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, 2000
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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
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (713) 706-6271
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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, 2000 and December 31, 1999 4
Consolidated Statements of Operations - For the Six Months
Ended June 30, 2000 and 1999 and for the Three Months Ended
June 30, 2000 and 1999 5
Consolidated Statements of Changes in Partners' Equity - For
the Year Ended December 31, 1999 and for the Six Months Ended
June 30, 2000 6
Consolidated Statements of Cash Flows - For the Six Months Ended
June 30, 2000 and 1999 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 Sierra Pacific
Development Fund's (the Partnership) Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Form 10-Q.
The Partnership currently owns a 94.92% interest in the Sierra Creekside
Partnership, which operates the Sierra Creekside property (the Property) in San
Diego, CA.
(b) RESULTS OF OPERATIONS
Rental income for the six months ended June 30, 2000 increased by approximately
$42,000, or 9%, when compared to the corresponding period in the prior year,
primarily due to higher rental rates. One tenant, who leases approximately 7,000
square feet of the Property, extended his lease for an additional five-year term
in March 2000 at a higher rate. Rental income for the quarter ended June 30,
2000 increased by approximately $27,000, or 12%, principally as a result of the
lease extension. The Property was 100% occupied at June 30, 2000 and 1999.
2
<PAGE>
Operating expenses for the six months ended June 30, 2000 increased by
approximately $22,000, or 9%, in comparison to the same period in 1999. This
increase was principally due to higher utilities and maintenance and repair
costs. This increase was partially offset by a decrease in administrative costs
incurred during the period. Operating expenses for the three months ended June
30, 2000 decreased by approximately $6,000 or 5%, primarily as a result of the
lower administrative costs.
Depreciation and amortization expenses for the six months and three months ended
June 30, 2000 decreased by approximately $14,000, or 8%, and by approximately
$9,000, or 10%, respectively, principally due to fully depreciated capitalized
tenant improvements and fully amortized lease costs.
Interest expense for the six months and three months ended June 30, 2000,
increased by approximately $88,000 and $53,000, respectively, when compared to
the same periods in the prior year. As stated below, the Partnership refinanced
its mortgage loan on the Property in January 2000.
An extraordinary loss of approximately $46,000 was recorded in the first quarter
due to the write-off of deferred loan costs associated with the payoff of the
mortgage loan with Home Federal Savings.
(c) LIQUIDITY AND CAPITAL RESOURCES
In January 2000, the Partnership paid its loan balance of $1,669,000 to Home
Federal Savings and entered into a loan agreement with General Electric Capital
Corporation (GECC) in the amount of $4,250,000. The lender funded $4,050,000 at
closing and held back $200,000 to be drawn upon to help finance future tenant
improvements and leasing costs. The Partnership received net proceeds of
$2,222,000 as a result of the new loan. The loan is secured by the Property and
bears interest at 2.75% above the GECC Composite Commercial Paper Rate.
Principal and interest payments are due monthly based on a 30-year amortization.
The loan matures January 31, 2005. The majority of the loan proceeds were
distributed to the minority owner of the property, Sierra Mira Mesa Partners
(SMMP). During the six months ended June 30, 2000, SMMP received distributions
totaling approximately $2,433,000 from the Partnership and made contributions
totaling approximately $78,000 to the Partnership.
The Partnership is in a liquid position at June 30, 2000 with cash and billed
receivables of approximately $124,000 and accrued and other liabilities of
approximately $108,000. A secondary source of cash is available through
contributions from SMMP.
The Partnership's primary capital requirements are for the construction of new
tenant space and debt obligations. It is anticipated that these requirements
will be funded from the operations of the Property, the $200,000 tenant
improvement/lease commission holdback and contributions from SMMP.
Inflation:
The Partnership does not expect inflation to be a material factor in its
operations in 2000.
3
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
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<TABLE>
<CAPTION>
JUNE 30, 2000
(UNAUDITED) DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................................................... $ 108,848 $ 134,154
Receivables:
Unbilled rent .................................................................... 52,726 51,981
Billed rent ...................................................................... 14,992 8,640
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,231,848 and $3,289,481,
respectively ...................................................................... 2,442,996 2,557,487
Other assets - net of accumulated amortization
of $187,078 and $263,977, respectively ............................................ 277,408 238,197
Excess distributions to minority Partner ............................................ 2,490,568 128,513
------------------ ------------------
Total Assets ........................................................................ $ 5,387,538 $ 3,118,972
================== ==================
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ....................................................... $ 108,346 $ 64,825
Notes payable ....................................................................... 4,040,218 1,673,186
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Total Liabilities ................................................................... 4,148,564 1,738,011
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Partners' equity (deficit):
General Partner ................................................................... (82,191) 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding .................................................................. 1,321,165 1,380,961
------------------ ------------------
Total Partners' equity .............................................................. 1,238,974 1,380,961
------------------ ------------------
Total Liabilities and Partners' equity .............................................. $ 5,387,538 $ 3,118,972
================== ==================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
AND FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
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<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ................................................ $ 489,777 $ 448,066 $ 260,337 $ 233,294
------------ ------------ ------------ ------------
Total revenues ....................................... 489,777 448,066 260,337 233,294
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses ........................................... 268,936 247,077 114,756 120,726
Depreciation and amortization ................................ 160,035 174,227 78,993 87,922
Interest ..................................................... 164,372 76,814 91,491 38,277
------------ ------------ ------------ ------------
Total costs and expenses ............................. 593,343 498,118 285,240 246,925
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY LOSS ................................. (103,566) (50,052) (24,903) (13,631)
EXTRAORDINARY LOSS FROM WRITE-OFF
OF DEFERRED LOAN COSTS ....................................... (46,020) 0 0 0
------------ ------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ........................... (149,586) (50,052) (24,903) (13,631)
------------ ------------ ------------ ------------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS .............................. 7,599 3,279 1,265 893
------------ ------------ ------------ ------------
NET LOSS ....................................................... $ (141,987) $ (46,773) $ (23,638) $ (12,738)
============ ============ ============ ============
Per limited partnership unit:
Loss before extraordinary loss ............................... $ (3.24) $ (1.59) $ (0.80) $ (0.43)
Extraordinary loss ........................................... (1.55) 0 0 0
------------ ------------ ------------ ------------
Net loss per limited partnership unit .......................... $ (4.79) $ (1.59) $ (0.80) $ (0.43)
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE SIX MONTHS ENDED JUNE 30, 2000
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<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, 1998) ........................................... (223.05) (6,547,484) $ 14,600 (6,532,884)
Cumulative distributions
(to December 31, 1998) ........................................... (166.75) (4,894,473) (14,600) (4,909,073)
------------ ------------ ------------ ------------
Partners' equity - January 1, 1999 ................................. 49.91 1,465,181 0 1,465,181
Net loss ........................................................... (2.87) (84,220) (84,220)
------------ ------------ ------------ ------------
Partners' equity - January 1, 2000 (audited) ....................... 47.04 1,380,961 0 1,380,961
Transfer among general partner and limited partners................. 2.26 80,771 (80,771) 0
Net loss (unaudited) ............................................... (4.79) (140,567) (1,420) (141,987)
------------ ------------ ------------ ------------
Partners' equity (deficit) - June 30, 2000 (unaudited) ............. $ 44.51 $ 1,321,165 $ (82,191) $ 1,238,974
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES
6
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................. $ (141,987) $ (46,773)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation and amortization .......................................................... 160,035 174,227
Extraordinary loss from write-off of deferred
loan costs ........................................................................... 46,020 0
Minority interest's share of consolidated
joint venture loss ................................................................... (7,599) (3,279)
(Increase) decrease in receivables ..................................................... (7,097) 4,186
Increase in other assets ............................................................... (18,339) (17,138)
Increase (decrease) in accrued and other liabilities ................................... 43,521 (13,463)
------------ ------------
Net cash provided by operating activities .............................................. 74,554 97,760
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions ........................................................ 0 (9,642)
------------ ------------
Net cash used in investing activities .................................................. 0 (9,642)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable secured by property ......................................... 4,050,000 0
Principal payments on notes payable .................................................... (1,682,968) (23,041)
Payments on deferred loan costs ........................................................ (112,436) 0
Contributions from minority partner .................................................... 78,091 0
Distributions to minority partner ...................................................... (2,432,547) 0
Loan to affiliate ...................................................................... 0 (47,000)
------------ ------------
Net cash used in financing activities .................................................. (99,860) (70,041)
------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS .................................................................... (25,306) 18,077
CASH AND CASH EQUIVALENTS
Beginning of period .................................................................... 134,154 83,408
------------ ------------
CASH AND CASH EQUIVALENTS
End of period .......................................................................... $ 108,848 $ 101,485
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for real estate taxes ....................................... $ 36,473 $ 36,816
============ ============
Cash paid during the period for interest ................................................ $ 146,360 $ 76,986
============ ============
</TABLE>
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1. ORGANIZATION
In February 1994, Sierra Pacific Development Fund (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 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.
Accordingly, on January 1, 2000, the Partnership's interest in Sierra Creekside
Partners was increased from 93.45% to 94.92% to reflect 1999 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 at June 30, 2000.
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, 2000 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, 1999.
3. RELATED PARTY TRANSACTIONS
Included in the financial statements for the six months ended June 30, 2000 and
1999 are affiliate transactions as follows:
June 30
-----------------------
2000 1999
-----------------------
Management fees $ 21,235 $ 20,245
Administrative fees 20,398 30,739
8
<PAGE>
Sierra Pacific Development Fund
Notes to Consolidated Financial Statements (Unaudited)
Page two
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.
During the quarter ended March 31, 2000, an amount was transferred between the
partners' equity accounts such that 99% of cumulative operating income, gains,
losses, deductions and credits of the Partnership is allocated among the limited
partners and 1% is allocated to the general partner. Management does not believe
that the effect of this transfer is significant.
5. PENDING TRANSACTION
CGS Real Estate Company, Inc. (CGS), an affiliate of the general partner, is in
the process of developing a plan pursuant to which the property owned by the
Partnership would be combined with the properties of other real estate
partnerships managed by CGS and its affiliates. These limited partnerships own
office properties, industrial properties, shopping centers, and residential
apartment properties. It is expected that the acquirer would in the future
qualify as a real estate investment trust. Limited partners would receive shares
of common stock in the acquirer, which would be listed on a national securities
exchange or the NASDAQ national market system.
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
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27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed in April 2000 reporting a change in the Partnership's
Certifying Accountant.
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 14, 2000 /s/ THOMAS N. THURBER
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Thomas N. Thurber
President and Director
Date: AUGUST 14, 2000 /s/ G. ANTHONY EPPOLITO
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G. Anthony Eppolito
Chief Accountant
10
