FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended September 30, 1998
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Commission file number 0-14269
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SIERRA PACIFIC PENSION INVESTORS `84
(A LIMITED PARTNERSHIP)
State of California 33-0043952
------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
------------------------------- ------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (713) 706-6271
------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are submitted in the next pages:
PAGE
NUMBER
Balance Sheets - September 30, 1998 and December 31, 1997 .............. 4
Statements of Operations - For the Nine Months Ended
September 30, 1998 and 1997 and for the Three Months
Ended September 30, 1998 and 1997 ...................................... 5
Statements of Changes in Partners' Equity - From June 5, 1984
(inception of the Partnership) to December 31, 1997 and for the
Nine Months Ended September 30, 1998 ................................... 6
Statements of Cash Flows - For the Nine Months Ended
September 30, 1998 and 1997 ............................................ 7
Notes to Financial Statements .......................................... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) OVERVIEW
The following discussion should be read in conjunction with the Partnership's
Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.
The Partnership currently owns one property, Sierra Valencia. In addition, the
Partnership holds a 66.26% interest in Sierra Mira Mesa Partners ("SMMP").
(b) RESULTS OF OPERATIONS
Rental income for the first nine months of the year increased by $19,000, or 5%,
when compared to the corresponding period in the prior year, principally due to
occupancy fluctuations and increased rental rates. One tenant, whose lease
accounted for 9,700 square feet, vacated in August 1997. This space was
re-leased in November 1997 at a higher rate. In addition, 8,000 square feet was
leased in June 1998 to partially occupy space vacated by a tenant who had
downsized in the second quarter. Rental income for the three months ended
September 30, 1998 increased by $22,000 or 18%, primarily due
2
<PAGE>
to the occupancy fluctuations and higher rental rates on new leases. The
Property was 86% occupied at September 30, 1998.
Operating expenses for the nine months ended September 30, 1998 increased by
$5,000, or 2%, in comparison to the corresponding period in the prior year,
primarily attributable to an increase in auditing and maintenance and repair
costs. This increase was partially offset by a decrease in legal fees incurred
during the period. Operating expenses for the three months ended September 30,
1998 increased by $16,000, or 19%, principally due to higher administrative
costs and maintenance and repairs.
Depreciation and amortization expenses for the nine months ended September 30,
1998 increased by $19,000, or 11%, when compared to the corresponding period in
1997, primarily due to additional capitalized tenant improvements and deferred
loan costs. Depreciation and amortization expenses for the three months ended
September 30, 1998 increased by $5,000, or 8% principally due to the additional
capitalized tenant improvements.
The Partnership recognized interest expense in the amount of $112,000 for the
nine months ended September 30, 1998 in comparison to $77,000 for the same
period in the prior year. Two loan agreements were entered into by the
Partnership in 1997. The loans are secured by the Sierra Valencia property. The
Property was previously unencumbered.
The Partnership's share of income (loss) from investment in SMMP was $153,000
for the nine months ended September 30, 1998 compared to ($190,000) for the same
period in the prior year. The Partnership overstated its share of unconsolidated
joint venture loss $76,000 in the prior year. An adjustment was recorded in
1998. SMMP generated income for the nine months and three months ended September
30, 1998. SMMP recorded a loss for the same periods in 1997.
(c) LIQUIDITY AND CAPITAL
During 1997, the Partnership entered into two loan agreements totaling
$1,604,000. The loans are secured by the Sierra Valencia property. The proceeds
of these loans were primarily used to satisfy the liquidity requirements of
SMMP.
As of September 30, 1998, the Partnership is in an illiquid position with cash
of $26,000 and current liabilities of $132,000. The Partnership anticipates cash
required to meet debt obligations and for the construction of new tenant space
will be funded from the operations of the Property and distributions from SMMP.
3
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
September 30, 1998 and December 31, 1997
----------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
ASSETS
<S> <C> <C>
Cash and cash equivalents .......................... $ 25,518 $ 27,154
Receivables:
Note receivable, net of deferred gain of $215,786 2,005,498 2,005,498
Unbilled rent ................................... 41,816 45,846
Billed rent ..................................... 0 4,186
Other ........................................... 166,596 0
Due from affiliate ................................. 47,466 47,466
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,691,235 and $3,557,364,
respectively ..................................... 1,262,717 1,372,623
Investment in unconsolidated joint venture ......... 6,870,946 6,720,551
Other assets ....................................... 276,775 251,676
------------- -------------
Total Assets ....................................... $ 10,697,332 $ 10,475,000
============= =============
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ...................... $ 132,257 $ 108,044
Due to affiliate ................................... 160,500 0
Notes payable ...................................... 1,505,201 1,562,134
------------- -------------
Total Liabilities .................................. 1,797,958 1,670,178
------------- -------------
Partners' equity:
General Partner .................................. 0 0
Limited Partners:
80,000 units authorized,
77,000 issued and outstanding .................. 8,899,374 8,804,822
------------- -------------
Total Partners' equity ............................. 8,899,374 8,804,822
------------- -------------
Total Liabilities and Partners' equity ............. $ 10,697,332 $ 10,475,000
============= =============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1998 and 1997
and for the Three Months Ended September 30, 1998 and 1997
----------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income .............................. $ 369,030 $ 350,272 $ 138,641 $ 117,063
Interest income ............................ 166,603 147,346 55,534 50,250
--------- --------- --------- ---------
Total revenues .................... 535,633 497,618 194,175 167,313
--------- --------- --------- ---------
EXPENSES:
Operating expenses ......................... 290,562 285,996 99,772 83,973
Depreciation and amortization .............. 192,290 172,938 64,140 59,175
Interest expense ........................... 111,639 77,325 36,647 38,725
--------- --------- --------- ---------
Total costs and expenses .......... 594,491 536,259 200,559 181,873
--------- --------- --------- ---------
LOSS BEFORE PARTNERSHIP'S SHARE
OF JOINT VENTURE INCOME (LOSS) ............. (58,858) (38,641) (6,384) (14,560)
PARTNERSHIP'S SHARE OF UNCONSOLIDATED
JOINT VENTURE INCOME (LOSS) ................ 153,410 (190,957) 27,917 (55,273)
--------- --------- --------- ---------
NET INCOME (LOSS) ............................ $ 94,552 $(229,598) $ 21,533 $ (69,833)
========= ========= ========= =========
Net income (loss) per limited partnership unit $ 1.23 $ (2.98) $ 0.28 $ (0.91)
========= ========= ========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
From June 5, 1984 (Inception of Partnership) to December 31, 1997
and for the Nine Months Ended September 30, 1998
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners Total
----------------------- General Partners'
Per Unit Total Partner Equity
-------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Proceeds from sale of
partnership units ................. $ 250.00 $ 19,418,250 $ 19,418,250
Underwriting commissions
and other organization expenses ... (37.34) (2,894,014) (2,894,014)
Repurchase of 665 partnership units . (0.03) (151,621) (151,621)
Cumulative net (loss) income
(to December 31, 1997) ............ (76.85) (5,917,787) $ 133,334 (5,784,453)
Cumulative distributions
(to December 31, 1997) ............ (21.43) (1,650,006) (133,334) (1,783,340)
-------- ------------ --------- ------------
Partners' equity - January 1, 1998 .. 114.35 8,804,822 0 8,804,822
Net income .......................... 1.23 94,552 94,552
-------- ------------ --------- ------------
Partners' equity - September 30, 1998 $ 115.58 $ 8,899,374 $ 0 $ 8,899,374
======== ============ ========= ============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
6
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
-----------------------------------------------------
1998 1997
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................ $ 94,552 $ (229,598)
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation and amortization .................. 192,290 172,938
Undistributed (income) loss of
unconsolidated joint venture ................. (153,410) 190,957
Decrease in rent receivable .................... 8,216 13,722
Increase in other receivables .................. (166,596) (98,068)
Increase in other assets ....................... (61,854) (205,177)
Increase in accrued and other liabilites ....... 24,213 107,555
--------- -----------
Net cash used in operating activities .......... (62,589) (47,671)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions ................ (42,614) (57,555)
Capital contributions to unconsolidated
joint venture ................................ 0 (1,311,300)
--------- -----------
Net cash used in investing activities .......... (42,614) (1,368,855)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Funding of note payable secured by property .... 0 1,604,000
Principal payments on notes payable ............ (56,933) (23,846)
Repayment of loans to affiliate ................ 0 1,311,300
Loan from affiliate ............................ 160,500 0
Loan to affiliate .............................. 0 (1,459,043)
Cash distributions ............................. 0 (50,000)
--------- -----------
Net cash provided by financing activities ...... 103,567 1,382,411
--------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS ............................ (1,636) (34,115)
CASH AND CASH EQUIVALENTS - Beginning of period .... 27,154 42,060
--------- -----------
CASH AND CASH EQUIVALENTS - End of period .......... $ 25,518 $ 7,945
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest ....... $ 112,313 $ 64,711
========= ===========
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC PENSION INVESTORS `84
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. BASIS OF FINANCIAL STATEMENTS
In the opinion of the Partnership's management, these unaudited financial
statements reflect all adjustments which are necessary for a fair presentation
of its financial position at September 30, 1998 and results of operations and
cash flows for the periods presented. All adjustments included in these
statements are of a normal and recurring nature. These financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Annual Report of the Partnership for the year ended December
31, 1997.
2. RELATED PARTY TRANSACTIONS
In 1994, all of the common stock of TCP, Inc. was purchased by Finance Factors,
Inc. from Carlsberg Management Company ("CMC"). TCP, Inc. owns all of the common
stock of S-P Properties, Inc., the General Partner of the Partnership. CMC
continued to manage the affairs of the Partnership through March 31, 1995.
Included in the financial statements for the nine months ended September 30,
1998 and 1997 are affiliate transactions as follows:
September 30
-----------------------
1998 1997
------- -------
Management fees ................................ $13,693 $14,789
Administrative fees ............................ 50,493 48,207
Leasing fees ................................... 0 19,109
Construction supervision fees .................. 0 5,012
3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
Sierra Mira Mesa Partners ("SMMP") was formed in 1985 between the Partnership
and Sierra Pacific Development Fund II ("SPDFII"), an affiliate, to develop and
operate the real property known as Sierra Mira Mesa, an office building, located
in San Diego, California. The Partnership's initial ownership interest in SMMP
was 49%; the remaining 51% was owned by SPDFII. Effective December 31, 1996, the
general partners amended the partnership agreement to allow for adjustments in
the sharing ratio each year based upon the relative net contributions and
distributions since inception of each general partner. At September 30, 1998 the
Partnership's interest in SMMP was 66.26%; the remaining 33.74% interest is
owned by SPDFII.
UNAUDITED
8
<PAGE>
Sierra Pacific Pension Investors '84
Notes to Financial Statements
Page two
The consolidated financial statements of SMMP include the accounts of SMMP and
Sorrento I Partners, a majority owned California general partnership. Summarized
income statement information for SMMP for the nine months ended September 30,
1998 and 1997 follows:
September 30
-------------------------------
1998 1997
----------- -----------
Rental income ......................... $ 1,402,947 $ 1,436,848
Total revenues ........................ 1,556,950 1,566,402
Operating expenses .................... 571,196 537,379
Share of unconsolidated
joint venture loss .................. 101,443 348,525
Net income (loss) ..................... 116,785 (295,813)
As of September 30, 1998, SMMP holds a 33.55% interest in Sorrento II Partners
("SIIP"), a California general partnership with Sierra Pacific Institutional
Properties V formed in 1993; a 9.33% interest in Sierra Creekside Partners
("SCP"), a California general partnership with Sierra Pacific Development Fund
formed in 1994; and a 34.51% interest in Sierra Vista Partners ("SVP"), a
California general partnership with Sierra Pacific Development Fund III formed
in 1994.
Summarized income statement information for these Partnerships, which are
accounted for by SMMP under the equity method, for the nine months ended
September 30, 1998 and 1997 follows:
SIIP
------------------------------
September 30
------------------------------
1998 1997
--------- ---------
Rental income ........................ $ 554,735 $ 736,809
Total revenues ....................... 554,735 736,809
Operating expenses ................... 292,399 300,806
Net loss ............................. (350,695) (187,160)
UNAUDITED
9
<PAGE>
Sierra Pacific Pension Investors '84
Notes to Financial Statements
Page three
SCP SVP
----------------------- ----------------------
September 30 September 30
----------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Rental income ........... $ 706,189 $ 557,954 $ 0 $ 566,780
Total revenues .......... 706,189 557,954 93,656 567,413
Operating expenses ...... 357,587 377,391 33,075 418,057
Net (loss) income ....... (50,279) (257,921) 60,581 (614,475)
4. PARTNERS' EQUITY
Equity and net income (loss) per limited partnership unit is determined by
dividing the Limited Partners' share of the Partnership's equity and net income
(loss) by the number of limited partnership units outstanding, 77,000.
UNAUDITED
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K.
Exhibit
Number Description of Exhibit
- ---------- -----------------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
SIERRA PACIFIC PENSION INVESTORS `84
a Limited Partnership
S-P PROPERTIES, INC.
General Partner
Date: NOVEMBER 10, 1998 /S/ THOMAS N. THURBER
-----------------------
Thomas N. Thurber
President and Director
Date: NOVEMBER 10, 1998 /S/ G. ANTHONY EPPOLITO
-----------------------
G. Anthony Eppolito
Chief Accountant
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC PENSION INVESTORS '84 SEPTEMBER 30, 1998 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 25,518
<SECURITIES> 0
<RECEIVABLES> 208,411
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 239,580
<PP&E> 4,953,952
<DEPRECIATION> 3,691,235
<TOTAL-ASSETS> 1,262,717
<CURRENT-LIABILITIES> 132,257
<BONDS> 1,505,201
0
0
<COMMON> 0
<OTHER-SE> 8,899,374
<TOTAL-LIABILITY-AND-EQUITY> 10,697,332
<SALES> 369,030
<TOTAL-REVENUES> 535,633
<CGS> 0
<TOTAL-COSTS> 290,562
<OTHER-EXPENSES> 192,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,639
<INCOME-PRETAX> 94,552
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,552
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
