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 March 31, 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
- -------------------------------------- -----------------------------------
(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 - March 31, 2000 and December 31, 1999 ....... 4
Consolidated Statements of Operations - For the Three Months
Ended March 31, 2000 and 1999 ............................................ 5
Consolidated Statements of Changes in Partners' Equity - For
the Year Ended December 31, 1999 and for the Three Months Ended
March 31, 2000 ........................................................... 6
Consolidated Statements of Cash Flows - For the Three Months
Ended March 31, 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 three months ended March 31, 2000 increased by
approximately $15,000, or 7%, when compared to the corresponding period in the
prior year, primarily due to higher occupancy and rental rates. Occupancy at the
Property increased from 96% at March 31, 1999 to 100% at March 31, 2000.
2
<PAGE>
Operating expenses for the three months ended March 31, 2000 increased by
approximately $28,000, or 22%, in comparison to the same period in 1999. This
increase was principally due to higher maintenance and repair costs and
utilities. In addition, data processing and accounting and auditing costs rose
during the quarter.
Interest expense of approximately $73,000 was recorded during the first quarter
compared to approximately $39,000 for the same period 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 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).
The Partnership is in an illiquid position at March 31, 2000 with cash of
approximately $82,000 and accrued and other liabilities of approximately
$132,000. However, a 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
MARCH 31, 2000 AND DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents .................................................................... $ 82,081 $ 134,154
Receivables:
Unbilled rent ............................................................................. 51,068 51,981
Billed rent ............................................................................... 0 8,640
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,343,695 and $3,289,481,
respectively ............................................................................... 2,497,050 2,557,487
Other assets - net of accumulated amortization
of $248,218 and $263,977, respectively...................................................... 315,574 238,197
Excess distributions to minority Partner ..................................................... 2,496,394 128,513
--------------- ---------------
Total Assets ................................................................................. $ 5,442,167 $ 3,118,972
=============== ===============
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ................................................................ $ 132,001 $ 64,825
Notes payable ................................................................................ 4,047,554 1,673,186
--------------- ---------------
Total Liabilities ............................................................................ 4,179,555 1,738,011
--------------- ---------------
Partners' equity (deficit):
General Partner ............................................................................ (81,954) 0
Limited Partners:
30,000 units authorized,
29,354 issued and
outstanding ........................................................................... 1,344,566 1,380,961
--------------- ---------------
Total Partners' equity ....................................................................... 1,262,612 1,380,961
--------------- ---------------
Total Liabilities and Partners' equity ....................................................... $ 5,442,167 $ 3,118,972
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Rental income .............................................................................. $ 229,440 $ 214,772
--------------- ---------------
Total revenues ..................................................................... 229,440 214,772
--------------- ---------------
EXPENSES:
Operating expenses ......................................................................... 154,180 126,351
Depreciation and amortization .............................................................. 81,042 86,305
Interest ................................................................................... 72,881 38,537
--------------- ---------------
Total costs and expenses ........................................................... 308,103 251,193
--------------- ---------------
LOSS BEFORE EXTRAORDINARY LOSS ............................................................... (78,663) (36,421)
EXTRAORDINARY LOSS FROM WRITE-OFF
OF DEFERRED LOAN COSTS ..................................................................... (46,020) 0
--------------- ---------------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ......................................................... (124,683) (36,421)
--------------- ---------------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS ............................................................ 6,334 2,386
--------------- ---------------
NET LOSS ..................................................................................... $ (118,349) $ (34,035)
=============== ===============
Per limited partnership unit:
Loss before extraordinary loss ............................................................. (2.44) (1.16)
Extraordinary loss ......................................................................... (1.55) 0
--------------- ---------------
Net loss per limited partnership unit ........................................................ $ (3.99) $ (1.16)
=============== ===============
</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 THREE MONTHS ENDED MARCH 31, 2000
- --------------------------------------------------------------------------------
<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, 1999) .............................. (225.92) (6,631,704) $ 14,600 (6,617,104)
Cumulative distributions
(to December 31, 1999) .............................. (166.75) (4,894,473) (14,600) (4,909,073)
--------------- --------------- --------------- ---------------
Partners' equity - January 1, 2000 (audited) .......... 47.04 1,380,961 0 1,380,961
Cumulative adjustment of net loss allocation .......... 2.26 80,771 (80,771) 0
Net loss (unaudited) .................................. (3.99) (117,166) (1,183) (118,349)
--------------- --------------- --------------- ---------------
Partners' equity (deficit) - March 31, 2000 (unaudited) $ 45.31 $ 1,344,566 $ (81,954) $ 1,262,612
=============== =============== =============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
6
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................... $ (118,349) $ (34,035)
Adjustments to reconcile net loss
to cash (used in) provided by operating activities:
Depreciation and amortization ............................................................ 81,042 86,305
Extraordinary loss from write-off of deferred
loan costs ............................................................................. 46,020 0
Minority interest's share of consolidated
joint venture loss ..................................................................... (6,334) (2,386)
Decrease (increase) in receivables ....................................................... 9,553 (2,724)
Increase in other assets ................................................................. (31,566) (11,329)
Increase in accrued and other liabilities ................................................ 67,176 54,690
--------------- ---------------
Net cash (used in) provided by operating activities ...................................... 47,542 90,521
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable secured by property ........................................... 4,050,000 0
Principal payments on notes payable ...................................................... (1,675,632) (11,391)
Payments on deferred loan costs .......................................................... (112,436) 0
Distributions to minority partner ........................................................ (2,361,547) 0
Loan to affiliate ........................................................................ 0 (78,000)
--------------- ---------------
Net cash used in financing activities .................................................... (99,615) (89,391)
--------------- ---------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ...................................................................... (52,073) 1,130
CASH AND CASH EQUIVALENTS
Beginning of period ...................................................................... 134,154 83,408
--------------- ---------------
CASH AND CASH EQUIVALENTS
End of period ............................................................................ $ 82,081 $ 84,538
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest .................................................. $ 55,108 $ 38,622
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC DEVELOPMENT FUND
(A LIMITED PARTNERSHIP)
---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
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 March 31, 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 March 31, 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 three months ended March 31, 2000
and 1999 are affiliate transactions as follows:
MARCH 31
-----------------------
2000 1999
---------- ----------
Management fees $ 10,987 $ 9,324
Administrative fees 10,632 8,936
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.
Partners' equity accounts have been adjusted to reflect an allocation of
cumulative net loss to the partners in accordance with the agreement of limited
partnership. This agreement provides that 99% of operating income, gains,
losses, deductions and credits of the Partnership shall be allocated among the
limited partners and 1% be allocated to the general partner.
Prior year balances have not been adjusted because management does not believe
that the effects of these adjustments are significant to the prior year
partners' equity balances.
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
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: MAY 10, 2000 /S/ THOMAS N. THURBER
------------ -----------------------------------------------
Thomas N. Thurber
President and Director
Date: MAY 10, 2000 /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 MARCH 31, 2000 FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 82,081
<SECURITIES> 0
<RECEIVABLES> 51,068
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82,081
<PP&E> 5,840,745
<DEPRECIATION> 3,343,695
<TOTAL-ASSETS> 5,442,167
<CURRENT-LIABILITIES> 132,001
<BONDS> 4,047,554
0
0
<COMMON> 0
<OTHER-SE> 1,262,612
<TOTAL-LIABILITY-AND-EQUITY> 5,442,167
<SALES> 229,440
<TOTAL-REVENUES> 229,440
<CGS> 0
<TOTAL-COSTS> 154,180
<OTHER-EXPENSES> 81,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,881
<INCOME-PRETAX> (118,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (72,329)
<DISCONTINUED> 0
<EXTRAORDINARY> (46,020)
<CHANGES> 0
<NET-INCOME> (118,349)
<EPS-BASIC> (4.03)
<EPS-DILUTED> (4.03)
</TABLE>
