FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16467
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 33-0098488
(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
(Address of principal (Zip Code)
executive offices)
(415) 343-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Total number of units outstanding as of March 31, 1997: 99,763
Page 1 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1997 1996
<S> <C> <C>
Assets
Investments in real estate:
Rental property, net of accumulated depreciation of
$15,595 and $15,180 at March 31, 1997 and
December 31, 1996, respectively $ 35,602 $ 35,999
Land held for development 9,587 9,586
Land held for sale 1,005 1,005
--------- --------
Total real estate investments 46,194 46,590
Cash and cash equivalents 5,538 5,007
Pledged cash 353 353
Accounts receivable 178 145
Deferred financing costs and other fees, net of accumulated
amortization of $1,649 and $1,565 at March 31, 1997
and December 31, 1996, respectively 1,261 1,301
Prepaid expenses and other assets 801 797
--------- --------
Total assets $ 54,325 $ 54,193
========= ========
</TABLE>
- continued -
Page 2 of 13
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1997 1996
<S> <C> <C>
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 13,806 $ 13,845
Accounts payable and accrued expenses 596 276
Interest payable 75 75
--------- --------
Total liabilities 14,477 14,196
--------- --------
Commitments and contingent liabilities (see Note 3)
Partners' equity (deficit):
General partners (922) (921)
Limited partners, 99,763 and 99,767 limited
partnership units outstanding at March 31, 1997
and December 31, 1996, respectively 40,770 40,918
--------- ---------
Total partners' equity 39,848 39,997
--------- ---------
Total liabilities and partners' equity $ 54,325 $ 54,193
========= =========
</TABLE>
See accompanying notes to financial statements.
Page 3 of 13
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts and units outstanding)
(Unaudited)
Three months ended
March 31,
1997 1996
<S> <C> <C>
Revenue:
Rental income $ 1,804 $ 1,707
Interest income 63 9
--------- --------
Total revenue 1,867 1,716
Expenses:
Operating 744 863
Interest expense 326 226
Depreciation and amortization 486 560
Expenses associated with undeveloped land 158 156
General and administrative expenses 302 325
--------- --------
Total expenses 2,016 2,130
--------- --------
Net (loss) $ (149) $ (414)
========= ========
Net loss per limited partnership unit $ (1.48) $ (4.11)
========= =========
Weighted average number of limited partnership units
outstanding during each period used to compute net loss
per limited partnership unit 99,765 99,783
======== ========
</TABLE>
See accompanying notes to financial statements.
Page 4 of 13
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
For the three months ended March 31, 1997 and 1996
(in thousands)
(Unaudited)
General Limited
Partners Partners Total
Balance at December 31, 1996 $ (921) $ 40,918 $ 39,997
Net loss (1) (148) (149)
--------- --------- --------
Balance at March 31, 1997 $ (922) $ 40,770 $ 39,848
========= ========= ========
Balance at December 31, 1995 $ (908) $ 42,212 $ 41,304
Net loss (4) (410) (414)
--------- --------- --------
Balance at March 31, 1996 $ (912) $ 41,802 $ 40,890
========= ========= ========
See accompanying notes to financial statements.
Page 5 of 13
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts and units outstanding)
(Unaudited)
Three months ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (149) $ (414)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 486 560
Amortization of loan fees, included in interest expense 13 6
Changes in certain assets and liabilities:
Accounts receivable (33) 12
Prepaid expenses and other assets (4) 95
Accounts payable and accrued expenses 320 335
Interest payable --- 49
Deferred financing costs and other fees (44) (77)
--------- --------
Net cash provided by operating activities 589 566
--------- --------
Cash flows from investing activities:
Additions to real estate investments (19) (334)
--------- --------
Net cash used for investing activities: (19) (334)
--------- --------
Cash flows from financing activities:
Notes payable principal payments (39) (16)
--------- --------
Net cash used for financing activities (39) (16)
--------- --------
Net increase in cash and cash equivalents 531 216
Cash and cash equivalents at beginning of period 5,007 676
-------- --------
Cash and cash equivalents at end of period $ 5,538 $ 892
========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 313 $ 172
========= ========
</TABLE>
See accompanying notes to financial statements.
Page 6 of 13
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Rancon Financial Corporation ("RFC") and Daniel Lee Stephenson
(the "Sponsors") and Glenborough Inland Realty Corporation, the accompanying
unaudited financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial position of Rancon
Realty Fund V, A California Limited Partnership (the "Partnership") as of March
31, 1997 and December 31, 1996, the related statements of operations, the
changes in partners' equity and cash flows for the three months ended March 31,
1997 and 1996.
In December 1994, RFC entered into an agreement with Glenborough Inland Realty
Corporation ("Glenborough") whereby RFC sold to Glenborough the contract to
perform the rights and responsibilities under RFC's agreement with the
Partnership and other related Partnerships (collectively, the "Rancon
Partnerships") to perform or contract on the Partnership's behalf, for
financial, accounting, data processing, marketing, legal, investor relations,
asset and development management and consulting services for the Partnership for
a period of ten years or until the liquidation of the Partnership, whichever
comes first. Pursuant to the contract, the Partnership will pay Glenborough for
its services as follows: (i) a specified asset administration fee of $967,000
per year, which is fixed for five years subject to reduction in the year
following the sale of assets; (ii) sales fees of 2% for improved properties 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 tasks for the General Partner of the Rancon Partnerships and RFC agreed
to cooperate with Glenborough, should Glenborough attempt to obtain a majority
vote of the limited partners to substitute itself as the General Partner for the
Rancon Partnerships. This agreement became effective January 1, 1995.
Glenborough is not an affiliate of RFC or the Partnership.
During the quarter ended March 31, 1997, a total of 4 units were abandoned as a
result of partners desiring to no longer receive Partneship K-1's and to give
them the ability to write off investments for income tax purposes. The equity
(deficit) balance of the abandoned units was allocated to the remaining
outstanding units. As of March 31, 1997, there were 99,763 limited partnership
units issued and outstanding.
Consolidation - In order to satisfy certain lender requirements for the
Partnership's 1996 loan secured by Two Carnegie Plaza, Lakeside Tower and One
Parkside, Rancon Realty Fund V Tri-City Limited Partnership, a Delaware limited
partnership ("RRF V Tri-City") was formed in May, 1996. The three properties
securing the loan were contributed to RRF V Tri-City by the Partnership. The
limited partner of RRF V Tri-City is the Partnership and the general partner is
Rancon Realty Fund V, Inc., a corporation wholly owned by the Partnership. Since
the Partnership indirectly owns 100% of RRF V Tri-City, the financial statements
of RRF V Tri-City have been consolidated with those of the Partnership. All
intercompany transactions have been eliminated in consolidation.
Page 7 of 13
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
Reclassification - Certain 1996 balances have been reclassified to conform with
the current period presentation.
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the December 31, 1996 audited
financial statements.
Note 3. COMMITMENTS AND CONTINGENT LIABILITIES
The Partnership is contingently liable for subordinated real estate commissions
payable to the Sponsor in the amount of $102,000 at March 31, 1997. The
subordinated real estate commissions are payable only after the Limited Partners
have received distributions equal to their original invested capital plus a
cumulative non-compounded return of six percent per annum on their adjusted
invested capital.
Page 8 of 13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Partnership had cash of $5,538,000 (net of pledged cash).
The remainder of the Partnership's assets consist primarily of its investments
in real estate, totaling approximately $46,194,000.
The Partnership's primary sources of funds consist of cash provided by its
rental activities. Other sources of funds include permanent financing, property
sales, and interest income on certificates of deposit.
All of the Partnership's assets are located within the Inland Empire, a
submarket of Southern California, and have been directly affected by the
economic weakness of the region. Management believes, however, that the market
has flattened and is no longer falling in terms of sales prices. While prices
have not increased significantly, the Southern California real estate market
appears to be improving. Management continues to evaluate the real estate
markets in which the Partnership's assets are located in an effort to determine
the optimal time to dispose of them and realize their maximum value.
The Partnership currently owns the following properties in the Tri-City
Corporate Center area within the Inland Empire submarket of the Southern
California region:
<TABLE>
<CAPTION>
Property Type Square Feet
---------- ----------------------------------------- -----------
<S> <C> <C>
One Carnegie Plaza Two, two story garden-style office buildings 102,693
Two Carnegie Plaza Two story garden-style office buildings 68,925
Carnegie Business Center II Two light industrial buildings 50,804
Santa Fe One story office building 36,288
Lakeside Tower Six story office building 112,814
One Parkside Four story office building 70,069
Bally's Health Club Health club facility 25,000
Outback Steakhouse Restaurant 6,500
</TABLE>
The Partnership also owns approximately 14 acres of unimproved land in the
Tri-City area.
Additionally, the Partnership owns the Rancon Center Ontario property (245,000
square feet of leasable office space) in Ontario, California plus approximately
34 acres of unimproved land in Ontario, California. Development of the
unimproved land will coincide with market demand.
The Partnership also owns 23.8 acres of unimproved land referred to as
Perris-Ethanac Road and 60.41 acres of undeveloped land referred to as
Perris-Nuevo Road. There has been no development to date at the Partnership's
Perris-Ethanac Road or Perris-Nuevo Road projects. Both properties are
unencumbered and are being marketed for sale by the Partnership.
The Partnership knows of no demands, commitments, events or uncertainties which
might effect its liquidity or capital resources in any material respect. The
effect of inflation on the Partnership's business should be no greater than its
effect on the economy as a whole.
Page 9 of 13
<PAGE>
Management believes that the Partnership's cash balance as of March 31, 1997,
together with the cash from operations, property sales and financing, will be
sufficient to finance the Partnership's and the properties' continued operations
and development plans.
RESULTS OF OPERATIONS
Revenues
Rental income for the three months ended March 31, 1997 increased $97,000 or 6%
from the three months ended March 31, 1996 due largely to the commencement of
the Outback Steakhouse lease in the fourth quarter of 1996, slight increases in
rental rates, and the increased occupancy at all but two of the Partnership
properties at March 31, 1997 compared to March 31, 1996 (see table below). Of
the two properties experiencing a decline in occupancy rates, the most
significant was the twenty percentage point decline in occupancy rate at Rancon
Centre Ontario from March 31, 1996 to March 31, 1997. This change was due to a
50,000 square foot tenant vacating on February 28, 1997, which had a minimal
impact on rental revenue for the three months ended March 31, 1997.
Occupancy rates at the Partnership's properties as of March 31, 1997 and 1996
were as follows:
March 31,
1997 1996
----- -----
One Carnegie Plaza 88% 93%
Two Carnegie Plaza 83% 80%
Carnegie Business Center II 74% 65%
Lakeside Tower 83% 76%
Santa Fe 100% 100%
One Parkside 92% 83%
Rancon Centre Ontario 80% 100%
Bally's Health Club 100% 100%
Outback Steakhouse 100% n/a
As of March 31, 1997, tenants at Tri-City occupying substantial portions of
leased space include Medisco Pharmacy, New York Life Insurance, the California
Department of Transportation, State of California Health Services, MacLachlan,
Burford and Arias, the Atchison, Topeka and Santa Fe Rail Company, Sterling
Software, Chicago Title and Bally's Health Club, with leases expiring at various
dates between June, 1997 and December, 2010. These nine tenants, in the
aggregate, occupy approximately 217,000 square feet of the 473,000 total
leasable square feet at Tri-City and account for 55% of the rental income
generated at Tri-City and 49% of the total rental income for the Partnership.
United Pacific Mills, with a lease expiration date of April, 1998, occupies
74,850 square feet of the 245,000 total leasable square feet at Rancon Centre
Ontario and accounts for 25% of the rental income generated at Rancon Centre
Ontario and 3% of the total rental income generated by the Partnership.
Interest and other income for the three months ended March 31, 1997 increased
$54,000 from the three months ended March 31, 1996 due to the increase in cash
reserves as a result of the proceeds of the permanent financing obtained by the
Partnership in May, 1996.
Page 10 of 13
<PAGE>
Expenses
Operating expenses decreased $119,000 or 14% during the three months ended March
31, 1997 from the three months ended March 31, 1996 due to lowered required
association dues in 1997, the special appraisals performed on the Partnership's
properties in 1996 and the costs incurred in 1996 relating to flooding damage at
Two Carnegie Plaza.
Interest expense increased $100,000 or 44% during the three months ended March
31, 1997 over the same period in 1996 as a result of additional debt obtained in
May, 1996.
Depreciation and amortization decreased $74,000 or 13% during the first quarter
of 1997 from the first quarter of 1996 as a result of tenant improvements and
leasing commissions becoming fully depreciated and amortized in 1996.
The $23,000 or 7% decrease in general and administrative expenses during the
three months ended March 31, 1997 from the three months ended March 31, 1996 was
due to a payment of $26,000 for professional services in 1996 rendered in
connection with the valuation of the limited partner interests; such payment was
not incurred in 1997.
Page 11 of 13
<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 12 of 13
<PAGE>
SIGNATURE
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 V,
a California Limited Partnership
(Registrant)
Date: May 14, 1997 By: /s/ Daniel L. Stephenson
------------------------
Daniel L. Stephenson, General Partner
and Director, President, Chief Executive Officer
and Chief Financial Officer of
Rancon Financial Corporation,
General Partner of Rancon Realty Fund V,
a California Limited Partnership
Page 13 of 13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000769131
<NAME> RANCON REALTY FUND V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,891
<SECURITIES> 0
<RECEIVABLES> 178
<ALLOWANCES> 0
<INVENTORY> 1,005
<CURRENT-ASSETS> 6,069
<PP&E> 60,784
<DEPRECIATION> 15,595
<TOTAL-ASSETS> 54,325
<CURRENT-LIABILITIES> 671
<BONDS> 13,806
0
0
<COMMON> 0
<OTHER-SE> 39,848
<TOTAL-LIABILITY-AND-EQUITY> 54,325
<SALES> 0
<TOTAL-REVENUES> 1,867
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326
<INCOME-PRETAX> (149)
<INCOME-TAX> 0
<INCOME-CONTINUING> (149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149)
<EPS-PRIMARY> (1.48)
<EPS-DILUTED> (1.48)
</TABLE>
