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 June 30, 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 June 30, 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)
June 30, December 31,
1997 1996
<S> <C> <C>
Assets
Investments in real estate:
Rental property, net of accumulated depreciation
of $16,030 and $15,180 at June 30, 1997 and
December 31, 1996, respectively $ 35,328 $ 35,999
Land held for development 9,583 9,586
Land held for sale 1,005 1,005
-------- --------
Total real estate investments 45,916 46,590
Cash and cash equivalents 5,356 5,007
Pledged cash 353 353
Accounts receivable 122 145
Deferred financing costs and other fees, net of accumulated
amortization of $1,746 and $1,565 at June 30, 1997
and December 31, 1996, respectively 1,219 1,301
Prepaid expenses and other assets 784 797
-------- --------
Total assets $ 53,750 $ 54,193
======== ========
</TABLE>
- continued -
Page 2 of 13
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Consolidated Balance Sheets - continued
(in thousands, except units outstanding)
(Unaudited)
June 30, December 31,
1997 1996
<S> <C> <C>
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 13,766 $ 13,845
Accounts payable and other liabilities 308 276
Interest payable 75 75
-------- --------
Total liabilities 14,149 14,196
-------- --------
Commitments and contingent liabilities
(see Note 3)
Partners' equity (deficit):
General partners (925) (921)
Limited partners, 99,763 and 99,767 limited
partnership units outstanding at June 30, 1997
and December 31, 1996, respectively 40,526 40,918
-------- --------
Total partners' equity 39,601 39,997
-------- --------
Total liabilities and partners' equity $ 53,750 $ 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 Six months ended
June 30, June 30,
------------------- ------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 1,712 $ 1,731 $ 3,516 $ 3,438
Interest income 67 22 130 31
-------- -------- ------- -------
Total revenue 1,779 1,753 3,646 3,469
-------- -------- ------- -------
Expenses:
Operating 769 749 1,513 1,612
Interest expense 325 321 651 553
Depreciation and amortization 518 615 1,004 1,169
Expenses associated with
undeveloped land 89 209 247 365
General and administrative expenses 325 312 627 637
------- ------- ------- ------
Total expenses 2,026 2,206 4,042 4,336
------- ------- ------- ------
Net loss $ (247) $ (453) $ (396) $ (867)
======= ======= ======= ======
Net loss per limited partnership unit $ (2.45) $ (4.49) $ (3.93) $(8.60)
======= ======= ======= ======
Weighted average number of limited
partnership units outstanding during
each period used to compute net loss
per limited partnership unit 99,763 99,767 99,765 99,767
======= ======= ======= =======
</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 six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
General Limited
Partners Partners Total
Balance at December 31, 1996 $ (921) $ 40,918 $ 39,997
Net loss (4) (392) (396)
-------- --------- --------
Balance at June 30, 1997 $ (925) $ 40,526 $ 39,601
======== ========= ========
Balance at December 31, 1995 $ (908) $ 42,212 $ 41,304
Net loss (9) (858) (867)
-------- --------- --------
Balance at June 30, 1996 $ (917) $ 41,354 $ 40,437
======== ========= ========
See accompanying notes to financial statements.
Page 5 of 13
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six months ended
June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (396) $ (867)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,004 1,169
Amortization of loan fees, included in interest expense 27 9
Changes in certain assets and liabilities:
Accounts receivable 23 22
Prepaid expenses and other assets 13 (88)
Accounts payable and other liabilities 32 16
Interest payable -- 75
Deferred financing costs and other fees (99) (382)
-------- --------
Net cash provided by (used for) operating activities 604 (46)
-------- --------
Cash flows from investing activities:
Pledged cash released -- 349
Additions to real estate investments (176) (590)
-------- --------
Net cash used for investing activities: (176) (241)
-------- --------
Cash flows from financing activities:
Net loan proceeds -- 6,836
Notes payable principal payments (79) (35)
-------- --------
Net cash provided by (used for) financing activities (79) 6,801
-------- --------
Net increase in cash and cash equivalents 349 6,514
Cash and cash equivalents at beginning of period 5,007 676
-------- --------
Cash and cash equivalents at end of period $ 5,356 $ 7,190
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 624 $ 469
======== ========
</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
June 30, 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 Corporation (successor by merger with
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 June 30, 1997 and
December 31, 1996, the related statements of operations for the three and six
months ended June 30, 1997 and 1996, and the changes in partners' equity
(deficit) and cash flows for the six months ended June 30, 1997 and 1996.
In December 1994, RFC entered into an agreement with Glenborough 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 first half of 1997, a total of four units were abandoned as a result
of partners desiring to no longer receive Partnership 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 June 30, 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
RRF V, Inc., a corporation wholly owned by the Partnership. Since the
Partnership
Page 7 of 13
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
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 and account balances have been eliminated in consolidation.
Reclassification - Certain 1996 balances have been reclassified to conform to
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 June 30, 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 June 30, 1997, the Partnership had cash of $5,356,000 (net of pledged cash).
The remainder of the Partnership's assets consist primarily of its investments
in real estate, totaling approximately $45,916,000.
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 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 building 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. Development of the unimproved land will coincide with market
demand.
Additionally, the Partnership owns the Rancon Center Ontario property (245,000
square feet of leasable industrial 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 June 30, 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 six months ended June 30, 1997 increased $78,000 or 2%
from the six months ended June 30, 1996, due largely to the commencement of the
Outback Steakhouse lease in the fourth quarter of 1996.
Occupancy rates at the Partnership's properties as of June 30, 1997 and 1996
were as follows:
June 30,
1997 1996
One Carnegie Plaza 88% 87%
Two Carnegie Plaza 81% 86%
Carnegie Business Center II 74% 65%
Lakeside Tower 83% 78%
Santa Fe 100% 100%
One Parkside 66% 92%
Rancon Centre Ontario 80% 100%
Bally's Health Club 100% 100%
Outback Steakhouse 100% n/a
The 26 percentage point drop in occupancy from June 30, 1996 to June 30, 1997 at
One Parkside is due to MacLachlan, Burford and Arias ("MBA"), a 18,531 square
foot tenant, vacating their space prior to the lease termination date due to
financial difficulties. MBA filed for Chapter 11 bankruptcy protection in May
1997.Management intends to market this space as soon as legal possession is
obtained.
As of June 30, 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, the Atchison,
Topeka and Santa Fe Rail Company, Sterling Software, Chicago Title and Bally's
Health Club, with leases expiring at various dates between July 1998 and
December 2010. These eight tenants, in the aggregate, occupy approximately
200,000 square feet of the 473,000 total leasable square feet at Tri-City and
account for 51% of the rental income generated at Tri-City and 46% 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 28% of the rental income generated at Rancon Centre
Ontario and 3% of the total rental income generated by the Partnership.
Management believes that this tenant will vacate upon their lease expiration due
to their need for a space in close proximity to rail service which the
Partnership is unable to provide. Management intends to market this space as
early as the current lease agreement allows.
Page 10 of 13
<PAGE>
Interest and other income for the six and three months ended June 30, 1997
increased $99,000 and $45,000 from the six and three months ended June 30, 1996,
respectively, due to the increase in cash reserves as a result of the proceeds
of the permanent financing obtained by the Partnership in May 1996.
Expenses
Operating expenses decreased $99,000 or 6% during the six months ended June 30,
1997 from the six months ended June 30, 1996 due to lower maintenance
association dues in 1997, the special appraisals performed on the Partnership's
properties in first quarter of 1996 and the costs incurred in March 1996
relating to flooding damage at Two Carnegie Plaza.
Interest expense increased $98,000 or 18% during the six months ended June 30,
1997 over the same period in 1996 as a result of additional debt obtained in May
1996.
Depreciation and amortization decreased $165,000 or 14% and $97,000 or 16%
during the six and three months ended June 30, 1997 from the six and three
months ended June 30, 1996 as a result of tenant improvements and leasing
commissions becoming fully depreciated and amortized in 1996.
Expenses associated with undeveloped land decreased $118,000 or 32% and $120,000
or 57% during the six and three months ended June 30, 1997 compared to the six
and three months ended June 30, 1996, respectively, due to the receipt of
property tax refunds in 1997 for parcels associated with undeveloped land and
the reduction of property taxes in 1997 resulting from a reduction of the
assessed property values by the Assessor's office.
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: August 13, 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> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,709
<SECURITIES> 0
<RECEIVABLES> 122
<ALLOWANCES> 0
<INVENTORY> 1,005
<CURRENT-ASSETS> 5,831
<PP&E> 60,941
<DEPRECIATION> 16,030
<TOTAL-ASSETS> 53,750
<CURRENT-LIABILITIES> 383
<BONDS> 13,766
0
0
<COMMON> 0
<OTHER-SE> 39,601
<TOTAL-LIABILITY-AND-EQUITY> 53,750
<SALES> 0
<TOTAL-REVENUES> 3,646
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 651
<INCOME-PRETAX> (396)
<INCOME-TAX> 0
<INCOME-CONTINUING> (396)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (396)
<EPS-PRIMARY> (3.93)
<EPS-DILUTED> (3.93)
</TABLE>
