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, 1998
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)
(650) 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, 1998: 18,346
Page 1 of 11
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
Assets
Investments in real estate:
Rental property held for sale $ 1,439 $ 1,439
Land held for sale 366 366
-------------- --------------
Net real estate investments 1,805 1,805
Cash and cash equivalents 2,148 1,924
Note receivable, net -- 270
Accounts receivable 23 16
Deferred financing costs and other fees,
net of accumulated amortization of $51
and $50 at March 31, 1998 and December 31,
1997, respectively 25 26
Other assets 7 6
-------------- ---------------
Total assets $ 4,008 $ 4,047
============== ==============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Note payable $ 1,783 $ 1,791
Accounts payable and accrued expenses 23 40
Interest payable 14 14
Other liabilities 12 12
-------------- --------------
Total liabilities 1,832 1,857
-------------- --------------
Partners' Equity (Deficit):
General partners (35) (35)
Limited partners, 18,346 limited partnership
units outstanding at March 31, 1998 and
December 31, 1997 2,211 2,225
-------------- --------------
Total partners' equity 2,176 2,190
-------------- --------------
Total liabilities and partners' equity $ 4,008 $ 4,047
============== ==============
</TABLE>
See accompanying notes to financial Statements.
Page 2 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
Three months ended
March 31,
----------------------
1998 1997
----------------------
Revenue:
Rental income $ 92 $ 130
Interest and other income 25 1
-------- --------
Total revenue 117 131
-------- --------
Expenses:
Operating 38 59
Interest 44 44
Depreciation and amortization -- 1
General and administrative 42 59
Expenses associated with undeveloped land 7 12
-------- --------
Total expenses 131 175
-------- --------
Net loss $ (14) $ (44)
======== ========
Net loss per limited partnership unit $ (0.76) $ (2.34)
========= =========
Weighted average number of limited partnership
units outstanding during the period used to
compute net loss per limited partnership unit 18,346 18,346
======== ========
See accompanying notes to financialstatements.
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, 1998 and 1997
(in thousands)
(Unaudited)
General Limited
Partners Partners Total
-------------- ----------- -------------
Balance at December 31, 1997 $ (35) $ 2,225 $ 2,190
Net loss -- (14) (14)
------------- ------------ -------------
Balance at March 31, 1998 $ (35) $ 2,211 $ 2,176
============= ============ =============
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
============= ============ =============
See accompanying notes to financialstatements.
Page 4 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
(in thousands)
(Unaudited)
Three months ended
March 31,
---------------------
1998 1997
---------------------
Cash flows from operating activities:
Net loss $ (14) $ (44)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization -- 1
Amortization of loan fees, included in
interest expense 1 1
Changes in certain assets and liabilities:
Accounts receivable (7)
Other assets (1) 4
Accounts payable and accrued expenses (17) (1)
------- ------
Net cash used for operating activities 38) (39)
------- ------
Cash flows from investing activities:
Additions to real estate -- (2)
Collection of note receivable 270 --
------- -------
Net cash provided by (used for) investing activitieS 270 (2)
------- -------
Cash flows from financing activities:
Note payable principal payments (8) (8)
------- -------
Net cash used for financing activities (8) (8)
------- -------
Net increase (decrease) in cash and cash equivalents 224 (49)
Cash and cash equivalents at beginning of period 1,924 467
------- -------
Cash and cash equivalents at end of period 2,148 418
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 43 $ 49
======= =======
See accompanying notes to financialstatements.
Page 5 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1998
(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 Corporation (successor by merger with Glenborough
Inland Realty Corporation) ("Glenborough"), 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, 1998 and
December 31, 1997, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the three months ended March 31,
1998 and 1997.
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. During 1997, the Partnership sold one rental
property and approximately 13.9 acres of land. The remaining investments in real
estate consist of one rented 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 March 31, 1998 and December 31, 1997 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, 1998 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.
Effective January 1, 1995, RFC entered into an agreement with 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. Effective January 1, 1998, the
agreement was amended to eliminate Glenborough's responsibility for providing
investor relation services. According to the contract, the Partnership will pay
Glenborough for its services as follows: (i) a specified asset administration
fee which is fixed for five years subject to reduction in the year following the
sale of assets; currently $126,000 per year, (ii) sales fees of 2% for improved
properties and 4% for land; (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
Page 6 of 11
<PAGE>
RANCON REALTY FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1998
(Unaudited)
the limited partners to substitute itselfas the Sponsor for the Rancon
Partnerships. Glenborough is not an affiliate of RFC or the Partnership.
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 1997 balances have been reclassified to conform with
the current period presentation.
Note 2. REFERENCE TO 1997 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the 1997 audited financial statements.
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.
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, 1998 and its results of operations for the three months ended March
31, 1998 and 1997. This information should be read in conjunction with the
Partnership's audited December 31, 1997 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, 1998, the Partnership had cash of $2,148,000. The remainder of
the Partnership's assets consist primarily of its investments in real estate,
all held for sale, which totaled approximately $1,805,000 at March 31, 1998.
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 consist of one rented property and the adjacent lots (comprising
approximately 8.9 acres). These investments are classified as rental property
and land held for sale on the accompanying March 31, 1998 and December 31, 1997
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, 1998
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.
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.
The Partnership has a single note payable, in the amount of $1,783,000 which is
secured by Mountain View Plaza Shopping Center and matures on June 1, 2002.
Meanwhile, as of April 1998, the Partnership has discontinued the payment of
debt service on the loan although, as of the date of this filing, the
Partnership has not received a Notice of Default or a Notice of Foreclosure from
the secured lender. The Partnership is currently negotiating with a third party
buyer for the sale of the Mountain View Plaza Shopping Center and the adjacent
lots. The
Page 8 of 11
<PAGE>
Partnership plans to pay-off the loan if a purchase and sale agreement can be
reached with the third party buyer and the sale closes. If this asset cannot be
sold by year-end we will abandon this asset and terminate the partnership.
Management believes that the Partnership's available cash 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, 1998 decreased $38,000, or
29%, compared to the three months ended March 31, 1997 primarily due to the sale
of the Rancon Commerce Center Auto Service Center on August 1, 1997. Occupancy
rates at Mountain View Plaza Shopping Center as of March 31, 1998 and March 31,
1997 were 93% and 90%, respectively.
Interest and other income increased $24,000 during the three months ended March
31, 1998 compared to the same period in 1997 due to interest earned on invested
cash balances.
The decrease in operating expenses of $21,000 or 36% is primarily due to the
sale of the Rancon Commerce Center Auto Service Center.
General and administrative expenses decreased $17,000 or 29% for the three
months ended March 31, 1998 compared to the three months ended March 31, 1997
due to a reduction in administrative overhead costs of $8,000 as a result of the
sale of Rancon Commerce Center Auto Service, a decrease of $3,000 for a one-time
data processing charge, a decrease of $3,000 in professional services and a
$3,000 decrease in miscellaneous expenses.
The decrease in expenses associated with undeveloped land of $7,000 or 42% is
primarily due to the 1997 sales of the Rancon Commerce Center lots.
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 14, 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 of
Rancon Realty Fund I,
a California Limited Partner
Page 11 of 11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701637
<NAME> RANCON REALTY FUND I
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 2,148
<SECURITIES> 0
<RECEIVABLES> 23
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,155
<PP&E> 1,805
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,008
<CURRENT-LIABILITIES> 35
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,176
<TOTAL-LIABILITY-AND-EQUITY> 4,008
<SALES> 0
<TOTAL-REVENUES> 117
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 87
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> (14)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
