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 March 31, 1999
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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 offices) (Zip Code)
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 - March 31, 1999 and December 31, 1998 5
Statements of Operations - For the Three Months Ended March 31, 1999
and 1998 6
Statements of Changes in Partners' Equity - From June 5, 1984 (inception
of the Partnership) to December 31, 1998 and for the Three Months Ended
March 31, 1999 7
Statements of Cash Flows - for the Three Months Ended March 31, 1999 and
1998 8
Notes to Financial Statements 9
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 66.99% interest in Sierra Mira Mesa Partners ("SMMP").
(b) RESULTS OF OPERATIONS
Rental income for the three months ended March 31, 1999 increased by $22,000, or
19%, when compared to the corresponding period in the prior year, primarily due
to higher rental rates. Further, billing credits were given to tenants in the
first quarter of the prior year due to common area maintenance fees being lower
than anticipated in 1997. The Property was 100% occupied at March 31, 1999.
2
<PAGE>
Operating expenses for the three months ended March 31, 1999 increased by
$10,000, or 8%, principally due to an increase in data processing fees and other
general and administrative costs incurred during the quarter.
Depreciation and amortization expenses for the three months ended March 31, 1999
increased by $4,000, or 6%, when compared to the corresponding period in 1998,
due to additional capitalized tenant improvements and leasing costs.
The Partnership's share of income from investment in SMMP was $59,000 for the
three months ended March 31, 1999 compared to $81,000 for the same period in the
1998. SMMP increased its income for the three months ended March 31, 1999,
however, the Partnership had overstated its share of loss from investment in
SMMP in 1997 and recorded a $76,000 adjustment in the first quarter of 1998.
(c) LIQUIDITY AND CAPITAL
As of March 31, 1999, the Partnership is in an illiquid position. Total cash and
billed receivables amount to $7,000 compared to $141,000 of accrued and other
liabilities. 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.
(d) YEAR 2000 COMPLIANCE
The Year 2000 Compliance issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. As a result,
many companies' software and computer systems may need to be upgraded or
replaced in order to comply with Year 2000 requirements.
The Partnership employs a property management company to manage, operate and
lease the property. The management company believes it will be ready for the
Year 2000 date change by the end of 1999. The impact of Year 2000 non-compliance
by other third parties cannot accurately be gauged.
The total cost to the Partnership of activities associated with Year 2000
Compliance is not anticipated to be material to its financial position or
results of operations in any given year. In January 1999, the Partnership began
utilizing a new software program to maintain books and records. The new software
program is Year 2000 compliant.
The total amount of potential risk that would be reasonably likely to result
from Year 2000 failures cannot presently be estimated. In the event the
Partnership does not properly identify Year 2000 issues in a timely manner,
there can be no assurance that Year 2000 issues will not materially affect the
Partnership's results.
3
<PAGE>
The Partnership's contingency plan should systems fail due to the Year 2000 date
change is to temporarily convert to a manual system. The Partnership believes it
could temporarily operate on a manual system without adversely impacting
operations.
The preceding Year 2000 discussion contains various forward-looking statements
which represent the Partnership's beliefs or expectations regarding future
events. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from
projected results.
4
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
March 31, 1999 December 31, 1998
-------------- -----------------
ASSETS
Cash and cash equivalents ................. $ 7,119 $ 10,122
Receivables:
Note receivable, net of deferred gain
of $215,786............................ 2,227,627 2,227,627
Unbilled rent .......................... 43,269 42,331
Billed rent ............................ 650 962
Other .................................. 61,085 0
Due from affiliates ....................... 47,466 47,466
Income-producing property - net of
accumulated depreciation and valuation
allowance of $3,794,266 and $3,741,937,
respectively ............................ 1,207,711 1,212,015
Investment in unconsolidated joint venture 6,800,939 6,743,274
Other assets .............................. 230,900 274,381
-------------- -----------------
Total Assets .............................. $ 10,626,766 $ 10,558,178
============== =================
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ............. $ 140,611 $ 143,487
Due to affiliate .......................... 54,500 0
Notes payable ............................. 1,463,824 1,484,983
-------------- -----------------
Total Liabilities ......................... 1,658,935 1,628,470
-------------- -----------------
Partners' equity:
General Partner ......................... 0 0
Limited Partners:
80,000 units authorized,
77,000 issued and outstanding ......... 8,967,831 8,929,708
-------------- -----------------
Total Partners' equity .................... 8,967,831 8,929,708
-------------- -----------------
Total Liabilities and Partners' equity .... $ 10,626,766 $ 10,558,178
============== =================
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 19981
- --------------------------------------------------------------------------------
1999 1998
--------- ---------
REVENUES:
Rental income ................................ $ 143,659 $ 121,168
Interest income .............................. 61,088 55,534
--------- ---------
Total revenues .......................... 204,747 176,702
--------- ---------
EXPENSES:
Operating expenses ........................... 122,176 112,319
Depreciation and amortization ................ 68,349 64,343
Interest expense ............................. 34,769 38,127
--------- ---------
Total costs and expenses ................ 225,294 214,789
--------- ---------
LOSS BEFORE PARTNERSHIP'S SHARE OF
JOINT VENTURE INCOME ......................... (20,547) (38,087)
PARTNERSHIP'S SHARE OF UNCONSOLIDATED
JOINT VENTURE INCOME ......................... 58,670 80,549
--------- ---------
NET INCOME ..................................... $ 38,123 $ 42,462
========= =========
Net income per limited partnership unit ........ $ 0.50 $ 0.55
========= =========
UNAUDITED
SEE ACCOMPANYING NOTES
6
<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, 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------
<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, 1998) .......... (75.23) (5,792,901) $ 133,334 (5,659,567)
Cumulative distributions
(to December 31, 1998) .......... (21.43) (1,650,006) (133,334) (1,783,340)
------------ ------------ ------------ ------------
Partners' equity - January 1, 1999 115.97 8,929,708 0 8,929,708
Net income ........................ 0.50 38,123 -- 38,123
------------ ------------ ------------ ------------
Partners' equity - March 31, 1999 . $ 116.47 $ 8,967,831 $ 0 $ 8,967,831
============ ============ ============ ============
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC PENSION INVESTORS '84
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................... $ 38,123 $ 42,462
Adjustments to reconcile net income
to cash provided by (used in) operating activities:
Depreciation and amortization ...................... 68,349 64,343
Undistributed income of unconsolidated
joint venture .................................... (58,670) (80,549)
(Increase) decrease in rent receivable ............. (626) 5,702
Increase in other receivables ...................... (61,085) (55,532)
Decrease (increase) in other assets ................ 28,466 (49,982)
(Decrease) increase in accrued and other liabilites (2,876) 49,280
-------- --------
Net cash provided by (used in) operating activities 11,681 (24,276)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (48,025) 0
-------- --------
Net cash used in investing activities .............. (48,025) 0
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ................ (21,159) (18,900)
Loan from affiliate ................................ 54,500 33,000
-------- --------
Net cash provided by financing activities .......... 33,341 14,100
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............. (3,003) (10,176)
CASH AND CASH EQUIVALENTS - Beginning of period ........ 10,122 27,154
-------- --------
CASH AND CASH EQUIVALENTS - End of period .............. $ 7,119 $ 16,978
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest ........... $ 34,888 $ 38,233
======== ========
UNAUDITED
SEE ACCOMPANYING NOTES
8
<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 March 31, 1999 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, 1998.
2. RELATED PARTY TRANSACTIONS
Included in the financial statements for the three months ended March 31, 1999
and 1998 are affiliate transactions as follows:
March 31
----------------
1999 1998
------- -------
Management fees ....... $ 4,585 $ 4,298
Administrative fees ... 16,596 16,401
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 March 31, 1999 the
Partnership's interest in SMMP was 66.99%; the remaining 33.01% interest is
owned by SPDFII.
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 three months ended March 31, 1999
and 1998 follows:
UNAUDITED
9
<PAGE>
Sierra Pacific Pension Investors '84
Notes to Financial Statements
Page two
March 31
--------------------------
1999 1998
-------- --------
Rental income .................. $500,720 $482,917
Total revenues ................. 556,010 534,154
Operating expenses ............. 190,270 206,776
Share of unconsolidated
joint venture loss ........... 25,266 57,843
Net income ..................... 87,978 5,549
As of March 31, 1999, SMMP holds a 35.10% interest in Sorrento II Partners
("SIIP"), a California general partnership with Sierra Pacific Institutional
Properties V formed in 1993; a 6.55% interest in Sierra Creekside Partners
("SCP"), a California general partnership with Sierra Pacific Development Fund
formed in 1994; and a 33.32% 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 three months ended March
31, 1999 and 1998 follows:
SIIP
---------------------------
March 31
---------------------------
1999 1998
-------- --------
Rental income ................ $260,066 $169,808
Total revenues ............... 260,066 169,808
Operating expenses ........... 123,578 104,860
Net loss ..................... 63,391 136,367
SCP SVP
--------------------- ---------------------
March 31 March 31
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
Rental income .............. $214,772 $203,881 $ 0 $ 0
Total revenues ............. 214,772 203,881 11,907 0
Operating expenses ......... 126,351 125,117 13,797 20,852
Net loss ................... 36,421 52,473 2,457 20,852
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: MAY 4, 1999 /S/ THOMAS N. THURBER
----------------- -----------------------------------------
Thomas N. Thurber
President and Director
Date: MAY 4, 1999 /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 MARCH 31, 1999 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,119
<SECURITIES> 0
<RECEIVABLES> 105,004
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,320
<PP&E> 5,001,977
<DEPRECIATION> 3,794,266
<TOTAL-ASSETS> 10,626,766
<CURRENT-LIABILITIES> 195,111
<BONDS> 1,463,824
0
0
<COMMON> 0
<OTHER-SE> 8,967,831
<TOTAL-LIABILITY-AND-EQUITY> 10,626,766
<SALES> 143,659
<TOTAL-REVENUES> 204,747
<CGS> 0
<TOTAL-COSTS> 122,176
<OTHER-EXPENSES> 68,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,769
<INCOME-PRETAX> 38,123
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,123
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
