UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 No.)
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, 1997: 18,346
Page 1 of 11
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Assets
Investments in real estate:
Rental property held for sale $ 2,565 $ 2,563
Land held for sale 1,794 1,794
-------------- --------------
Net real estate investments 4,359 4,357
Cash 418 467
Deferred financing costs and other fees,
net of accumulated amortization of
$111 and $109 at March 31, 1997
and December 31, 1996, respectively 35 37
Other assets 12 16
-------------- --------------
Total assets $ 4,824 $ 4,877
============== ==============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Note payable $ 1,813 $ 1,821
Accounts payable and other liabilities 65 66
-------------- --------------
Total liabilities 1,878 1,887
-------------- --------------
Partners' Equity (Deficit):
General partners (20) (19)
Limited partners, 18,346 limited partnership
units outstanding at March 31, 1997 and
December 31, 1996 2,966 3,009
-------------- --------------
Total partners' equity 2,946 2,990
-------------- --------------
Total liabilities and partners' equity $ 4,824 $ 4,877
============== ==============
</TABLE>
See accompanying notes to financial statements.
Page 2 of 11
<PAGE>
<TABLE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
<CAPTION>
Three months ended
March 31,
1997 1996
<S> <C> <C>
Revenue:
Rental income $ 130 $ 128
Interest and other income 1 10
-------- --------
Total revenue 131 138
-------- --------
Expenses:
Operating 59 77
Interest 44 45
Depreciation and amortization 1 49
General and administrative 59 57
Expenses associated with undeveloped land 12 16
-------- --------
Total expenses 175 244
-------- --------
Net loss $ (44) $ (106)
======== ========
Net loss per limited partnership unit $ (2.34) $ (5.66)
======== ========
Weighted average number of limited partnership
units outstanding during the period used to
compute net loss per limited partnership unit 18,346 18,359
======== ========
</TABLE>
See accompanying notes to financial statements.
Page 3 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
For the three months ended March 31, 1997 and 1996
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
<S> <C> <C> <C>
Balance at December 31, 1996 $ (19) $ 3,009 $ 2,990
Net loss (1) (43) (44)
------------- ------------ -------------
Balance at March 31, 1997 $ (20) $ 2,966 $ 2,946
============= ============ =============
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
============= ============ =============
</TABLE>
See accompanying notes to financial statements.
Page 4 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows (in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (44) $ (106)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 1 49
Amortization of loan fees, included in
interest expense 1 1
Changes in certain assets and liabilities:
Other assets 4 15
Accounts payable and other liabilities (1) 17
---------- ----------
Net cash used for operating activities (39) (24)
---------- ----------
Cash flows from investing activities:
Additions to real estate (2) (13)
---------- ----------
Net cash used for investing activities (2) (13)
---------- ----------
Cash flows from financing activities:
Note payable principal payments (8) (6)
---------- ----------
Net cash used for financing activities (8) (6)
---------- ----------
Net decrease in cash (49) (43)
Cash at beginning of period 467 83
---------- ----------
Cash at end of period $ 418 $ 40
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 49 $ 45
========== ==========
</TABLE>
See accompanying notes to financial statements.
Page 5 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Rancon Financial Corporation (RFC) and Daniel Lee Stephenson
(the Sponsors) and Glenborough Inland Realty Corporation, 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, 1997 and December 31, 1996, and the related statements of operations,
changes in partners' equity and cash flows for the three months ended March 31,
1997 and 1996.
Allocation of profits, losses, cash distributions from operations and cash
distributions from sales 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.
On February 12, 1997, the general partners adopted a plan of orderly liquidation
of the Partnership's assets. Accordingly, all investments in real estate are
currently being marketed for sale. These investments are classified as property
and land held for sale on the Partnership's March 31, 1997 and December 31, 1996
balance sheets and are recorded at the estimated fair value of the respective
asset. The carrying value of the investments in real estate at March 31, 1997
does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to 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 until 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, currently $151,000 per
year, which is fixed for five years 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.
Page 6 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
(Unaudited)
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles under the presumption that the Partnership will continue
as a going concern. As discussed above, on February 12, 1997, the general
partners adopted a plan of orderly liquidation of the Partnership's assets.
However, the liquidation proceeds and the timing thereof are not currently
estimable. Once such liquidation proceeds and the cost and timing of the
liquidation become determinable, the Partnership will commence reporting on the
liquidation basis of accounting whereby remaining assets will be presented at
the estimated realizable value and remaining liabilities, including a provision
for the estimated costs of the plan, will be presented at the estimated
settlement value. Accordingly, the accompanying financial statements do not
provide for any adjustments relating to the aforementioned plan of orderly
liquidation. Effective January 1, 1997, the Partnership ceased depreciation of
the rental properties held for sale.
Reclassification - Certain 1996 balances have been reclassified to conform with
the current period presentation.
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the 1996 audited financial statements.
Page 7 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
INTRODUCTION
The following discussion addresses the Partnership's financial condition at
March 31, 1997 and its results of operations for the three months ended March
31, 1997 and 1996. This information should be read in conjunction with the
Partnership's audited December 31, 1996 Consolidated Financial Statements, notes
thereto and other information contained elsewhere in this report.
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, 1997, the Partnership had cash of $418,000. The remainder of the
Partnership's assets consist primarily of its investments in real estate, all
held for sale, which totaled approximately $4,359,000 at March 31, 1997.
On February 12, 1997, the General Partners adopted a plan of orderly liquidation
of the Partnership's assets. Accordingly, all investments in real estate are
currently being marketed for sale. These investments are classified as rental
property and land held for sale on the accompanying March 31, 1997 and December
31, 1996 balance sheets and are recorded at the estimated fair value of the
respective assets. The carrying value of the investments in real estate at March
31, 1997 does not purport to represent the ultimate sales price the Partnership
will realize from the disposition of these assets nor are the amounts reflected
in the accompanying financial statements intended to represent the ultimate
amount to be distributed to partners.
The Partnership's sources of funds have included mortgage indebtedness, property
operations, and property sales. 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.
All of the Partnership's assets are located within the Inland Empire, a
submarket of Southern California, and have been directly affected by the
economic weakness of the region. Management believes, however, that the market
has flattened and is no longer falling in terms of sales prices. While prices
have not increased significantly, the Southern California real estate market
appears to be improving.
The Partnership currently owns the following properties: Mountain View Plaza
Shopping Center (a 57,456 square foot shopping center and approximately 8.9
acres of undeveloped land), the Rancon Commerce Center Auto Service Center (a
25,761 square foot commercial/industrial center), and the Rancon Commerce Center
lots (7 undeveloped lots totaling approximately 13.9 acres).
Page 8 of 11
<PAGE>
The Rancon Commerce Center lots have entitlements in place for commercial or
industrial use within the Rancon Commerce Center. In November 1996, a new 100
year flood plan map was completed and released as part of the Murrieta Creek
Flood Control Project. The Rancon Commerce Center lots, which are adjacent to
the creek, are shown to be outside the flood plan. The proposed channel design
that benefits the Partnership's lots must still be approved and this may take as
long as three to four years.
On February 3, 1997, the Partnership entered into a letter of intent with an
unaffiliated third party for the sale of Mountain View Plaza Shopping Center and
the adjacent land. The sale was expected to be completed by April 15, 1997 for a
purchase price of approximately $2,150,000. On April 15, 1997, the letter of
intent expired; however, the Partnership remains in negotiations with the
potential buyer which may result in a reduced purchase price. The Partnership
would pay-off the related debt on the Mountain View Shopping Center property
with the proceeds from the sale.
The Partnership has a single note payable in the amount of $1,813,000 at March
31, 1997 secured by Mountain View Plaza Shopping Center. The note does not
mature until 2002.
Management believes that the Partnership's available cash together with the cash
generated by the operations prior to sales of the real estate and net proceeds
upon the sales of the assets will be sufficient to finance the cash requirements
of the Partnership until an orderly liquidation is completed.
RESULTS OF OPERATIONS
Rental income for the three months ended March 31, 1997 was consistent with the
three months ended March 31, 1996. Occupancy rates as of March 31, 1997 and
March 31, 1996 were 90% and 91%, respectively, for the Mountain View Plaza
Shopping Center and 91% and 78%, respectively, for the Auto Service Center.
Although total rental income remained consistent, the rental income at the Auto
Service Center increased slightly with the addition of a new tenant in late
1996. This increase is offset by the decrease in rental income at the Mountain
View Plaza as a result of a new tenant paying a lower rental rate per square
foot than the previous tenant that occupied the space in 1996.
Interest and other income decreased $9,000 for the first quarter of 1997
compared to the first quarter of 1996, primarily due to a one-time settlement
fee of $10,000 received in 1996 from once potential buyers of the Bowling Center
property which sold in December 1996.
The decrease in operating expenses of $18,000 or 23% is primarily due to costs
incurred in 1996 when the Partnership obtained appraisals of the rental
properties.
Depreciation and amortization expense decreased $48,000 or 98% in 1997 compared
to 1996 as a result of ceasing depreciation on January 1, 1997, of assets
classified as held for sale.
The decrease in expenses associated with undeveloped land of $4,000 or 25% is
primarily due to costs incurred in 1996 when the Partnership obtained appraisals
of the undeveloped land.
Page 9 of 11
<PAGE>
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:
#27 - Financial data schedule.
(b) Reports on Form 8-K:
None.
Page 10 of 11
<PAGE>
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: May 15, 1997 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 Partner
Page 11 of 11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701637
<NAME> Rancon Realty Fund I
<MULTIPLIER> 1,000
<CURRENCY> u.s. dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 418
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 430
<PP&E> 4359
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,824
<CURRENT-LIABILITIES> 65
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,946
<TOTAL-LIABILITY-AND-EQUITY> 4,824
<SALES> 0
<TOTAL-REVENUES> 131
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> (44)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
