FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________ to ____________
Commission File number: 0-10363
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
California 95-3523265
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification)
400 South El Camino Real, Suite 1100
San Mateo, California 94402- 1708
(Address of principal executive offices) (Zip Code)
(415) 343-9300
(Registrant's telephone number)
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
Total number of units outstanding as of March 31, 1996: 18,359
NO EXHIBIT INDEX REQUIRED
Page 1 of 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
Assets 1996 1995
------- -------- ---------
Real estate investments:
Land $ 421 $ 421
Buildings and improvements, net of
accumulated depreciation of $2,318
and $2,270 at March 31, 1996 and
December 31, 1995, respectively 3,234 3,283
Land held for development 1,849 1,835
------ ------
Net real estate investments 5,504 5,539
Cash and cash equivalents 40 83
Receivables 6 25
Other assets, net of accumulated
amortization of $168 and $167 at
March 31, 1996 and December 31,
1995 46 44
------ ------
Total assets $ 5,596 $ 5,691
====== ======
Liabilities and Partners' Equity (Deficit)
------------------------------------------
Accounts payable and accrued expenses $ 52 $ 35
Trust deed notes payable 1,840 1,846
Other liabilities 17 17
------ ------
Total liabilities 1,909 1,898
------ ------
Partners' Equity (Deficit):
General partners (5) (3)
Limited partners (18,359 limited
partnership units outstanding in
1996 and 1995, respectively) 3,692 3,796
------ ------
Total partners' equity 3,687 3,793
------ ------
Total liabilities and partners' equity $ 5,596 $ 5,691
====== ======
See accompanying notes to financial statements.
Page 2 of 11
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended
March 31,
----------------
1996 1995
------ ------
Revenues:
Rental income $ 128 $ 195
Interest and other income 10 1
------ ------
Total revenues 138 196
------ ------
Costs and expenses:
Operating 93 83
Depreciation and amortization 50 55
Administrative 57 58
Interest 44 44
------ ------
Total costs and expenses 244 240
------ ------
Net loss $ (106) $ (44)
====== ======
Net loss per Limited Partnership Unit $ (5.66) $ (2.34)
====== ======
Weighted average number of limited partnership
Units outstanding during each period used to
compute net loss per limited partnership unit 18,359 18,359
====== ======
See accompanying notes to financial statements.
Page 3 of 11
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
(in thousands)
(Unaudited)
General Limited
Partners Partners Total
-------- -------- ------
Balance at December 31, 1994 4 4,154 4,158
Net loss (1) (43) (44)
------ ------ ------
Balance at March 31, 1995 $ 3 $ 4,111 $ 4,114
====== ====== ======
Balance at December 31, 1995 (3) 3,796 3,793
Net loss (2) (104) (106)
------ ------ ------
Balance at March 31, 1996 $ (5)$ 3,692 $ 3,687
====== ====== ======
See accompanying notes to financial statements.
Page 4 of 11
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows (in thousands)
(Unaudited)
Three Months Ended
March 31,
------------
1996 1995
------ ------
Cash flows provided by (used for)
operating activities:
Net loss $ (106) $ (44)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Depreciation and amortization 50 55
Changes in certain assets and
liabilities:
Receivables 19 (25)
Other assets (4) 6
Payable to Sponsor (109)
Accounts payable and accrued
expenses 17 56
------ ------
Net cash used for operating
activities (24) (61)
------ ------
Cash Flows From Investing Activities:
Additions to investments in real
estate and development costs (13) (1)
------ ------
Cash Flows From Financing Activities:
Principal payments on notes payable (6) (5)
------ ------
Net decrease in cash (43) (67)
Cash at beginning of period 83 385
------ ------
Cash at end of period $ 40 $ 318
====== ======
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 45 $ 29
====== ======
See accompanying notes to financial statements.
Page 5 of 11
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Rancon Financial Corporation and Daniel Lee
Stephenson (the Sponsors) and Glenborough Inland Realty
Corporation, collectively referred to as management, the
accompanying unaudited financial statements contain all
adjustments (consisting of only normal accruals) necessary to
present fairly the financial position of Rancon Realty Fund I, A
California Limited Partnership (the Partnership) as of March 31,
1996 and December 31, 1995, and the related statements of
operations, changes in partners' equity, and cash flows for the
three months ended March 31, 1996 and 1995.
Allocation of profits, losses, cash distributions from operations
and cash distributions from sale or financing are made pursuant
to the terms of the Partnership Agreement which generally
allocates such items 98% to the limited partners and 2% to the
General Partners.
In December, 1994, RFC entered into an agreement with Glenborough
Inland Realty Corporation (Glenborough) whereby RFC sold to
Glenborough the contract to perform the rights and
responsibilities under RFC's agreement with the Partnership and
other related Partnerships (collectively, the Rancon
Partnerships) to perform or contract on the Partnership's behalf
for financial, accounting, data processing, marketing, legal,
investor relations, asset and development management and
consulting services for the Partnership for a period of ten years
or to the liquidation of the Partnership, whichever comes first.
According to the contract, the Partnership will pay Glenborough
for its services as follows: (i) a specified asset administration
fee of $159,000 per year, which is fixed for five years and
subject to reduction in the year following the sale of assets;
(ii) sales fees of 2% for improved properties; (iii) a
refinancing fee of 2% and (iv) a management fee of 5% of gross
rental receipts. As part of this agreement, Glenborough will
perform certain responsibilities for the General Partner of the
Rancon Partnerships and RFC agreed to cooperate with Glenborough,
should Glenborough attempt to obtain a majority vote of the
limited partners to substitute itself as the Sponsor for the
Rancon Partnerships. This agreement was effective January 1,
1995. Glenborough is not an affiliate of RFC.
As a result of this agreement, RFC terminated several of its
employees between December 31, 1994 and February 28, 1995. Also
as a result of this agreement, certain of the officers of RFC
resigned from their positions effective February 28, 1995, March
31, 1995 and July 1, 1995.
Page 6 of 11
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Reclassification - Certain 1995 balances have been reclassified
to conform with the current year presentation.
Note 2. REFERENCE TO 1995 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in
conjunction with the Notes to Financial Statements included in
the 1995 audited financial statements.
Page 7 of 11
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results
LIQUIDITY AND CAPITAL RESOURCES
Rancon Realty Fund I, a California Limited Partnership (the
Partnership) completed its public offerings of limited
partnership units (Units) in the amount of $15,981,000 (net of
selling and organization expenses) in July, 1983. As of March
31, 1996, the Partnership had cash of $40,000. The remainder of
the Partnership's assets consist primarily of its investments in
properties, which totaled approximately $5,504,000 at March 31,
1996.
The Partnership's primary source of funds has consisted of the
proceeds of its public offerings of Units. Other sources of
funds have included mortgage indebtedness, property operations,
property sales and interest income on deposits of funds invested
temporarily, pending their use in the development of properties.
Funds from property operations consist of cash generated from
rental activities reduced by related rental expenses and costs
associated with obtaining tenants. Net cash generated by
property operations as well as the Partnership's cash reserves
and interest income thereon have been used to pay expenses
related to the Partnership's administrative operations.
A majority of the Partnership's assets are located within the
Inland Empire submarket of the Southern California region. The
Southern California regional economy in general, and the real
estate industry in particular, are considered to be in a
recessionary cycle. Consequently, the operations of the
Partnership continue to be affected by the economic weakness of
the real estate industry in Southern California.
The Partnership currently owns the following properties:
Mountain View Plaza Shopping Center (57,456 leasable square feet
and 8.9 acres of undeveloped land), the Bowling Center (24,402
leasable square feet), the Auto Center (25,760 leasable square
feet), and the Rancon Commerce Center lots (7 undeveloped lots
totaling approximately 13.9 acres).
In 1994, the company that owned and operated the business at the
Bowling Center, one of the Partnership's three operating
properties, attempted to sell the business without success. The
lien holder on the equipment within the Bowling Center
repossessed and removed the equipment from the building. The
Partnership has determined that the property is not viable as a
bowling center and has elected to change its use to industrial
and market the property for rental or sale. The Partnership
continues to attempt to lease and is also currently soliciting
interest in the Bowling Center. The proceeds from a sale of the
property would be used to either paydown the Partnership's debt
or replenish reserves, which may eventually be used to fund
future development costs of the Partnership's undeveloped land.
The Rancon Commerce Center lots which are adjacent to Murrieta
Creek, cannot be developed until either a) the final location of
Page 8 of 11
the creek realignment has been determined by the Flood Control
District or b) until an alternative economic method of
eliminating the flood hazard which affects these lots has been
developed. Either alternative may take as long as a couple of
years.
The Partnership has a single note payable, in the amount of
$1,840,000 as of March 31, 1995, which is secured by Mountain
View Plaza Shopping Center. The note does not mature until 2002.
Cash generated by rental activities during 1996 when combined
with cash on hand may not be adequate to cover the Partnership's
projected expenditures for 1996. The GPs are currently
considering the best action to take to satisfy this possible
shortfall. Options being considered include; (i) selling a
portion of the unimproved land; (ii) obtaining a working capital
line of credit; (iii) obtaining a new loan secured by the Auto
Center, and (iv) sale of the Mountain View Shopping Plaza, in
order to generate sufficient cash proceeds to place the
Partnership in a position to cover its projected expenditures.
The Partnership will continue to monitor market conditions in
order to sell its remaining properties for the best obtainable
price during fiscal years 1996 through 1999 as conditions allow.
RESULTS OF OPERATIONS
Rental income for the three months ended March 31, 1996 decreased
$67,000 or 34% compared to the three months ended March 31, 1995.
This decrease is the result of a slight decrease in occupancy at
Mountain View Plaza combined with the billing of prior year
recoveries in 1995 that was not been billed in the first quarter
of 1996. Occupancy rates as of March 31, 1996 were 91%, 78% and
0% for the Mountain View Plaza, Auto Care Centers and Bowling
Center, respectively, compared to 93%, 78% and 0%, respectively,
for the same periods in 1995.
Interest and other income increased $9,000 when comparing 1996
and 1995 due to a one-time settlement fee of $10,000 from
potential buyers of the Bowling Center site as a result of
breaking their contract.
Operating expenses for the three months ended March 31, 1996
increased by $10,000 or 12% compared to the three months ended
March 31, 1995. The increase is due to the costs incurred
related to appraisals of the Bowling Center and the unimproved
land.
Depreciation and amortization expense decreased $5,000, or 9%, as
compared to the same period in 1995 as a result of certain assets
becoming fully amortized.
General and administrative costs remained consistent for the
three months ended March 31, 1996 compared to 1995.
Page 9 of 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
Page 10 of 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RANCON REALTY FUND I,
a California Limited Partnership
(Registrant)
Date: By: /s/ DANIEL L. STEPHENSON
Daniel L. Stephenson, General Partner and
Director, President, Chief Executive
Officer and Chief Financial Officer of
Rancon Financial Corporation,
General Partner of
Rancon Realty Fund I,
a California Limited Partnership
Page 11 of 11
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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<PP&E> 7822
<DEPRECIATION> (2318)
<TOTAL-ASSETS> 5596
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0
0
<OTHER-SE> 3687
<TOTAL-LIABILITY-AND-EQUITY> 1909
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