UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the year ended December 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
San Mateo, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (650) 343-9300 Securities
registered pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus dated November 10, 1982, filed pursuant to Rule 424(b), File no.
2-68265, is incorporated by reference in Part IV hereof.
Page 1 of 26
<PAGE>
PART I
Item 1. Business
Rancon Realty Fund I, a California Limited Partnership, (the Partnership) was
organized in accordance with the provisions of the California Uniform Limited
Partnership Act for the purpose of acquiring, developing, operating and
ultimately selling real property. The general partners of the Partnership are
Daniel L. Stephenson and Rancon Financial Corporation (RFC) (General Partners).
The Partnership was organized in 1980, and completed its public offerings of
limited partnership units (Units) in July 1983. As of December 31, 1997, 18,346
Units were issued and outstanding. The Partnership has no employees.
On February 12, 1997, the General Partners adopted a plan of orderly liquidation
of the Partnership's assets. During 1997, the Partnership sold one rental
property and approximately 13.9 acres of land. The remaining investments in real
estate at December 31, 1997 consist of one operating property and adjacent lots
which are being marketed for sale and are more fully described in Item 2. These
investments are classified as rental property and land held for sale on the
accompanying December 31, 1997 and 1996 balance sheets and are recorded at the
estimated fair value of the respective assets as of the valuation dates. The
carrying value of the investments in real estate at December 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.
Competition Within the Market
Management believes that characteristics influencing the competitiveness of a
real estate project are the geographic location of the property, the
professionalism of the property manager and the maintenance and appearance of
the property, in addition to external factors such as general economic
circumstances, trends, and the existence of new, competing properties in the
vicinity. Additional competitive factors with respect to commercial and
industrial properties are the ease of access to the property, the adequacy of
related facilities, such as parking, and the ability to provide rent concessions
and additional tenant improvements commensurate with local market conditions.
Such competition may lead to rent concessions that could adversely affect the
Partnership's cash flow. Although Management believes the Partnership operating
property is competitive with comparable properties as to those factors within
the Partnership's control, continued over-building and other external factors
could adversely affect the ability of the Partnership to attract and retain
tenants. The marketability of the properties may also be affected (either
positively or negatively) by these factors as well as by changes in general or
local economic conditions, including prevailing interest rates.
Working Capital
The Partnership's practice is to maintain cash reserves, when possible, for
normal repairs, replacements, working capital and other contingencies. The
Partnership knows of no statistical information which allows comparison of its
cash reserves to those of its competitors.
Item 2. Properties
The Partnership currently owns the properties listed below:
Encumbrances at
Name Location Type Size December 31, 1997
- ---- -------- ---- ---- -----------------
Mountain View Plaza
Shopping Center Mojave, CA Commercial 57,456 sq. ft. $1,791,000
Mountain View
Plaza lots Mojave, CA Unimproved lots 8.9 acres None
Page 2 of 26
<PAGE>
Mountain View Plaza Shopping Center
In July 1981, the Partnership acquired approximately 21.7 gross acres of
undeveloped land located in Mojave, Kern County, California for approximately
$1,625,000. Of the 21.7 acres acquired, the Partnership developed approximately
12.8 acres as a neighborhood shopping center consisting of a detached
30,000-square foot retail building, two single-story multi-tenant retail
buildings (9,534 square feet and 12,000 square feet, respectively), a
1,872-square foot fast food building and a 4,050-square foot family restaurant.
A sixth free-standing building, consisting of approximately 1,584 square feet,
was built and later sold to an unaffiliated purchaser on September 30, 1987. The
Partnership operates the neighborhood shopping center as rental property and
holds the balance of the land (approximately 8.9 acres) for sale.
Mountain View Plaza Shopping Center is constructed with masonry/concrete block
with stucco store fronts and Mexican tile overhangs, and is the only large
retail strip center in Mojave within a 15 mile radius. The property is located
in a very unpopulated area of Kern County. The population of Mojave is estimated
at 4,300 (based on Census information) with 1,561 households.
Due to the remote location of Mojave, the size of the trade area and the fact
that this is the only traditional retail center in Mojave, it is difficult to
identify a retail property that directly competes with Mountain View Plaza.
According to research conducted by the Partnership's property manager, the trade
market has approximately 432,000 square feet of leasable space, of which
approximately 12% is vacant. This vacancy rate is 2% higher than the average
vacancy rate of approximately 10% for grocery/drug anchored centers in Kern
County. The average asking rent of competitive centers in Bakersfield is
approximately $12.00 per square foot per year with landlords achieving $9.60 -
$11.40 effective rental rates plus operating expenses. Overall, the Mojave real
estate market is static. There has not been any noticable growth in the
commercial or residential markets in Mojave during 1997. Demographics show the
Landcaster/Palmdale Market will see growth before Mojave.
The occupancy level at December 31, (including tenants with ground leases)
expressed as a percentage of the total net rentable square feet, and the average
annual effective rent per square foot for the last five years were as follows:
Occupancy Level Average Annual Effective
Percentage Rent per Square Foot
--------------- ------------------------
1997 93% $ 6.59
1996 89% $ 6.61
1995 91% $ 7.39
1994 85% $ 7.56
1993 93% $ 7.56
There are two ground leases totaling 49,701 square feet at Mountain View Plaza
Shopping Center. These tenants are only obligated to pay their ground lease
payment plus pro-rata share of the common area expenses of the property.
The current annual rental rates range from $7.80 to $12.94 per square foot.
Page 3 of 26
<PAGE>
One tenant occupies more than ten percent of the net rentable square footage of
the building. The principal terms of the lease and the nature of the tenant's
business are as follows:
K-Mart
------
Nature of Business: Retail
Lease Term: 25 years
Expiration Date: October 31, 2007
Square Feet: 30,000
(% of rentable total): 28%
Annual Rent: $136,000
Rent Increase: Annual-CPI
Renewal Options: None
In 1993, K-Mart Corporation vacated the space at Mountain View Plaza Shopping
Center but has continued to meet its monthly rental obligations as set forth in
the lease agreement.
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Partnership has a single note payable secured by the
Mountain View Plaza Shopping Center in the amount of $1,791,000. The note
matures June 1, 2002.
During 1997, the Mountain View Plaza Shopping Center property was assessed
property taxes of approximately $24,000 based on a tax rate of 1.11%.
The unimproved lots include 7.7 acres located behind the Mountain View Shopping
Center, and 1.2 acres on two retail pads in front of the Center. The 1.2 acres
are suitable for fast food restaurants. There are no entitlements in place for
the 7.7 unimproved acres, and the Partnership has no plans to obtain them, since
current demand for office or industrial property in this market is minimal. The
property was acquired in 1982, and is zoned commercial. It suffers from poor
access and a significant drainage problem which limits current usage.
During 1997, the Mountain View Plaza unimproved lots were assessed property
taxes approximately $5,000 based on a tax rate of1.12%.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Page 4 of 26
<PAGE>
PART II
Item 5. Market for Partnership's Common Equity and Related Stock Holder Matters
Market Information
- ------------------
There is no established trading market for the Units.
Holders
- -------
As of December 31, 1997, a total of 2,478 persons (Limited Partners) held Units.
Distributions
- -------------
Distributions are paid from either Sale or Refinancing Proceeds or Cash
Available for Distribution.
Cash Available for Distribution is defined in the Partnership Agreement as all
cash flow of the Partnership, after deducting such funds used to pay debt
service, capital improvements and operating expenses, less adequate cash
reserves for obligations of the Partnership for which there is no provision. All
distributions of Cash Available for Distribution are divided in the ratio of 98%
to the Limited Partners and 2% to the General Partners.
Sale or Refinancing Proceeds is defined in the Partnership Agreement as the net
cash realized by the Partnership from the sale, disposition or refinancing of
any property after retirement of applicable mortgage debt and all expenses
related to the transaction. All distributions of Sale or Refinancing Proceeds
are allocated generally as follows (a more explicit statement of these
distribution policies is set forth in the Partnership Agreement):
(i) 100% to Limited Partners until they have received distributions from
Sale or Refinancing Proceeds totaling 100% of their capital contributions, plus
distributions from all sources equal to a 15% per annum cumulative noncompounded
return on their unreturned capital contributions and (ii) thereafter 80% to the
Limited Partners and 20% to the General Partners.
There were no distributions during the three most recent fiscal years.
Page 5 of 26
<PAGE>
Item 6. Selected Financial Data
The financial data should be read in conjunction with the financial statements
and related notes contained elsewhere in this report. This financial data is not
covered by the reports of the independent public accountants.
The following is selected financial data for the five years ended December 31,
(in thousands, except per Unit data).
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rental income $ 480 $ 515 $ 598 $ 632 $ 755
Net gain on sales of properties $ 1 $ 138 $ - $ - $ -
Provision for impairment of
investments in real estate $ (625) $ (513) $ - $ - $ (115)
Net loss $ (800) $ (803) $ (365) $ (395) $ (200)
Net loss allocable to
limited partners $ (784) $ (787) $ (358) $ (387) $ (196)
Net loss per limited
partnership unit $ (42.73) $ (42.90) $ (19.51) $ (21.07) $ (10.67)
Total assets $ 4,047 $ 4,877 $ 5,691 $ 6,155 $ 6,498
Long-term obligations $ 1,791 $ 1,821 $ 1,846 $ 1,868 $ 1,891
Cash distribution per
limited partnership unit $ - $ - $ - $ - $ -
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of operations
LIQUIDITY AND CAPITAL COMMITMENTS:
- ---------------------------------
As of December 31, 1997, the Partnership had cash of $1,924,000. The remainder
of the Partnership's assets consist primarily of it's investments in real
properties, all held for sale, which totaled approximately $1,805,000 at
December 31, 1997.
On February 12, 1997, the General Partners adopted a plan of orderly liquidation
of the Partnership's assets. During 1997, the Partnership sold one rental
property and approximately 13.9 acres of land. The remaining investments in real
estate at December 31, 1997 consist of one operating property and adjacent lots
which are being marketed for sale. These investments are classified as rental
property and land held for sale on the accompanying December 31, 1997 balance
sheet and are recorded at the estimated fair value of the respective assets. The
carrying value of the investments in real estate at December 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
Page 6 of 26
<PAGE>
property operations aswell as the Partnership's cash reserves and interest
income thereon have been used to pay expenses related to the Partnership's
administrative operations.
On August 1, 1997, the Partnership sold the Rancon Commerce Center Auto Service
Center and a Rancon Commerce Center lot to an unaffiliated third party for a
purchase price of $1,174,000 less commissions and other closing costs of
$81,000. The sale was an all cash sale and the Partnership has no continuing
obligations or involvement in the property. The Partnership realized net
proceeds of approximately $1,108,000 which were added to its cash reserves.
In December 1997, the Partnership sold the remaining 11.63 acres of the Rancon
Commerce Center lots through three separate transactions. The sales were to
unaffiliated parties for an aggregate sales price of $981,000, which included a
$300,000 note receivable. The Partnership realized $577,000 of net proceeds from
these sales which was added to the Partnership's cash reserves.
On January 16, 1998, the above mentioned $300,000 note receivable was sold to an
unaffiliated third party for $270,000. To adjust the carrying value of the note
to fair value, the Partnership recorded a provision for impairment of the note
receivable of $30,000 at December 31, 1997.
The Partnership has a single note payable, in the amount of $1,791,000 as of
December 31, 1997, which is 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 of the remaining real estate and net proceeds from
the sale of the assets will be sufficient to finance the cash requirements of
the Partnership until an orderly liquidation is completed.
RESULTS OF OPERATIONS:
- ---------------------
1997 vs. 1996
- -------------
Rental income and operating expenses decreased $35,000 or 7% and $55,000 or 21%,
respectively, from the year-end December 31, 1996 to the year-end December 31,
1997 primarily due to the sale of the Bowling Center on December 17, 1996 and
the sale of the Rancon Commerce Center Auto Service Center on August 1, 1997.
Interest and other income increased $35,000 or 350% from the year-ended December
31, 1996 to the year-ended December 31, 1997 primarily due to a $26,000 increase
in interest income as a result of higher invested cash balances in 1997. The
remaining increase in income resulted from a legal settlement from a former
tenant and the receipt of miscellaneous income of $3,000.
The 1997 net gain on sales of rental properties and land of $1,000 represents
the net gain on the sales of the Rancon Commerce Center Auto Service Center and
13.9 acres of Rancon Commerce Center lots. See Item 14 at Note 2 to the
Financial Statements for further discussion of these sales.
Depreciation and amortization expense decreased $192,000 or 96% from 1996 to
1997 as a result of ceasing depreciation on January 1, 1997 of assets classified
as held for sale and due to the sale of the Bowling Center property in December
1996.
In 1997, due to a decrease in the estimated fair value of the Rancon Commerce
Center lots and the Mountain View Plaza Shopping Center and adjacent lots, the
Partnership recorded provisions for impairment of these assets of $262,000 and
$363,000, respectively. See Item 14 at Note 2 to the financial statements for
further discussion on the provision for impairment of investments in real
estate.
Page 7 of 26
<PAGE>
At December 31, 1997, the Partnership held a $300,000 Promissory Note secured by
three Rancon Commerce Center lots totaling approximately 5.07 acres of land. On
January 16, 1998 the Partnership sold this note receivable to an unaffiliated
third party for $270,000. Accordingly, the Partnership recorded a provision to
impairment of the note receivable of $30,000 on the accompanying December 31,
1997 statement of operations.
General and administrative expenses decreased $28,000 or 11% during the
year-ended December 31, 1997 compared to the year-ended December 31, 1996. The
decrease is primarily due to the one-time payment of $7,000 for professional
services in 1996 rendered in connection with the valuation of the limited
partner interests combined with the decrease in tax preparation fees of $14,000
as a result of additional services incurred in 1996. In addition, administrative
overhead costs decreased approximately $8,000 in 1997 due to the sale of the
Bowling Center property in December 1996.
1996 vs. 1995
- -------------
Rental revenue decreased $83,000, or 14% in 1996 compared to 1995. The decrease
is a result of the slight decrease in occupancy at the Mountain View Plaza
resulting in vacancy loss of $17,000, combined with a $17,000 decrease in the
billing of prior year recoveries from 1995 to 1996. Recoverable expenses were
higher than budgeted in 1994 resulting in reconciliation of recoveries of
$33,000 in 1995 where as in 1996 the recoveries relating to 1995 expenses were
calculated to be $16,000. In addition, there was $12,000 of bad debt at Mountain
View Plaza recorded as a reduction to rental revenue in 1996.
As discussed in Note 2 of the Notes to Financial Statements, the sale of the
Bowling Center resulted in a gain of $138,000 and is included on the
Partnership's 1996 statement of operations.
Operating expenses decreased $49,000, or 16%, for the year ended December 31,
1996 compared to 1995 primarily due to a $16,000 reduction in real estate taxes
and a $7,000 refund of prior years real estate taxes combined with a reduction
in parking repairs and maintenance at Mountain View Plaza. In addition, the
management fee at Mountain View Plaza, which is based on collections, decreased
$5,000 due to the reduction in rental revenue, as previously discussed.
Depreciation and amortization expense remained consistent from 1995 to 1996.
During 1996, management concluded that the carrying value of the Partnership's
investment in Mountain View Plaza Shopping Center and adjacent lots were in
excess of their estimated fair value and a provision for impairment of the
investments in the amount of $513,000 was recorded.
General and administrative expense increased $31,000, or 14%, for the year ended
December 31, 1996 compared to 1995 primarily due to a one-time payment of $7,000
for fees rendered in connection with valuations of the limited partnership
interests and an increase in data processing charges of $7,000. In addition,
there was a $14,000 increase in general legal fees associated with administering
the Partnership's and properties' day-to-day affairs.
Year 2000 Compliance
- --------------------
The Partnership utilizes a number of computer software programs and operating
systems across its entire organization, including applications used in financial
business systems and various administrative functions. To the extent that the
Partnership's software applications contain a source code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of modification, or replacement of such applications will be necessary. The
Partnership has completed its identification of applications that are not yet
"Year 2000" compliant and has commenced modification or replacement of such
applications, as necessary. Given information known at this time about the
Partnership's systems that are non-compliant, coupled with the Partnership's
ongoing, normal course-of-business efforts to upgrade or replace critical
systems, as necessary, management does not expect "Year 2000" compliance
Page 8 of 26
<PAGE>
costs to have any material adverse impact on the Partnership's liquidity or
ongoing results of operations. No assurance can be given, however, that all of
the Partnership's systems will be "Year 2000" compliant or that compliance costs
or the impact of the Partnership's failure to achieve substantial "Year 2000"
compliance will not have a material adverse effect on the Partnership's future
liquidity or results of operations.
Item 8. Financial Statements and Supplementary Data
For information with respect to Item 8, see Financial Statements and Schedules
as listed in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure None.
Page 9 of 26
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership
Daniel Lee Stephenson and Rancon Financial Corporation (RFC) are the General
Partners of the Partnership. The executive officer and director of RFC is:
Daniel L. Stephenson Director, President, Chief Executive Officer and
Chief Financial Officer
There is no fixed term of office for Mr. Stephenson.
Mr. Stephenson, age 54, founded RFC (formerly known as Rancon Corporation) in
1971 for the purpose of establishing itself as a commercial, industrial and
residential property syndication, development and brokerage concern. Mr.
Stephenson has, from inception, held the position of Director. In addition, Mr.
Stephenson was President and Chief Executive Officer of RFC from 1971 to 1986,
from August 1991 to September 1992 and from March 31, 1995 to present. Mr.
Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm
which has acquired a portfolio of assets from the Resolution Trust Corporation.
Item 11. Executive Compensation
The Partnership has no executive officers. For information relating to fees,
compensation, reimbursements and distributions paid to related parties,
reference is made to Item 13 below.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
No person is known by the Partnership to be the beneficial owner of more than 5%
of the Units.
Security Ownership of Management
- --------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and Nature of
Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class
- -------------- ------------------------ -------------------- ----------------
Units Rancon Financial Corporation 95 Units (direct) Less than 1 percent
</TABLE>
Changes in Control
The Limited Partners have no right, power or authority to act for or bind the
Partnership. However, the Limited Partners have the power to vote upon the
following matters affecting the basic structure of the Partnership, each of
which shall require the approval of Limited Partners holding a majority of the
outstanding Units: (i) amendment of the Partnership Agreement; (ii) termination
and dissolution of the Partnership; (iii) sale, exchange or pledge of all or
substantially all of the assets of the Partnership; (iv) removal of the General
Partners or any successor General Partner; and (v) election of a new General
Partner or General Partners upon the removal, retirement, death, insanity,
insolvency, bankruptcy or dissolution of the General Partners or any successor
General Partner.
Item 13. Certain Relationships and Related Transactions
For the year ended December 31, 1997, the Partnership did not incur any costs
reimbursable to RFC.
Page 10 of 26
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of the report
(1)Financial Statements:
Report of Independent Public Accountants
Balance Sheets as of December 31, 1997 and 1996
Statements of Operations for the Years Ended December 31, 1997,
1996 and 1995
Statements of Partners' Equity (Deficit) for the Years Ended
December 31, 1997, 1996 and 1995
Statements of Cash Flows for the Years Ended December 31, 1997,
1996 and 1995
Notes to Financial Statements
(2)Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation as of
December 31, 1997 and Note thereto
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(3)Exhibits:
(3.1) Certificate and Agreement of Limited Partnership of the
Partnership, included as Exhibit A to the Prospectus dated
November 10, 1982, filed pursuant to Rule 424(b),File Number
2-68265, is incorporated as an Exhibit herein by reference.*
(27) Financial data schedule
* Included as an Exhibit in the Partnership's annual report on
Form 10-K for fiscal year ended December 31, 1992.
(b) Reports on Form 8-K
On January 13, 1998, the Partnership filed a Form 8-K announcing the
sale of three Rancon Commerce Center lots totaling 5.07 acres of
undeveloped land.
Page 11 of 26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership 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: March 30, 1998 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
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Partnership and in the
capacities and on the dates indicated.
Date: March 30, 1998 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
Page 12 of 26
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Public Accountants 14
Financial Statements:
Balance Sheets as of December 31, 1997 and 1996 15
Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 16
Statements of Partners' Equity (Deficit)
for the years ended December 31, 1997, 1996 and 1995 17
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 18
Notes to Financial Statements 19
Schedule:
III -Real Estate and Accumulated Depreciation
as of December 31, 1997 and Note thereto 26
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
Page 13 of 26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
RANCON REALTY FUND I, A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of RANCON REALTY FUND I, A
CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity (deficit) and cash flows for the
years ended December 31, 1997, 1996 and 1995. These financial statements and the
schedule referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RANCON REALTY FUND I, A
CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index to financial statements and schedule is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
San Francisco, California /s/Arther Andersen LLP
March 20, 1998
Page 14 of 26
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1997 and 1996
(in thousands, except units outstanding)
Assets 1997 1996
- ------ ---- ----
Investments in real estate:
Rental property held for sale $ 1,439 $ 2,563
Land held for sale 366 1,794
------------- -------------
Net real estate investments 1,805 4,357
Cash 1,924 467
Note receivable, net 270 -
Accounts receivable 16 10
Deferred financing costs and other fees, net
of accumulated amortization of $50 and $109
in 1997 and 1996, respectively 26 37
Other assets 6 6
------------- --------------
Total assets $ 4,047 $ 4,877
============= =============
Liabilities and Partners' Equity (Deficit)
- ------------------------------------------
Liabilities:
Note payable $ 1,791 1,821
Accounts payable and accrued expenses 40 23
Interest payable 14 21
Other liabilities 12 22
------------- -------------
Total liabilities 1,857 1,887
------------- -------------
Partners' Equity (Deficit):
General partners (35) (19)
Limited partners (18,346 limited partnership
Units outstanding at December 31, 1997 and
1996) 2,225 3,009
------------- -------------
Total partners' equity 2,190 2,990
------------- -------------
Total liabilities and partners' equity $ 4,047 $ 4,877
============= =============
The accompanying notes are an integral part of these financial statements.
Page 15 of 26
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
For the years ended December 31, 1997, 1996 and 1995
(in thousands, except per unit amounts)
1997 1996 1995
Revenue: ---- ---- ----
Rental income $ 480 $ 515 $ 598
Interest and other income 45 10 3
Net gain on sales of rental properties and land 1 138 -
-------- --------- -------
Total revenue 526 663 601
-------- --------- -------
Expenses:
Operating 209 264 313
Interest 179 188 183
Depreciation and amortization 7 199 205
Provision for impairment of investments in
real estate 625 513 -
Provision for impairment of note receivable 30 - -
General and administrative 223 251 220
Expenses associated with undeveloped land 53 51 45
--------- --------- --------
Total expenses 1,326 1,466 966
--------- --------- --------
Net loss $ (800) $ (803) $ (365)
========= ========= ========
Net loss per limited partnership unit $ (42.73) $ (42.90) $(19.51)
======== ========= ========
Weighted average number of limited
partnership units outstanding during the
period used to compute net loss per limited
partnership
unit 18,347 18,347 18,350
======= ======= =======
The accompanying notes are an integral part of these financial statements.
Page 16 of 26
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
For the years ended December 31, 1997,
1996 and 1995 (in thousands)
General Limited
Partners Partners Total
Balance at December 31, 1994 $ 4 $ 4,154 $ 4,158
Net loss (7) (358) (365)
---------- ----------- -----------
Balance at December 31, 1995 (3) 3,796 3,793
Net loss (16) (787) (803)
---------- ----------- -----------
Balance at December 31, 1996 (19) 3,009 2,990
Net Loss (16) (784) (800)
---------- ----------- -----------
Balance at December 31, 1997 $ (35) $ 2,225 $ 2,190
========== =========== ===========
The accompanying notes are an intergral part of these financial statements.
Page 17 of 26
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (800) $ (803) $ (365)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 7 199 205
Amortization of loan fees, included in interest expense 4 4 4
Gain on sale of rental properties and land (1) (138) -
Provision for impairment of investment in real estate 625 513 -
Provision for impairment of note receivable 30 - -
Changes in certain assets and liabilities:
Accounts receivable (6) 15 (8)
Deferred financing costs and other fees (8) (7) (1)
Other assets - - 9
Accounts payable and accrued expenses 17 3 20
Payable to sponsor - - (109)
Interest payable (7) 6 15
Other liabilities (10) 5 (3)
---------- --------- -----------
Net cash used for operating activities (149) (203) (233)
---------- --------- -----------
Cash flows from investing activities:
Additions to investments in real estate (24) (24) (47)
Proceeds from sale of property 1960 636 -
---------- --------- -----------
Net cash provided by (used for) investing activities 1936 612 (47)
---------- --------- -----------
Cash flows from financing activities:
Increase in note receivable (300) -- --
Notes payable principal payments (30) (25) (22)
Borrowings on unsecured note payable - 144 -
Repayment of unsecured note payable - (144) -
----------- --------- -----------
Net cash used for financing activities (330) (25) (22)
---------- --------- -----------
Net increase (decrease) in cash 1,457 384 (302)
Cash at beginning of year 467 83 385
--------- -------- ----------
Cash at end of year $ 1,924 $ 467 $ 83
========= ======== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 182 $ 178 $ 164
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 18 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Rancon Realty Fund I, a California Limited Partnership (the Partnership), was
organized in accordance with the provisions of the California Uniform Limited
Partnership Act for the purpose of acquiring, developing, operating and
ultimately selling real property. The General Partners of the Partnership are
Daniel L. Stephenson and Rancon Financial Corporation (RFC), herein referred to
as the Sponsor. RFC is wholly-owned by Daniel L. Stephenson. The Partnership
reached final funding in July, 1983. At December 31, 1997 and 1996, 18,346 Units
were issued and outstanding.
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.
Plan of Orderly Liquidation
- ---------------------------
On February 12, 1997, the General Partners adopted a plan of orderly liquidation
of the Partnership's assets. During 1997, the Partnership sold one rental
property and approximately 13.9 acres of land. The remaining investments in real
estate at December 31, 1997 consist of one rental property and the adjacent lots
(comprising approximately 8.9 acres). These investments are classified as
property and land held for sale on the Partnership's 1997 balance sheet and are
recorded at the estimated fair value of the respective asset. The carrying value
of the investments in real estate at December 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.
Management believes that the Partnership's available cash together with cash
generated from operations prior to sale of the real estate assets and net
proceeds upon sale will be sufficient to finance the cash requirements of the
Partnership until an orderly liquidation is completed.
General Partners and Management Matters
- ---------------------------------------
In December 1994, RFC entered into an agreement with Glenborough Corporation
(successor by merger 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 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 $151,000 in 1997 and $159,000 in 1996; (ii) sales
fees of 2% for improved properties and 4% for land; (iii) a refinancing fee of
1% and (iv) a management fee of 5% of gross rental receipts. As part of this
agreement, Glenborough will perform certain responsibilities for the General
Partners of the Rancon Partnerships. RFC has 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
or the Partnership.
Page 19 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
Significant Accounting Policies
- -------------------------------
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
rental properties held for sale.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
Rental Property Held for Sale - Rental property held for sale is stated at the
lower of cost or estimated fair value. Estimated fair value is computed using
estimated sales price or appraised value of the property less selling costs and
does not purport, for a specific property, to represent the sales price that the
Partnership could obtain from third parties for such property.
Land Held for Sale - Land held for sale is stated at the lower of cost or
estimated fair value. Estimated fair value is computed using estimated sales
price or appraised value of the land and does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property.
Deferred Costs - Deferred loan fees are being amortized over the life of the
related loans on a straight-line basis. Amortization expense, which is included
in interest expense, was $4,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Deferred lease commissions are amortized over the initial
fixed term of the related lease agreement. Amortization expense was $7,000,
$6,000 and $11,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Rental Income - Rental income is recognized as earned over the life of the
respective leases.
Page 20 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
Net Loss Per Limited Partnership Unit - Net loss per limited partnership unit is
calculated using the weighted average number of limited partnership units
outstanding during the period and the Limited Partners' share of the net loss.
Gain on Sale of Property - Revenue from the sale of a property is recognized at
the close of escrow, when title has passed, minimum down payment requirements
are met, the terms of any notes received by the Partnership satisfy continuing
payment requirements and the Partnership is relieved of any requirements for
continued involvement with the property.
Income Taxes - No provision for income taxes is included in the accompanying
financial statements, as the Partnership's results of operations are passed
through to the partners for inclusion in their respective income tax returns.
Net income (loss) and partners' equity (deficit) for financial reporting
purposes differs from the Partnership's income tax return because of different
accounting methods used for certain items, principally depreciation expense and
the provision for impairment of investments in real estate.
Note 2. INVESTMENTS IN REAL ESTATE
Rental property held for sale as of December 31, 1997 and 1996 is as follows:
1997 1996
---- ----
Land $ 210,000 $ 351,000
Buildings and improvements 2,468,000 4,048,000
Leasehold and improvements 119,000 116,000
--------------- ---------------
2,797,000 4,515,000
Accumulated depreciation (1,358,000) (1,952,000)
--------------- ---------------
Total $ 1,439,000 $ 2,563,000
=============== ===============
As of December 31, 1997, one of the Partnership's properties held for sale,
Mountain View Plaza, has been pledged as security for a trust deed note payable
(see Note 4).
Land held for sale as of December 31, 1997 and 1996 is as follows:
1997 1996
---- ----
8.9 acres in Mojave, California $ 366,000 $ 411,000
13.9 acres in Temecula, California - 1,383,000
--------------- ---------------
Total $ 366,000 $ 1,794,000
=============== ===============
The above unimproved land remains unencumbered at December 31, 1997.
In 1996, management concluded that the carrying value of the Partnership's
investment in Mountain View Plaza Shopping Center and adjacent lots was in
excess of its estimated fair value and a provision for impairment of the
investment in the amount of $513,000 was recorded.
On March 11, 1997, the Partnership entered into a Purchase and Sale Agreement
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 at a sale price of approximately $2,150,000. On April 15, 1997, the
Purchase and Sale Agreement expired; however, on June 3, 1997, the Partnership
entered into a Reinstatement of Agreement of Purchase and Sale with the
potential buyer at a reduced purchase price of
Page 21 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
$1,920,000. At December 31, 1997, the Agreement of Purchase and Sale again
expired. Subsequent to December 31, 1997, the potential buyer again expressed
interest in acquiring the property for $1,920,000; however, there is no formal
contract with the buyer. As of December 31, 1997, based on the potential sale
and current market conditions, management determined that the carrying value of
the Partnership's investment on Mountain View Plaza Shopping Center and adjacent
lots was in excess of its estimated fair value and a provision for impairment of
the investment in the amount of $363,000 was recorded.
Also during 1997, management concluded that the carrying value of the
Partnership's investments in the Rancon Commerce Center lots (which were sold in
August and December - see below) were in excess of their estimated fair value
and accordingly, a $262,000 provision for impairment of the investment in Rancon
Commerce Center lots was recorded.
On August 1, 1997, the Partnership sold the Rancon Commerce Center Auto Service
Center and a Rancon Commerce Center lot to an unaffiliated third party for
$1,174,000 and recognized a $116,000 gain on the sale which is included in the
accompanying 1997 statement of operations.
In December 1997, the Partnership sold a total of 11.63 acres of the Rancon
Commerce Center lots through three separate transactions. The sales were to
unaffiliated parties for an aggregate sales price of $981,000. The Partnership
recognized a net loss on these sales totaling $115,000 which is included in the
accompanying 1997 statement of operations.
On December 11, 1996, the Partnership sold the Bowling Center to an unaffiliated
third party for $700,000 and recognized a $138,000 gain on the sale of the
property which is included in the accompanying 1996 statement of operations.
Note 3. NOTE RECEIVABLE
At December 31, 1997, the Partnership held a $300,000 Promissory Note secured by
three Rancon Commerce Center lots totaling approximately 5.07 acres of land. On
January 16, 1998 the Partnership sold this note receivable to an unaffiliated
third party for $270,000. Accordingly, the Partnership recorded a provision to
impairment of the note receivable of $30,000 on the accompanying December 31,
1997 statement of operations.
Note 4. NOTE PAYABLE
The note payable with a balance of $1,791,000 and $1,821,000 at December 31,
1997 and 1996, respectively, collateralized by a first deed of trust on the
Mountain View Plaza property, bears interest at the weighted average cost of
savings, borrowings and advances for eleventh district members of the Federal
Home Loan Bank System (9.5% per annum at December 31, 1997 and 1996). Principal
and interest payments are due in monthly installments of approximately $17,000
and the remaining principal balance is due on June 1, 2002.
During 1996, the Partnership entered into an unsecured note payable with
Glenborough in the amount of $144,000 to finance operating costs in excess of
revenues. The loan accrued interest at 10% and was due and payable September
1998. In December 1996, the Partnership paid off the loan with the proceeds from
the sale of the Bowling Center.
Page 22 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31,1997,1996 and 1995
The aggregate annual maturities of the remaining note payable for the years
subsequent to December 31, 1997 are as follows:
1998 $ 33,000
1999 36,000
2000 39,000
2001 44,000
2002 1,639,000
--------------
Total $ 1,791,000
==============
Note 5. LEASES
The Partnership's rental properties are leased under operating leases that
expire at various dates through October 2007. In addition to basic monthly
rentals, some of the leases provide for additional rents based upon a percentage
of sales levels attained by the retail tenants. Minimum future rental income on
non-cancelable operating leases as of December 31, 1997 is as follows:
1998 $ 306,000
1999 235,000
2000 211,000
2001 202,000
2002 187,000
Thereafter 962,000
---------------
Total $ 2,103,000
===============
Included in the future rental income stated above is $1,337,000 of rents from
K-Mart who although vacated its space in 1993, continues to meet its monthly
rental obligations pursuant to its lease.
Note 6. TAXABLE INCOME
The Partnership's tax returns, the qualification of the Partnership as a
partnership for federal income tax purposes, and the amount of income or loss
are subject to examination by federal and state taxing authorities. If such
examinations result in changes to the Partnership's taxable income or loss, the
tax liability of the partners could change accordingly.
The Partnership's tax returns are filed on a calendar year basis. As such, the
following is a reconciliation of the net income for financial reporting purposes
to the estimated taxable income, for the years ended December 31, 1997, 1996 and
1995, determined in accordance with accounting practices used in preparation of
federal income tax returns (in thousands).
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net loss per financial statements $ (800) (803) $ (365)
Tax reporting depreciation in excess
of financial reporting depreciation (223) (110) (114)
Provision for impairment of investments
in real estate 625 513 -
Page 23 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
Tax reporting gain on sale in excess
of financial reporting -- 136 -
Financial reporting property tax expense
in excess of tax reporting 5 16 -
Operating expenses recognized in a
different period for financial
reporting than for income tax reporting, net 181 6 (116)
------------ ------------ ------------
Estimated net loss for federal
income tax purposes $ (212) $ (242) $ (595)
============= ============ ============
</TABLE>
The following is a reconciliation, as of December 31, 1997 and 1996, of
partner's equity for financial reporting purposes to estimated partners' equity
for federal income tax purposes (in thousands).
1997 1996
---- ----
Partners' equity per financial statements $ 2,190 $ 2,990
Cumulative provision for impairment of
investment in real estate 1,138 513
Tax reporting depreciation in excess of
financial reporting depreciation (1,655) (1,432)
Financial reporting property tax expense
in excess of tax reporting 21 16
Operating expenses recognized in a
different period for financial reporting
than for income tax reporting, net 161 6
Other, net (28) (54)
-------------- -------------
Estimated partners' equity for
federal income tax purposes $ 1,827 $ 2,039
============== =============
Page 24 of 26
<PAGE>
RANCON REALTY FUND I
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- ----------------------------------------------------------------------------------------------------------------
Cost Capitalized
Initial Cost to Subsequent to
Partnership Acquisition
--------------- ----------------
Buildings
and Carrying
Description Encumbrances Land Improvements Improvements Cost
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental property held for sale:
Kern County, California
Retail Shopping Center
Mountain View Plaza $ 1,821 $ 271 $ - $ 3,297 $ -
Less: Provision for impairment of
investment in real estate(4) - (61) - (710) -
----------- -------- ----------- -------------- --------
1,821 210 - 2,587 -
----------- -------- ----------- -------------- --------
Land Held for sale:
Kern County, California
Unimproved lots - (3) 40 - 431 -
Less: Provision for imapirment of
investment in real estate (4) - - - (105)
------------ ------- ----------- ------------ ---------
- 40 - 326 -
------------ ------- ----------- ------------ ---------
$ 1,821 $ 250 $ - $ 2,913 $ -
----------- ------- ----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ---------------------------------------------------------------------------------------------------------------------------------
Gross Amount Carried
at December 31, 1996
----------------------
Building Date Life
and (1) Accumulated Construction Date Depreciated
Description Land Improvements Total Depreciation Began Acquired Over (2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental property held for sale:
Kern County, California
Retail Shopping Center
Mountain View Plaza $ 271 $ 3,297 $ 3,568 $ 1,358 9/82 7/81 Various
Less: Provision for impairment of
investment in real estate(4) (61) (710) (771) -
-------- ------------- -------- -----------
210 2,587 2,797 1,358
-------- ------------- -------- -----------
Land Held for sale:
Kern County, California
Unimproved lots 40 431 471 N/A N/A N/A N/A
Less: Provision for imapirment of
investment in real estate (4) - - (105) (105) -
-------- ------------ -------- -----------
40 326 366
-------- ------------ -------- -----------
$ 250 $ 2,913 $ 3,163 $ 1,358
-------- ------------ -------- -----------
</TABLE>
(1) The aggregate cost for Federal income tax purposes is $ 3,409.
(2) Buildings depreciated over 30-40 years, tenant improvements depreciated over
5-10 years.
(3) Encumbered by same deed of trust as appears under Mountain View Plaza.
(4) See Note 2 to Financial Statements
Page 25 of 26
<PAGE>
RANCON REALTY FUND I,
A California Limited Partnership
NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
Reconciliation of gross amount at which real estate was carried:
<TABLE>
<CAPTION>
For the years ended December 31,
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
INVESTMENT IN REAL ESTATE
Balance at beginning of period $ 6,309 $ 7,809 $ 7,762
Additions (deletions) during period:
Improvements 24 24 47
Property dispositions (2,545) (1,011) -
Provision for impairment of
investments in real estate (625) (513) -
-------------- -------------- --------------
Balance at end of period $ 3,163 $ 6,309 $ 7,809
============== ============== ==============
ACCUMULATED DEPRECIATION
Balance at beginning of period $ 1,952 $ 2,270 $ 2,076
Additions charged to expense - 193 194
Property dispositions (594) (511) -
-------------- -------------- --------------
Balance at end of period $ 1,358 $ 1,952 $ 2,270
============== ============= =============
</TABLE>
Page 26 of 26
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701637
<NAME> RANCON REALTY FUND I
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 1924
<SECURITIES> 0
<RECEIVABLES> 16
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1930
<PP&E> 1805
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,047
<CURRENT-LIABILITIES> 52
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,190
<TOTAL-LIABILITY-AND-EQUITY> 4,047
<SALES> 0
<TOTAL-REVENUES> 526
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,149
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179
<INCOME-PRETAX> (800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (800)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
