501,420 $ 0 $ 1,501,420
============ ============ ============ ============
</TABLE>
Unaudited
See Accompanying Notes
6
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
- -------------------------------------------------------------------------------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................ $ (45,588) $(245,128)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation and amortization ..................... 281,037 317,878
Minority interest's share of consolidated
joint venture loss .............................. (4,691) (12,793)
Decrease (increase) in rent receivable ............ 27,396 (6,038)
Increase in other assets .......................... (68,083) (20,766)
Decrease in accrued and other liabilities ......... (90) (10,570)
--------- ---------
Net cash provided by operating activities ......... 189,981 22,583
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions ................... (78,467) (77,930)
--------- ---------
Net cash used in investing activities ............. (78,467) (77,930)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on note payable ................ (31,957) (29,217)
Loan to affiliate ................................. (95,500) 0
Loan from affiliate ............................... 0 83,500
--------- ---------
Net cash (used in) provided by financing activities (127,457) 54,283
--------- ---------
NET DECREASE IN CASH
AND CASH EQUIVALENTS ............................... (15,943) (1,064)
CASH AND CASH EQUIVALENTS
Beginning of period ............................... 87,192 55,629
--------- ---------
CASH AND CASH EQUIVALENTS
End of period ..................................... $ 71,249 $ 54,565
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest ........... $ 118,084 $ 120,825
========= =========
Unaudited
See Accompanying Notes
7
<PAGE>
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. Accordingly,
on January 1, 1998, the Partnership's interest in Sierra Creekside Partners was
decreased from 95.04% to 90.67% to reflect 1997 contributions and distributions.
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 September 30, 1998. 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 September 30, 1998 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, 1997.
3. RELATED PARTY TRANSACTIONS
In 1994, all of the common stock of TCP, Inc. was purchased by Finance Factors,
Inc. from Carlsberg Management Company ("CMC"). TCP, Inc. owns all of the common
stock of S-P Properties, Inc., the General Partner of the Partnership. CMC
continued to manage the affairs of the Partnership through March 31, 1995.
UNAUDITED
8
<PAGE>
Sierra Pacific Development Fund
Notes to Consolidated Financial Statements
Page two
Included in the financial statements for the nine months ended September 30,
1998 and 1997 are affiliate transactions as follows:
September 30
-----------------------
1998 1997
-----------------------
Management fees $ 32,620 $ 22,208
Administrative fees 27,189 26,305
Leasing fees 35,485 17,015
Construction fees 6,209 8,943
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
<PAGE>
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: NOVEMBER 10, 1998 /s/ THOMAS N. THURBER
Thomas N. Thurber
President and Director
Date: NOVEMBER 10, 1998 /s/ G. ANTHONY EPPOLITO
G. Anthony Eppolito
Chief Accountant
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC DEVELOPMENT FUND SEPTEMBER 30, 1998 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 71,249
<SECURITIES> 0
<RECEIVABLES> 45,566
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 193,665
<PP&E> 6,004,378
<DEPRECIATION> 3,163,004
<TOTAL-ASSETS> 3,354,124
<CURRENT-LIABILITIES> 100,422
<BONDS> 1,731,463
0
0
<COMMON> 0
<OTHER-SE> 1,501,420
<TOTAL-LIABILITY-AND-EQUITY> 3,354,124
<SALES> 706,189
<TOTAL-REVENUES> 706,189
<CGS> 0
<TOTAL-COSTS> 357,587
<OTHER-EXPENSES> 281,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,844
<INCOME-PRETAX> (45,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,588)
<EPS-PRIMARY> (1.55)
<EPS-DILUTED> (1.55)
</TABLE>
