UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the year ended December 31, 1997
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: 0-16467
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 33-0098488
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
San Mateo, California (Zip Code)
(Address of principal executive offices)
Partnership's telephone number, including area code (650) 343-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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____
State the aggregate market value of the voting stock held by non-affiliates of
the Partnership. Not applicable
No market for the Limited Partnership units exists and therefore a market value
for such units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus dated December 29, 1986, as amended on January 5, 1987, filed
pursuant to Rule 424(b), File no. 2-90327, is incorporated by reference in Part
IV hereof.
Page 1 of 38
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Part I
Item 1. Business
Rancon Realty Fund V, a California Limited Partnership, ("the Partnership") was
organized in accordance with the provisions of the California Revised Limited
Partnership Act for the purpose of acquiring, developing, operating and
ultimately selling real property. The Partnership was organized in 1985 and
completed its public offerings of limited partnership units ("Units") in
February, 1989. The general partners of the Partnership are Daniel L. Stephenson
("DLS") and Rancon Financial Corporation ("RFC"). RFC is wholly owned by DLS. At
December 31, 1997, 96,754 Units were outstanding. The Partnership has no
employees.
The Partnership's initial acquisition of property in June, 1985 was for
approximately 76.21 acres of partially developed and unimproved land located in
San Bernardino, California. The property is part of a master-planned development
of 153 acres known as Tri-City Corporate Centre ("Tri-City") and is zoned for
mixed commercial, office, hotel, transportation-related, and light industrial
uses. The balance of Tri-City is owned by Rancon Realty Fund IV ("Fund IV"), a
partnership sponsored by the General Partners of the Partnership. Since the
acquisition of the land, the Partnership has constructed eight projects at
Tri-City consisting of five office projects, one industrial property, a 25,000
square foot health club, and a 6,500 square foot restaurant, all of which are
more fully described in Item 2. Fund IV has constructed three office buildings,
one industrial property, and four commercial properties.
Subsequent acquisitions have included approximately 56.3 acres of unimproved
land in Ontario, California (known as Rancon Centre Ontario) in May, 1987, a
portion of which has since been developed, approximately 23.8 acres of
unimproved land in Perris, California (known as Perris-Ethanac Road) in March,
1989 and approximately 83 acres of unimproved land in Perris, California (known
as Perris-Nuevo Road) in December, 1989. Each of these properties are further
described in Item 2.
In May, 1996, the Partnership formed Rancon Realty Fund V Tri-City Limited
Partnership, a Delaware limited partnership ("RRF V Tri-City") to satisfy
certain lender requirements for a loan obtained in 1996. This loan is secured by
three properties which have been 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. ("RRF V, Inc."), a corporation
wholly owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc.
and indirectly owns 100% of RRF V Tri-City, the Partnership considers all assets
owned by RRF V, Inc. and RRF V Tri-City to be owned by the Partnership.
Competition Within the Market
Management believes that characteristics influencing the competitiveness of a
real estate project are the geographic location of the property, the
professionalism of the property manager and the maintenance and appearance of
the property, in addition to external factors such as general economic
circumstances, trends, and the existence of new, competing properties in the
vicinity. Additional competitive factors with respect to commercial and
industrial properties are the ease of access to the property, the adequacy of
related facilities, such as parking, and the ability to provide rent concessions
and tenant improvements commensurate with local market conditions. Although
management believes the Partnership properties are competitive with comparable
properties as to those factors within the Partnership's control, over-building
and other external factors could adversely affect the ability of the Partnership
to attract and retain tenants. The marketability of the properties may also be
affected (either positively or negatively) by these factors as well as by
changes in general or local economic conditions, including prevailing interest
rates. Depending on market and economic conditions, the Partnership may be
required to retain ownership of its
Page 2 of 38
<PAGE>
properties for periods longer than anticipated, or may need to sell earlier than
anticipated or refinance a property, at a time or under terms and conditions
that are less advantageous than would be the case if unfavorable economic or
market conditions did not exist.
Working Capital
The Partnership's practice is to maintain cash reserves for normal repairs,
replacements, working capital and other contingencies. The Partnership knows of
no statistical information which allows comparison of its cash reserves to those
of its competitors.
Item 2. Properties
Tri-City Corporate Centre
On June 3, 1985, the Partnership acquired 76.21 acres on seven parcels of
partially developed land in Tri-City for a total acquisition price of
$14,118,000. In 1984 and 1985, a total of 76.5 acres within Tri-City was
acquired by Fund IV.
Tri-City is located at the northeastern quadrant of the intersection of
Interstate 10 (San Bernardino Freeway) and Waterman Avenue in the southernmost
part of the City of San Bernardino.
The Partnership has constructed and owns the following eight operating
properties in Tri-City:
Property Type Square Feet
---------------------------- -------------------------------- -----------
One Carnegie Plaza Two, two story office buildings 107,276
Two Carnegie Plaza Two story office building 68,956
Carnegie Business Center II Two R & D buildings 50,867
Santa Fe One story office building 36,288
Lakeside Tower Six story office building 112,717
One Parkside Four story office building 70,069
Bally's Health Club Health club facility 25,000
Outback Steakhouse Restaurant 6,500
These properties total approximately 478,000 leasable square feet and offer a
wide range of commercial, R & D and office product to the market.
The I-10/San Bernardino area consists of approximately 3,397,000 square feet of
office space, with a vacancy rate of 21% as of December, 1997 (the vacancy rates
and square feet amounts are according to research conducted by an independent
broker). There is no comparable R & D or commercial space in the market.
Within the Tri-City Corporate Centre at December 31, 1997, the Partnership has
395,306 square feet of office space with a vacancy rate of 17%, 50,867 square
feet of R & D space with a vacancy rate of 26% and 31,500 square feet of
commercial space with a 0% vacancy rate.
Page 3 of 38
<PAGE>
The following are the occupancy levels for the Partnership's Tri-City buildings
at December 31, 1997 and 1996 and November 30, 1995, 1994 and 1993, expressed as
a percentage of the total net rentable square feet:
December 31, November 30,
--------------- -----------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
One Carnegie Plaza 85% 87% 93% 66% 56%
Two Carnegie Plaza 81% 83% 87% 86% 86%
Carnegie Business Center II 74% 65% 68% 76% 77%
Santa Fe 100% 100% 100% 100% 100%
Lakeside Tower 86% 90% 69% 76% 84%
One Parkside 66% 92% 83% 83% 83%
Bally's Health Club 100% 100% N/A N/A N/A
(commenced January 1996)
Outback Steakhouse 100% 100% N/A N/A N/A
(commenced October 1996)
In 1997, management renewed 13 leases totaling 62,477 square feet of space,
expanded three existing tenants by 15,267 square feet and executed four new
leases totaling 8,174 square feet of space. Slightly offsetting these factors
increasing occupancy were various vacancy of tenants, the most noteworthy was a
18,531 square foot tenant who filed for bankruptcy in 1997. In 1998, 16 leases
totaling 121,118 square feet are due to expire. Management is currently
negotiating lease renewals for six tenants totaling 25,883 square feet of space,
while five tenants occupying 59,982 square feet of space have vacated or have
indicated that they will vacate upon their lease expiration. Five remaining
tenants occupying 35,253 square feet of space, with lease expirations in the
latter part of 1998 have not indicated whether they will renew their lease or
vacate the premises.
The annual effective rent per square foot for the years ended December 31, 1997
and 1996 and November 30, 1995 were:
1997 1996 1995
------ ------ ------
One Carnegie Plaza $14.74 $14.85 $13.57
Two Carnegie Plaza $15.70 $15.91 $16.50
Carnegie Business Center II $10.73 $10.91 $11.11
Santa Fe $16.87 $16.64 $16.50
Lakeside Tower $17.43 $16.72 $18.58
One Parkside $17.80 $17.86 $18.23
Bally's Health Club $ 9.85 $ 9.85 N/A
(commenced January 1996)
Outback Steakhouse $13.85 $13.85 N/A
(commenced October 1996)
At December 31, 1997, the Partnership's Tri-City annual rental rates ranged from
$12.49 to $22.64 per square foot for office space; $9.73 to $12.32 per square
foot for R & D space; and $9.85 to $13.85 per square foot for commercial space.
According to research conducted by the property manager, the average annual
effective rent per square foot for office space in the Partnership's competitive
market ranges from $12.00 to $18.60. Since there is no comparable R & D or
commercial space in the market, management has determined the asking rents based
on discussions with independent leasing brokers.
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The Partnership's Tri-City properties had the following five tenants which
occupied a significant portion of the net rentable square footage as of December
31, 1997:
<TABLE>
<CAPTION>
Atchison, Topeka
California and Santa Fe Holiday Spa
Department of Railway Sterling Chicago Health
Tenant Transportation Company Software Title Club
- ------------------- -------------- -------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
One Carnegie Bally's
Building [a] Santa Fe Plaza One Parkside Health Club
Governmental Real Estate
Nature of Business Agency Transportation Software Services Health Club
Lease Term 5 yrs. 10 yrs. 5 yrs. 10 yrs. 14 yrs.
Expiration Date 7/31/98 9/30/99 11/30/00 2/03/04 12/31/10
Square Feet 39,993 36,288 26,144 29,389 25,000
(% of rentable total) 8% 8% 5% 6% 5%
Annual Rent $564,639 $612,089 $360,304 $541,684 $246,250
Future Rent Increases None None 8.7% in 1998 None 15% in 2001
and 2006
Renewal Options None None Two 3-yr. options None Three 5-yr. options
</TABLE>
[a] The California Department of Transportation occupies space at One Carnegie
Plaza and Carnegie Business Center II. The tenant has indicated that it intends
to vacate upon its lease expiration in July 1998.
In the opinion of management, the properties are adequately covered by
insurance.
The Partnership's Tri-City rental properties are owned by the Partnership, in
fee, subject to the following notes and deeds of trust:
One Lakeside Tower
Carnegie One Parkside and
Security Plaza Two Carnegie Plaza
Principal balance at December 31, 1997 $4,238,000 $9,446,000
Interest Rate 8.25% 9.39%
Monthly Payment $33,995 $83,142
Maturity Date 12/01/01 8/1/06
Page 5 of 38
<PAGE>
During 1997, the Partnership's Tri-City rental properties were assessed $590,000
in property taxes based on an average realty tax rate of 1.46%
Tri-City Land
Approximately 14 acres of the Tri-City land owned by the Partnership remains
undeveloped. It is the Partnership's intention to develop parcels of this land
as tenants become available or dispose of the property at the optimal time and
sales price. During 1997, management determined that the carrying value of the
land was in excess of its estimated fair value and, accordingly, recorded a
provision for impairment of the real estate. See footnote 4 in Item 14 for
further discussion.
During 1997, the Partnership's Tri-City land was assessed $211,000 in property
taxes based on an average realty tax rate of 3.67% (which includes 2.56% in
additional assessments).
Rancon Centre Ontario
In 1987, the Partnership acquired approximately 56.3 acres of undeveloped land
in Ontario, San Bernardino County, California, for a purchase price of
$5,905,000.
The property is immediately north of Interstate 10 near Interstate 15 and is
zoned for industrial and light manufacturing use.
The Partnership completed the first of three phases of development in 1988,
consisting of seven distribution-center buildings totaling 326,000 square feet
of which two buildings totaling 81,000 square feet have been sold. Phase II was
originally planned to consist of 39 buildings, each ranging between 4,000 and
8,000 square feet. However, as there is currently no demand for such properties,
it is likely that the Partnership will attempt to identify users interested in
large build-to-suit buildings for the Phase II land. In an effort to facilitate
these build-to-suits, the Partnership purchased a 5.76 acre parcel of land in
December, 1995 located between Phase II and Phase III. This purchase prevents
development adverse to the Partnership's interests. Further development of the
unimproved land remaining at Rancon Centre Ontario will coincide with market
demands. As of December 31, 1997, the Partnership does not have definitive plans
for further development.
The five buildings at this property had a 100% occupancy rate at December 31,
1997 and 1996, and a 92% occupancy rate at November 30, 1995. In 1998, leases
for six tenants occupying 225,425 square feet or 92% of the rentable space in
this property will or have expired and all of the tenants have vacated or
indicated that they will vacate upon lease termination. Reasons cited for not
renewing their leases range from the desire to consolidate into larger
facilities which they currently occupy and their desire to relocate out of the
Ontario area. In an effort to keep the impact of these vacancies minimal,
management signed a new exclusive leasing agreement with Grubb & Ellis, has
developed marketing brochures and has planned a broker open house in April 1998.
A prospective tenant has toured one of the 27,000 square foot spaces and has
requested a proposal. Management remains optimistic since it believes that the
location of this property is good, there is limited comparable space in this
market desirable to three to five year users, and that the close proximity to
other businesses resulting from a recent build to suit development and the
activity from the Ontario Mills Shopping Center in the area makes this an
attractive site.
At December 31, 1997, the Partnership's annual rental rates at Rancon Centre
Ontario ranged from $2.64 per square foot (for those who occupy significant
square footage) to $4.32 per square foot for newer and/or smaller tenants.
Page 6 of 38
<PAGE>
According to research conducted by the Partnership's Ontario property manager,
there is 103,510,000 square feet of light industrial space in the immediate
market area. The average occupancy was 91% and the average annual rental rate
per square foot ranged from $3.84 to $4.56 at December 31, 1997.
Two tenants, United Pacific Mills and USCO Distribution Services, Inc. ("USCO),
occupy a significant portion of the square footage of Rancon Centre Ontario.
United Pacific Mills, whose five year lease expires on April 30, 1998 and
occupies 74,850 square feet or 31% of Rancon Centre Ontario. USCO, whose one
year lease expires on June 30, 1998 with no renewal options, occupies 50,000
square feet or 20% of Rancon Centre Ontario. These tenants have indicated to
management that they will be vacating when their lease expires. The annual rent
during 1997 was $193,862 for United Pacific Mills and $93,500 for USCO.
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Rancon Centre Ontario property is unencumbered.
During 1997, the Rancon Centre Ontario property was assessed $84,000 in property
taxes based on an average realty tax rate of 1.07%.
Perris-Ethanac Road
In 1989, the Partnership purchased 23.8 acres of unimproved land at the
intersection of Ethanac Road and Interstate 215 in Perris, Riverside County,
California for a purchase price of $2,780,000.
The property is zoned for commercial uses and is adjacent to a freeway
interchange. There has been no development of this property to date.
The Partnership currently holds this property for sale.
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Perris-Ethanac Road property is unencumbered.
During 1997, the Perris-Ethanac Road property was assessed $23,000 in property
taxes based on an average realty tax rate of 1.06%.
Perris-Nuevo Road
On December 28, 1989, the Partnership acquired 83 acres of undeveloped property
at the intersection of Nuevo Road and Interstate 215 in Perris, Riverside
County, California for a purchase price of $5,140,000 in an all cash
transaction. The property has been zoned for light industrial, commercial and
retail use. In 1991, the Partnership sold approximately 4.9 acres. There has
been no development of this property to date. During 1997, management determined
that the carrying value of the land was in excess of its estimated fair value
and, accordingly, recorded a provision for impairment of the real estate. See
footnote 4 in Item 14 for further discussion. At December 31, 1997, this
property consists of 78.1 acres.
The Partnership currently holds this property for sale.
Page 7 of 38
<PAGE>
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Perris-Nuevo Road Property is unencumbered.
During 1997, the Perris-Nuevo Road property was assessed $157,000 in property
taxes based on an average realty tax rate of 4.71% (which includes 3.70% in
additional assessments).
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
On September 30, 1997, the Partnership entered into an agreement to sell all of
its real estate assets to Glenborough Realty Trust Incorporated ("GLB"), a
publicly traded real estate investment trust and Glenborough Properties, L.P.
("GPLP"), the operating partnership of GLB, for an aggregate price of
$44,765,000.
It was intended that if the sale to GLB and GPLP was completed, management would
then liquidate the Partnership as soon as possible following the sale. A Consent
Solicitation Statement (the "Solicitation") was sent to the Unitholders on
October 17, 1997, detailing these two transactions (incorporated by reference to
the Definitive Schedule 14A - Proxy Statement filed with the Securities and
Exchange Commission on October 17, 1997). A final tabulation of the results of
the Solicitation was made on November 21, 1997 with 58,949 Unitholders or 59% of
the total outstanding units in favor, 9,297 Unitholders or 9% against, 1,192
Unitholders or 1% abstaining, 214 Unitholders or less than 1% pending and no
response was received from the remaining 30% of the Unitholders..
Notwithstanding the foregoing, the Partnership's General Partner determined it
would be in the best interests of the Partnership to rescind the agreement to
sell all of the Partnership's real estate assets to GLB and GPLP for the
following reasons:
i. The greater than expected opposition to the timing of the sale by the
Limited Partners; and
ii. The holding of the real estate assets for an additional period of time
will provide the Partnership the opportunity to possibly recognize an
appreciation in value of real estate in the areas where the
Partnership's properties are located.
Page 8 of 38
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Part II
Item 5. Market for Partnership's Common Equity and Related Stockholder Matters
Market Information
There is no established trading market for the Units issued by the Partnership.
Holders
As of December 31, 1997, there were 12,790 holders of Partnership Units.
Dividends
Distributions are paid from either Cash From Operations or Cash From Sales or
Refinancing.
Cash From Operations as defined in the Partnership Agreement includes all cash
receipts from operations in the ordinary course of business (except for the
sale, exchange or other disposition of real property in the ordinary course of
business) after deducting payments for operating expenses. All distributions of
Cash From Operations are paid in the ratio of 90% to the Limited Partners and
10% to the General Partners.
Cash From Sales or Refinancing as defined in the Partnership Agreement is the
net cash realized by the Partnership from the sale, disposition or refinancing
of any property after retirement of applicable mortgage debt and all expenses
related to the transaction, together with interest on any notes taken back by
the Partnership upon the sale of a property. All distributions of Cash From
Sales or Refinancing are generally allocated as follows (a more explicit
statement of these distribution policies is set forth in the Partnership
Agreement): (i) first, 1 percent to the General Partners and 99 percent to the
Limited Partners until the Limited Partners have received an amount equal to
their capital contributions; (ii) second, 1 percent to the General Partners and
99 percent to the Limited Partners until the Limited Partners have received a 12
percent return on their unreturned capital contributions (less prior
distributions of Cash From Operations); (iii) third, 1 percent to the General
Partners and 99 percent to the Limited Partners who purchased their Units prior
to April 1, 1986, to the extent they receive an additional return (depending on
the date on which they purchased the Units) on their unreturned capital of
either 9 percent, 6 percent or 3 percent (calculated through the anniversary
date of the purchase of the Units); (iv) fourth, 99 percent to the General
Partners and 1 percent to the Limited Partners until the General Partners have
received an amount equal to 20 percent of all distributions of Cash From Sales
or Refinancing previously made under clauses (ii) and (iii) above, reduced by
the amount of prior distributions made to the General Partners under clauses
(ii) and (iii); and (v) fifth, the balance 20 percent to the General Partners
and 80 percent to the Limited Partners.
There were no distributions made by the Partnership during the three most recent
fiscal years (including the one month stub period ended December 31, 1995).
Page 9 of 38
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Item 6. Selected Financial Data
The following is selected financial data for the years ended December 31, 1997
and 1996, the one month ended December 31, 1995, and the years ended November
30, 1995, 1994 and 1993 (in thousands, except per Unit data).
<TABLE>
<CAPTION>
For the one
For years ended month ended
December 31, December 31, For the years ended November 30,
1997 1996 1995 1995 1994 1993
--------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Rental Income $ 6,894 $ 6,969 $ 461 $ 6,200 $ 6,023 $ 5,949
Gain (loss) on sale of real estate $ -- $ -- $ -- $ -- $ (391) $ 39
Provision for impairment
of real estate investments $ (1,688) $ -- $ -- $ (14,760) $ (2,965) $ --
Net loss $ (3,293) $ (1,307) $ (199) $ (16,148) $ (5,558) $ (1,934)
Net loss Allocable to
Limited Partners $ (3,260) $ (1,294) $ (197) $ (15,986) $ (5,503) $ (1,916)
Net loss per Unit $ (32.68) $ (12.97) $ (1.97) $ (160.18) $ (55.11) $ (19.18)
Total assets $ 50,191 $ 54,193 $ 50,175 $ 51,347 $ 64,771 $ 69,548
Long-term obligations $ 13,684 $ 13,845 $ 8,615 $ 8,621 $ 6,209 $ 5,933
Cash distributions per Unit $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Partnership had cash of $4,361,000. The remainder
of the Partnership's assets consists primarily of its investments in real estate
totaling approximately $42,386,000, which includes $33,486,000 in rental
properties, $7,980,000 of land held for development within the Tri-City or
Ontario areas, and the remaining $920,000 of undeveloped land held for sale in
Perris, California.
Development of the unimproved land will coincide with market demand.
All of the Partnership's assets are considered to be 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. Cash
generated from property sales may be utilized in the development of other
properties or distributed to the partners.
Page 10 of 38
<PAGE>
On September 30, 1997, the Partnership entered into an agreement to sell all of
its real estate assets to Glenborough Realty Trust Incorporated ("GLB"), a real
estate investment trust publicly traded on the New York Stock Exchange and
Glenborough Properties, L.P., the operating partnership of GLB. On October 17,
1997, the Partnership sent a proxy to its Unitholders (incorporated by reference
to the Definitive Schedule 14A - Proxy Statement filed on October 17, 1997),
requesting the Unitholders' consent to the proposed bulk sale of its real estate
assets and a subsequent liquidation of the Partnership. A final tabulation of
the results of the Solicitation was made on November 21, 1997 with 58,949
Unitholders or 59% of the total outstanding units in favor, 9,297 Unitholders or
9% against, 1,192 Unitholders or 1% abstaining, 214 Unitholders or less than 1%
pending and no response was received from the remaining 30% of the Unitholders.
Notwithstanding the foregoing, the Partnership's General Partner determined it
would be in the best interests of the Partnership to rescind the agreement to
sell all of the Partnership's real estate assets to GLB and Properties for the
following reasons:
i. The greater than expected opposition to the timing of the sale by the
Limited Partners; and
ii. The holding of the real estate assets for an additional period of time
will provide the Partnership the opportunity to possibly recognize an
appreciation in value of real estate in the areas where the
Partnership's properties are located.
Operationally, the Partnership's primary sources of funds consist of cash
provided by its rental activities. Other sources of funds may include permanent
financing, property sales, interest income on certificates of deposit and other
deposits of funds invested temporarily, pending their use in the development of
properties.
As of December 31, 1997, the Partnership was in various stages of negotiations
for 19,448 square feet of space on leases expiring in 1998 at Tri-City. Five
tenants occupying 59,982 square feet of space at Tri-City whose leases have or
will expire in 1998, have vacated or have indicated that they will vacate upon
their lease expiration. The primary reason cited for not renewing their leases
is due to their desire to consolidate into larger facilities, which they
currently occupy elsewhere or are having built.
At Rancon Centre Ontario in 1998, leases for six tenants occupying 225,425
square feet or 92% of the rentable space in this property will expire and all of
the tenants have either already vacated or have indicated that they will vacate
upon lease expiration. In an effort to keep the impact of these vacancies
minimal, management signed a new exclusive leasing agreement with a major
broker, has developed marketing brochures and has planned a broker open house in
April 1998. A prospective tenant has toured a 27,000 square foot facility and
has requested a proposal. Management remains optimistic since it believes that
the location of this property is good, there is limited comparable space in this
market desirable to three to five year users, and that the close proximity to
other businesses resulting from a recent build to suit development and the
activity from the Ontario Mill Shopping Center in the area makes this an
attractive site.
The Partnership's pledged cash primarily represent a certificate of deposit held
as collateral for subdivision improvement bonds relating to the Perris - Nuevo
property owned by the Partnership.
The $417,000 increase in accounts payable and accrued expenses at December 31,
1997 compared to December 31, 1996 is due to timing of a payment for the
Partnership's redemption of 2,665 Limited Partnership Units ("Units") on
December 31, 1997. This was paid in January 1998.
Page 11 of 38
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The Partnership is contingently liable for subordinated real estate commissions
payable to the Sponsor in the amount of $102,000 at December 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.
Aside from the foregoing, 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.
Management believes that the Partnership's cash balance as of December 31, 1997
together with the cash from operations, sales and financing, will be sufficient
to finance the Partnership's and the properties' continued operations and
development plans. However, there can be no assurance that the Partnership's
results of operations will not fluctuate in the future and at times affect its
ability to meet its operating requirements.
RESULTS OF OPERATIONS
1997 versus 1996
Revenue
Rental income for the year ended December 31, 1997 remained comparable to the
year ended December 31, 1996. The decreases in occupancy at December 31, 1997
compared to December 31, 1996 for One Carnegie, Two Carnegie, Lakeside Tower and
One Parkside were offset by an increase in occupancy at Carnegie Business Center
II as well as a full year of rental income for Outback Steakhouse in 1997 versus
less than three months in 1996.
Occupancy rates at the Partnership's Tri-City and Rancon Centre Ontario
properties as of December 31, 1997 and 1996, and November 30, 1995, 1994 and
1993 were as follows:
December 31, November 30,
--------------- ------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
One Carnegie Plaza 85% 87% 93% 66% 56%
Two Carnegie Plaza 81% 83% 87% 86% 86%
Carnegie Business Center II 74% 65% 68% 76% 77%
Lakeside Tower 86% 90% 69% 76% 84%
Santa Fe 100% 100% 100% 100% 100%
One Parkside 66% 92% 83% 83% 83%
Rancon Centre Ontario 100% 100% 92% 100% 100%
Bally's Health Club 100% 100% N/A N/A N/A
Outback Steakhouse 100% 100% N/A N/A N/A
The 26-percentage point drop in occupancy from December 31, 1996 to December 31,
1997 at One Parkside is due to an 18,531 square foot tenant vacating their space
prior to the lease termination date due to financial difficulties. This tenant
filed for Chapter 11 bankruptcy protection in May 1997. Management is currently
marketing this space for lease.
Page 12 of 38
<PAGE>
The California Department of Transportation, the Atchison Topeka and Santa Fe
Railway Company, Sterling Software, Chicago Title and Holiday Spa Health Club,
occupy substantial portions of leased space at Tri-City with leases expiring at
various dates between July, 1998 and December, 2010. These five tenants, in the
aggregate, occupy approximately 157,000 square feet of the 478,000 total
leasable square feet at Tri-City and account for approximately 39% of the rental
income generated at Tri-City and approximately 35% of the total rental income
for the Partnership.
Two tenants, United Pacific Mills and USCO Distribution Services, Inc., occupy a
significant square footage of Rancon Centre Ontario ("Ontario"). These two
tenants occupy an aggregate 124,850 square feet or 51% of Ontario and accounts
for 38% of the rental income generated at Ontario and 4% of total rental income
for the Partnership.
Interest and other income for the year ended December 31, 1997 increased
$173,000 or 84% from the year ended December 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.
Expenses
All expenses except for the provision for impairment of investments in real
estate remained consistent during the year ended December 31, 1997 as compared
to the year ended December 31, 1996.
In 1997, management determined that the carrying values of the land held for
development and the land held for sale were in excess of the estimated fair
market value of such property and, accordingly, recorded provisions for
impairment of real estate investments totaling $1,688,000. The fair market
values were based on independent appraisals of the Partnerships' real estate.
Due to the uncertainties inherent in these processes, these valuations do not
purport to be the price at which a sale transaction involving these properties
can or will take place.
The Partnership made the following provisions to reduce the carrying value of
investments in real estate for the year ended December 31, 1997:
Land held for development:
San Bernardino, CA $ 1,603,000
Land held for sale:
78.1 acres in Perris, CA 85,000
------------
Total provision for impairment
of real estate investments $ 1,688,000
============
No such provisions were recorded in 1996.
The $479,000 for proposed dissolution costs in 1997 was for work performed and
expenses incurred while exploring the possibilities of having the Partnership
sell all of its real estate assets and then be liquidated. The proposed
transactions were detailed in a Consent Solicitation Statement, sent to the
Unitholders on October 17, 1997, (incorporated by reference to the Definitive
Schedule 14A - Proxy Statement filed with the Securities and Exchange Commission
on October 17, 1997).
Page 13 of 38
<PAGE>
1996 versus 1995
In 1995, the Partnership's reporting year end changed from November 30 to
December 31. Since the Partnership's operations are not seasonal, the analysis
of results of operations compares the fiscal years ended December 31, 1996 and
November 30, 1995.
Revenue
Rental income for the year ended December 31, 1996 increased $769,000 or 12%
from the year ended November 30, 1995, due primarily to the commencement of
operations of the Bally's Health Club on January 1, 1996 and the increased
average occupancy at two of the Partnership's larger properties, One Carnegie
Plaza and Lakeside Tower. The increase in average occupancy had a smaller impact
on rental revenue than operating expenses due to amortizing free rent over the
term of the related lease whereby rental revenue during the year ended December
31, 1996 was reduced by free rent given in prior years.
Interest and other income for the year ended December 31, 1996 increased
$106,000 or 106% from the year ended November 30, 1995 due to the increase in
cash reserves as a result of the proceeds of the permanent financing obtained by
the Partnership in 1996 as described in the Liquidity and Capital Resources
section above.
Expenses
Operating expenses increased $212,000 or 7% during the year ended December 31,
1996 compared to the year ended November 30, 1995 as a result of increased
operating costs associated with increased occupancy at Lakeside Tower and One
Parkside.
Interest expense increased $603,000 or 90% for the year ended December 31, 1996
over the year ended November 30, 1995 as a result of additional debt obtained
during those years.
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of." SFAS 121 requires
that an evaluation of an individual property for possible impairment must be
performed whenever events or changes in circumstances indicate that an
impairment may have occurred and that long-lived assets to be disposed of be
carried at the lower of carrying amount or fair value. Prior to 1995, the
Partnership's business strategy was to hold its properties for future
development and operations. Conclusions about the carrying value of the
Partnership's properties were based upon this strategy. In 1995, the Partnership
modified this strategy to focus on eventual disposition of its assets at the
optimal time and sales price and revalued certain of its assets by providing for
impairment in real estate.
Page 14 of 38
<PAGE>
The Partnership made the following provisions to reduce the carrying value of
investments in real estate for the year ended November 30, 1995:
Land held for development:
San Bernardino, CA $ 5,775,000
Land held for sale:
78.1 acres in Perris, CA 6,778,000
23.8 acres in Perris, CA 2,207,000
------------
8,985,000
Total provision for impairment
of real estate investments $ 14,760,000
============
Expenses associated with undeveloped land include property taxes for the
Partnership's non-operating properties that are not currently under construction
as well as maintenance association fees in connection with non-operating
properties. Any expenses associated with land currently under construction
(i.e., undergoing activities necessary to get it ready for its intended use)
have been capitalized. These expenses decreased $83,000 or 12% in the year ended
December 31, 1996 from the year ended November 30, 1995 due to the increased
amount capitalized in 1996.
Administrative expenses increased $76,000 or 7% during the year ended December
31, 1996 over the year ended November 30, 1995 primarily due to an
administrative expense refund from the Sponsor in 1995.
Year 2000 Compliance
The Partnership utilizes a number of computer software programs and operating
systems across its entire organization, including applications used in financial
business systems and various administrative functions. To the extent that the
Partnership's software applications contain a source code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of modification, or replacement of such applications will be necessary. The
Partnership has completed its identification of applications that are not yet
"Year 2000" compliant and has commenced modification or replacement of such
applications, as necessary. Given information known at this time about the
Partnership's systems that are non-compliant, coupled with the Partnership's
ongoing, normal course-of-business efforts to upgrade or replace critical
systems, as necessary, management does not expect "Year 2000" compliance costs
to have any material adverse impact on the Partnership's liquidity or ongoing
results of operations. No assurance can be given, however, that all of the
Partnership's systems will be "Year 2000" compliant or that compliance costs or
the impact of the Partnership's failure to achieve substantial "Year 2000"
compliance will not have a material adverse effect on the Partnership's future
liquidity or results of operations.
Item 8. Financial Statements and Supplementary Data
For information with respect to this Item 8, see Financial Statements and
Schedules as listed in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Page 15 of 38
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership
Daniel Lee Stephenson and RFC are the General Partners of the Partnership. The
executive officer and director of Rancon is:
Daniel L. Stephenson Director, President, Chief Executive Officer and Chief
Financial Officer
There is no fixed term of office for Mr. Stephenson.
Mr. Stephenson, age 54, founded RFC (formerly known as Rancon Corporation) in
1971 for the purpose of establishing itself as a commercial, industrial and
residential property syndication, development and brokerage concern. Mr.
Stephenson has, from inception, held the position of Director. In addition, Mr.
Stephenson was President and Chief Executive Officer of RFC from 1971 to 1986,
from August 1991 to September 1992 and from March 31, 1995 to present. Mr.
Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm
which has acquired a portfolio of assets from the Resolution Trust Corporation.
Item 11. Executive Compensation
The Partnership has no executive officers. For information relating to fees,
compensation, reimbursement and distributions paid to related parties, reference
is made to Item 13 below.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
No person is known by the Partnership to be the beneficial owner of more than 5%
of the Units.
Security Ownership of Management
Title Amount and Nature of Percent
of Class Name of Beneficial Owner Beneficial Ownership of Class
- -------- ------------------------ -------------------- -------
Units Daniel Lee Stephenson (IRA) 3 Units (direct) *
Units Daniel Lee Stephenson Family Trust 100 Units (direct) *
* Less than 1 percent
Changes in Control
The Limited Partners have no right, power or authority to act for or bind the
Partnership. However, the Limited Partners have the power to vote upon the
following matters affecting the basic structure of the Partnership, each of
which shall require the approval of Limited Partners holding a majority of the
outstanding Units: (i) amendment of the Partnership's Partnership Agreement;
(ii) termination and dissolution of the Partnership; (iii) sale, exchange or
pledge of all or substantially all of the assets of the
Page 16 of 38
<PAGE>
Partnership; (iv) removal of the General Partners or any successor General
Partner; (v) election of a new General Partner or General Partners upon the
removal, retirement, death, insanity, insolvency, bankruptcy or dissolution of
the General Partners or any successor General Partner; (vi) modification of the
terms of any agreement between the Partnership and the General Partners or an
affiliate of the General Partners; and (vii) extension of the term of the
Partnership.
Item 13. Certain Relationships and Related Transactions
During the year ended December 31, 1997, the Partnership did not incur any costs
reimbursable to RFC.
Page 17 of 38
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of the report
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996, the one month ended December 31,
1995, and the year ended November 30, 1995
Consolidated Statements of Partners' Equity (Deficit) for the
years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996, the one month ended December 31,
1995, and the year ended November 30, 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule:
Schedule III -- Real Estate and Accumulated Depreciation as
of December 31, 1997 and Note thereto
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
(3) Exhibits:
(2.1) Consent Solicitation Statement (filed as a Definitive
Schedule 14A - Proxy Statement of the Registrant, dated
October 17, 1997, is incorporated herein by reference).
(3.1) Amended and Restated Agreement of Limited Partnership
of the Partnership (included as Exhibit B to the
Prospectus dated March 3, 1988, filed pursuant to Rule
424(b), File Number 2-97837, is incorporated herein by
reference).
(3.2) Third Amendment to the Amended and Restated Agreement
of Limited Partnership of the Partnership, dated April
1, 1989 (filed as Exhibit 3.2 to the Partnership's
annual report on Form 10-K for the fiscal year ended
November 30, 1991 is incorporated herein by reference).
Page 18 of 38
<PAGE>
(3.3) Fourth Amendment to the Amended and Restated Agreement
of Limited Partnership of the Partnership, dated March
11, 1992 (filed as Exhibit 3.3 to the Partnership's
annual report on Form 10-K for the fiscal year ended
November 30, 1991 is incorporated herein by reference).
(3.4) Limited Partnership Agreement of RRF V Tri-City Limited
Partnership, A Delaware limited partnership of which
Rancon Realty Fund V, A California Limited Partnership
is the limited partner (filed as Exhibit 3.4 to the
Partnership's annual report on Form 10-K for the year
ended December 31, 1996 is incorporated herein by
reference).
(10.1) Documents related to the sale of a portion of Lot 28 at
Tri-City Corporate Centre (25,700 square feet sold to
Home Depot) (filed as Exhibit 10.1 to the Partnership's
annual report on Form 10-K for the fiscal year ended
November 30, 1994 is incorporated herein by reference).
(10.2) Management, administration and consulting agreement and
amendment thereto for services rendered by Glenborough
Inland Realty Corporation dated December 20, 1994 and
March 30, 1995, respectively.
(10.3) Promissory note in the amount of $9,600,000 dated May
9, 1996 secured by Deeds of Trust on three of the
Partnership Properties (filed as Exhibit 10.3 to the
Partnership's annual report on Form 10-K for the year
ended December 31, 1996 is incorporated herein by
reference).
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
Page 19 of 38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, the Partnership 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
(Partnership)
Date: March 27, 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
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Partnership and in the
capacities and on the dates indicated.
Date: March 27, 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
Page 20 of 38
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULE
Financial Statements and Schedule Page
Financial Statements:
Report of Independent Accountants 22
Consolidated Balance Sheets as of December 31, 1997 and 1996 23
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996, the one month ended December 31,
1995, and the year ended November 30, 1995 24
Consolidated Statements of Partners' Equity (Deficit) for the
years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996, the one month ended December 31,
1995, and the year ended November 30, 1995 26 and 27
Notes to Consolidated Financial Statements 28
Schedule:
III - Real Estate and Accumulated Depreciation as of
December 31, 1997 and Note thereto 37
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
Page 21 of 38
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
RANCON REALTY FUND V, A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheets of RANCON REALTY
FUND V, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1997 and 1996, and
the related consolidated statements of operations, partners' equity (deficit)
and cash flows for the years ended December 31, 1997 and 1996, the one month
ended December 31, 1995 and year ended November 30, 1995. These consolidated
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RANCON REALTY FUND
V, A CALIFORNIA LIMITED PARTNERSHIP, as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997 and 1996, the one month ended December 31, 1995 and year ended November 30,
1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying schedule
listed in the index to financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic consolidated financial statements. This
information has been subjected to the auditing procedures applied in our audits
of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic consolidated financial
statements taken as a whole.
San Francisco, California /s/ ARTHUR ANDERSEN LLP
February 12, 1998
Page 22 of 38
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
December 31, 1997 and 1996
(in thousands, except units outstanding)
Assets 1997 1996
------ --------- --------
Investments in real estate:
Rental property, net of accumulated depreciation
of $16,911 and $15,180 as of December 31, 1997
and 1996, respectively $ 33,486 $ 34,750
Land held for development 7,980 9,583
Land held for sale 920 1,005
-------- --------
Total real estate investments 42,386 45,338
-------- --------
Cash and cash equivalents 4,361 5,007
Pledged cash 353 353
Accounts receivable 141 145
Note receivable 1,208 1,249
Deferred financing costs and other fees, net of
accumulated amortization of $1,953 and $1,565
as of December 31, 1997 and 1996, respectively 1,097 1,301
Prepaid expenses and other assets 645 800
-------- --------
Total assets $ 50,191 $ 54,193
======== ========
Liabilities and Partners' Equity (Deficit)
-----------------------------------------
Liabilities:
Notes payable $ 13,684 $ 13,845
Accounts payable and accrued expenses 693 276
Interest payable 74 75
-------- --------
Total liabilities 14,451 14,196
-------- --------
Commitments and contingent liabilities (see Note 8) -- --
Partners' equity (deficit):
General partners (954) (921)
Limited partners 96,754 and 99,767 limited partnership
units outstanding at December 31, 1997
and 1996, respectively 36,694 40,918
-------- --------
Total partners' equity 35,740 39,997
-------- --------
Total liabilities and partners' equity $ 50,191 $ 54,193
======== ========
The accompanying notes are an integral part of these financial statements.
Page 23 of 38
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
For the years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995
(in thousands, except per unit amounts and units outstanding)
For the one For the year
For the years ended month ended ended
December 31, December 31, November 30,
1997 1996 1995 1995
-------- -------- ------ --------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 6,894 $ 6,969 $ 461 $ 6,200
Interest and other income 379 206 1 100
-------- -------- ------ --------
Total revenue 7,273 7,175 462 6,300
-------- -------- ------ --------
Expenses:
Operating, including $27 paid to Sponsor
during the year ended November 30, 1995 3,190 3,257 257 3,045
Depreciation and amortization 2,065 2,087 189 2,101
Interest expense 1,298 1,271 68 668
Provision for impairment of
real estate investments 1,688 -- -- 14,760
Expenses associated with undeveloped land 615 629 58 712
Administrative, including $84 paid to Sponsor
during the year ended November 30, 1995 1,231 1,238 89 1,162
Proposed dissolution costs 479 -- -- --
-------- -------- ------ --------
Total expenses 10,566 8,482 661 22,448
-------- -------- ------ --------
Net loss $ (3,293) $ (1,307) $ (199) $(16,148)
======== ======== ====== ========
Net loss per limited partnership unit $ (32.68) $ (12.97) $(1.97) $(160.18)
======== ======== ====== ========
Weighted average number of limited
partnership units outstanding during each
period used to compute net loss per limited
partnership unit 99,767 99,767 99,775 99,800
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 24 of 38
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
For the years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995
(in thousands)
General Limited
Partners Partners Total
------- --------- ---------
Balance at November 30, 1994 $ (744) $ 58,407 $ 57,663
Retirement of limited partnership units -- (9) (9)
Net loss (162) (15,986) (16,148)
------- --------- ---------
Balance at November 30, 1995 (906) 42,412 41,506
Retirement of limited partnership units -- (3) (3)
Net loss (2) (197) (199)
------- --------- ---------
Balance at December 31, 1995 (908) 42,212 41,304
Net loss (13) (1,294) (1,307)
------- --------- ---------
Balance at December 31, 1996 (921) 40,918 39,997
Retirement of limited partnership units -- (964) (964)
Net loss (33) (3,260) (3,293)
------- --------- ---------
Balance at December 31, 1997 $ (954) $ 36,694 $ 35,740
======= ========= =========
The accompanying notes are an integral part of these financial statements.
Page 25 of 38
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
For the years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995
(in thousands)
For the one For the year
For the years ended month ended ended
December 31, December 31, November 30,
1997 1996 1995 1995
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,293) $ (1,307) $ (199) $ (16,148)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and amortization 2,065 2,087 189 2,101
Amortization of loan fees, included in
interest expense 54 87 1 22
Provision for impairment of real
estate investments 1,688 -- -- 14,760
Changes in certain assets and liabilities:
Deferred fees (184) (158) (70) (303)
Accounts receivable 4 24 35 34
Note receivable 41 (1,249) -- --
Prepaid expenses and other assets 155 206 209 288
Accounts payable and accrued expenses 417 20 (951) 305
Interest payable (1) 75 (13) (37)
Payable to Sponsor -- -- -- (194)
--------- --------- ------- ---------
Net cash provided by (used for)
operating activities 946 (215) (799) 828
--------- --------- ------- ---------
Cash flows from investing activities:
Property acquisition and development costs (467) (309) (960) (3,023)
Pledged cash -- (2) -- --
Deposit on pending property acquisition -- -- -- (50)
--------- --------- ------- ---------
Net cash used for investing activities (467) (311) (960) (3,073)
--------- --------- ------- ---------
(continued)
</TABLE>
Page 26 of 38
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - continued
For the years ended December 31, 1997 and 1996, the one month ended
December 31, 1995, and the year ended November 30, 1995
(in thousands)
For the one For the year
For the years ended month ended ended
December 31, December 31, November 30,
1997 1996 1995 1995
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Net loan proceeds $ -- $ 6,768 $ -- $ 2,484
Loan fees paid -- (305) (23) --
Notes payable principal payments (161) (1,606) (6) (72)
Purchase and Retirement of Limited
Partnership Units (964) -- (3) (9)
--------- --------- ------- ---------
Net cash provided by (used for)
financing activities (1,125) 4,857 (32) 2,403
--------- --------- ------- ---------
Net increase (decrease) in cash and
cash equivalents (646) 4,331 (1,791) 158
Cash and cash equivalents at
beginning of period 5,007 676 2,467 2,309
--------- --------- ------- ---------
Cash and cash equivalents at
end of period $ 4,361 $ 5,007 $ 676 $ 2,467
========= ========= ======= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,245 $ 1,135 $ 79 $ 861
========= ========= ======= =========
Interest capitalized $ -- $ 26 $ -- $ 178
========= ========= ======= =========
Supplemental disclosure of refinancing activity:
New financing $ -- $ 9,600 $ -- $ --
Original financing paid off in escrow -- (2,764) -- --
Increase in other assets and loan fees paid -- (68) -- --
--------- --------- ------- ---------
Net loan proceeds $ -- $ 6,768 $ -- $ --
========= ========= ======= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 27 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Rancon Realty Fund V, a California Limited Partnership, ("the Partnership"), was
organized in accordance with the provisions of the California Revised Limited
Partnership Act for the purpose of acquiring, developing and operating real
property. The General Partners of the Partnership are Daniel L. Stephenson and
Rancon Financial Corporation ("RFC"), hereinafter referred to as the Sponsor.
RFC is wholly-owned by Daniel L. Stephenson. The Partnership reached final
funding in February, 1989.
Allocation of profits, losses and cash distributions from operations and cash
distributions from sale or financing are made pursuant to the terms of the
Partnership Agreement. Generally, net income and distributions from operations
are allocated 90% to the limited partners and 10% to the general partners. Net
losses from operations are allocated 99% to the limited partners and 1% to the
general partners until such time as a partner's account is reduced to zero.
Additional losses will be allocated entirely to those partners with positive
account balances until such balances are reduced to zero. In no event will the
General Partners be allocated less than 1% of net loss for any period.
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 with the exception of undeveloped land 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.
General Partner and Management Matters
Effective January 1, 1994 the Partnership contracted with RFC 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. These services were provided by RFC
subject to the provisions of the Partnership Agreement.
Effective January 1, 1995, RFC entered into an agreement with Glenborough
Corporation (successor by merger 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 to the
liquidation of the Partnership, whichever comes first. According 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
Page 28 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
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 the limited partners to substitute itself as the Sponsor for
the Rancon Partnerships. Glenborough is not an affiliate of RFC or the
Partnership.
Significant Accounting Policies
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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
New Accounting Pronouncements - In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosures about Segments of an Enterprise and Related Information." SFAS 131
is effective for fiscal years beginning after December 15, 1997. Management has
not yet determined the level of additional disclosure, if any, that may be
required by SFAS 131. Additional disclosures that may be required will be
provided beginning with the financial statements of the Partnership for the year
ending December 31, 1998.
Rental Property - Rental properties, including the related land, are stated at
cost unless events or circumstances indicate that cost cannot be recovered in
which case carrying value is reduced to estimated fair value. Estimated fair
value: (i) is based upon the Partnership's plans for the continued operations of
each property; (ii) is computed using estimated sales price, as determined by
prevailing market values for comparable properties and/or the use of
capitalization rates multiplied by annualized rental income based upon the age,
construction and use of the building, and (iii) does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property. The fulfillment of the Partnership's plans
related to each of its properties is dependent upon, among other things, the
presence of economic conditions which will enable the Partnership to continue to
hold and operate the properties prior to their eventual sale. Due to
uncertainties inherent in the valuation process and in the economy, it is
reasonably possible that the actual results of operating and disposing of the
Partnership's properties could be materially different than current
expectations.
Page 29 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
Land Held for Development - Land held for development is stated at cost unless
events or circumstances indicate that cost cannot be recovered in which case the
carrying value is reduced to estimated fair value. Estimated fair value: (i) is
based on the Partnership's plans for the development of each property; (ii) is
computed using estimated sales price, based upon market values for comparable
properties, (iii) considers the cost to complete and the estimated fair value of
the completed project; and (iv) does not purport, for a specific property, to
represent the current sales price that the Partnership could obtain from third
parties for such property. The fulfillment of the Partnership's plans related to
each of its properties is dependent upon, among other things, the presence of
economic conditions which will enable the Partnership to either hold the
properties for eventual sale or obtain financing to further develop the
properties.
In 1997, management determined that the carrying values of the land held for
development and the land held for sale were in excess of the estimated fair
market value of such property and, accordingly, recorded provisions for
impairment of real estate investments totaling $1,688,000. The fair market
values were based on independent appraisals of the Partnership's real estate.
Due to the uncertainties inherent in the appraisal process and the economy, it
is reasonably possible that the actual results of operating and disposing of the
Partnership's properties could be materially different than current
expectations.
Land Held for Sale - Land held for sale is stated at the lower of cost or
estimated fair value less costs to sell. During the fiscal years ended December
31, 1997 and November 30, 1995, the Partnership wrote down the carrying value of
the land held for sale based upon independent appraisals obtained in 1997 and
1995, respectively. Appraisals are estimates of fair value based upon
assumptions about the property and the market in which it is located. Due to the
uncertainties inherent in the appraisal process, these valuations do not purport
to be the price at which a sale transaction involving these properties can or
will take place.
Cash and Cash Equivalents - The Partnership considers certificates of deposit
and money market funds with original maturities of less than ninety days to be
cash equivalents.
Deferred Financing Costs and Other Fees - Deferred loan fees are amortized on a
straight-line basis over the life of the related loan and deferred lease
commissions are amortized over the initial fixed term of the related lease
agreement.
Rental Income - Rental income is recognized as earned over the life of the
respective leases.
Net Loss Per Limited Partnership Unit - Net loss per limited partnership unit is
calculated using the weighted average number of limited partnership units
outstanding during the period and the Limited Partners' allocable share of the
net loss.
Income Taxes - No provision for income taxes is included in the accompanying
financial statements, as the Partnership's results of operations are allocated
to the partners for inclusion in their respective income tax returns. Net loss
and partners' equity (deficit) for financial reporting purposes will differ from
the Partnership income tax return because of different accounting methods used
for certain items, including
Page 30 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
depreciation expense, capitalization of development
period interest, income recognition and provisions for impairment of investments
in real estate.
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 the consolidation.
Reclassifications - Certain prior year balances have been reclassified to
conform with the current year presentation.
Note 2. RELATED PARTY TRANSACTIONS
Through December 31, 1994, the Partnership had an agreement with the Sponsor for
property management services. The agreement provided for a management fee equal
to 5% of gross rentals collected while managing the properties. Fees incurred
under this agreement totaled $27,000 for the year ended November 30, 1995.
Effective January 1, 1995, the Partnership contracted with Glenborough to
provide these services to the Partnership.
The Partnership Agreement also provides for the reimbursement of actual costs
incurred by the Sponsor in providing certain administrative, legal and
development services necessary for the prudent operation of the Partnership.
Reimbursable costs incurred by the Partnership totaled $84,000 for the year
ended November 30, 1995, of which the Partnership capitalized $11,000 in 1995.
Effective January 1, 1995, such services are being provided by Glenborough as
described in Note 1.
Note 3. PLEDGED CASH
Pledged cash of $353,000 represents a $351,000 certificate of deposit held as
collateral for subdivision improvement bonds related to the 78.1-acre
Perris-Nuevo property owned by the Partnership. As the Perris-Nuevo property is
now being held for sale by the Partnership, this pledged cash would be a factor
in computing the sales price of such property and would therefore be recovered
in the event of a sale. Pledged cash as of December 31, 1997 and 1996 also
includes a $2,000 certificate of deposit pledged as security to a utility
district for construction of a sewer crossing.
Page 31 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
Note 4. INVESTMENTS IN REAL ESTATE
Rental property components at December 31, 1997 and 1996 are as follows (in
thousands):
1997 1996
----------- -----------
Land $ 6,586 $ 6,586
Buildings 31,614 31,580
Leasehold and other improvements 12,197 11,764
----------- -----------
50,397 49,930
Less: accumulated depreciation (16,911) (15,180)
------------ -----------
Total rental property $ 33,486 $ 34,750
=========== ===========
The Partnership's rental property includes projects at the Tri-City Corporate
Centre in San Bernardino, California and Rancon Centre Ontario in Ontario,
California.
Land held for development consists of the following at December 31, 1997 and
1996 (in thousands):
1997 1996
----------- ----------
14 acres at Tri-City Corporate Centre,
San Bernardino, CA $ 2,691 $ 4,294
41.02 acres in Ontario, CA 5,289 5,289
----------- ----------
Total land held for development $ 7,980 $ 9,583
=========== ==========
All land held for development is unencumbered at December 31, 1997 and 1996.
Land held for sale as of December 31, 1997 and 1996 includes the following (in
thousands):
1997 1996
----------- ----------
23.8 acres in Perris, CA (Ethanac Road) $ 775 $ 775
78.1 acres in Perris, CA (Nuevo Road) 145 230
----------- ----------
Total land held for sale $ 920 $ 1,005
=========== ==========
All land held for sale is unencumbered at December 31, 1997 and 1996.
Page 32 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
During the years ended December 31, 1997 and November 30, 1995, the Partnership
recorded the following provisions to reduce the carrying value of investments in
real estate (in thousands):
1997 1995
------- --------
Land Held for Development:
Tri-City Corporate Center, San Bernardino, CA $ 1,603 $ 5,775
Land Held for Sale:
78.1 acres in Perris, CA, (Nuevo Road) 85 6,778
23.8 acres in Perris, CA (Ethanac Road) -- 2,207
------- --------
85 8,985
------- --------
Total provision for impairment of real estate investments $ 1,688 $ 14,760
======= ========
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of." SFAS 121 requires
that an evaluation of an individual property for possible impairment must be
performed whenever events or changes in circumstances indicate that an
impairment may have occurred and that long-lived assets to be disposed of be
carried at the lower of carrying amount or fair value. In 1995, the Partnership
modified focused on eventual disposition of its assets at the optimal time and
sales price and revalued certain of its assets by providing for impairment in
real estate. In 1996, there was no impact on the financial position or results
of operations of the Partnership from the adoption of SFAS 121. In 1997,
additional provisions for impairment of real estate were recorded based on
independent appraisals of the Partnerships' real estate.
Note 5. NOTES PAYABLE
Notes payable as of the stated balance sheet dates were as follows (in
thousands):
December 31,
1997 1996
------- -------
Note payable, secured by first deed of
trust on Lakeside Tower, One Parkside
and Two Carnegie Plaza. The loan, which
matures August 1, 2006, is a 10-year,
9.39% fixed rate loan and with a 25-year
amortization and requires $83 in
principal and interest payments due
monthly. $ 9,446 $ 9,551
Page 33 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
Note payable, secured by first deed of
trust on One Carnegie Plaza. On August
30, 1996, the note was refinanced and
required a $1,500 principal paydown in
exchange for a reduction in the stated
interest rate from 10.0% to 8.25%. The
new loan terms provide for monthly
principal and interest payments totaling
$34 commencing November 1, 1996, with a
new maturity date of December 1, 2001. 4,238 4,294
------- -------
Total notes payable $13,684 $13,845
======= =======
The annual maturities on the Partnership's notes payable for the fiscal years
subsequent to December 31, 1997 are as follows (in thousands):
1998 $ 176
1999 193
2000 211
2001 4,194
2002 168
Thereafter 8,742
-----------
Total $ 13,684
===========
Note 6. PROPOSED DISSOLUTION COSTS
In 1997, the Partnership entered into an agreement to sell all of its real
estate assets and then liquidate the Partnership, described in a Consent
Solicitation Statement sent to the Unitholders on October 17, 1997 (incorporated
by reference to the Definitive Schedule 14A - Proxy Statement filed with the
Securities and Exchange Commission on October 17, 1997).
In December 1997, the Partnership's General Partner determined it would be in
the best interests of the Partnership to rescind the agreement (see Item 4) and
all costs totaling $479,000 related to the sale and proposed dissolution were
expensed.
Page 34 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
Note 7. LEASES
The Partnership's rental properties are leased under non-cancelable operating
leases that expire at various dates through December, 2010. In addition to
monthly base rents, several of the leases provide for additional rents based
upon a percentage of sales levels attained by the tenants; however, no
contingent rentals were realized during the years ended December 31, 1997 and
1996, and November 30, 1995 or the month ended December 31, 1995. Future minimum
rents under non-cancelable operating leases as of December 31, 1997 are as
follows (in thousands):
1998 $ 5,850
1999 3,980
2000 2,897
2001 2,152
2002 1,684
Thereafter 6,643
-----------
Total $ 23,206
===========
Note 8. 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 December 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.
Note 9. TAXABLE INCOME (LOSS)
The Partnership's tax returns, the qualification of the Partnership as a
partnership for federal income tax purposes, and the amount of income or loss
are subject to examination by federal and state taxing authorities. If such
examinations result in changes to the Partnership's taxable income or loss, the
tax liability of the partners could change accordingly.
The Partnership's tax returns are filed on a calendar year basis. As such, the
following reconciliation has been prepared using tax amounts estimated on a
calendar year basis.
Page 35 of 38
<PAGE>
RANCON REALTY FUND V,
A California Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1997 and 1996, and November 30, 1995
<TABLE>
<CAPTION>
The following is a reconciliation for the years ended December 31, 1997 and 1996
and November 30, 1995, of the net loss for financial reporting purposes to the
estimated taxable income (loss) determined in accordance with accounting
practices used in preparation of federal income tax returns (in thousands).
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Net loss per financial statements $ (3,293) $ (1,307) $ (16,148)
Provision for impairment of investments
in real estate 1,688 -- 14,760
Financial reporting depreciation in excess
of tax reporting depreciation 269 558 626
Operating revenues and expenses recognized in
a different period for financial reporting
than for income tax reporting, net 1,486 (175) 166
Property taxes capitalized for tax 436 487 477
--------- -------- ---------
Estimated net loss for federal
income tax purposes $ 586 $ (437) $ (119)
========= ======== =========
</TABLE>
The following is a reconciliation of partner's equity for financial reporting
purposes to estimated partners' capital for federal income tax purposes as of
December 31, 1997 and 1996 (in thousands).
1997 1996
--------- --------
Partners' equity per financial statements $ 35,740 $ 39,997
Cumulative provision for impairment of
investments in real estate 23,413 21,725
Cumulative financial reporting depreciation in
excess of tax reporting depreciation 7,152 6,883
Operating revenues and expenses recognized in
a different period for financial reporting
than for income tax reporting, net 2,155 (175)
Property taxes capitalized for tax 1,400 964
Syndication costs (1,987) (1,987)
Other, net 964 843
--------- --------
Estimated partners' capital for federal
income tax purposes $ 68,837 $ 68,250
========= ========
Page 36 of 38
<PAGE>
<TABLE>
<CAPTION>
RANCON REALTY FUND V,
A California Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(In Thousands)
- -----------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
Cost Capitalized
Initial Cost to Subsequent to
Partnership Acquisition
Buildings
and Carrying
Description Encumbrances Land Improvements Improvements Cost
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental Properties:
Commercial Office Complexes
San Bernardino County, CA:
One Carnegie Plaza $ 4,238 $ 1,583 $ -- $ 9,498 $ 40
Less: Provision for impairment
of investment in real estate (B) -- -- -- (1,657) --
Two Carnegie Plaza (C) 873 -- 5,592 --
Carnegie Business
Center II -- 544 -- 3,518 15
Less: Provision for impairment
of investment in real estate (B) -- -- -- (299) --
Lakeside Tower (C) 834 -- 11,309 92
Santa Fe -- 501 -- 2,530 --
One Parkside (C) 529 -- 6,141 235
Less: Provision for impairment
of investment in real estate (B) -- -- -- (700) --
Health Club -- 786 -- 1,754 178
Outback Steakhouse -- -- -- 808 --
Industrial Office Complexes
San Bernardino County, CA:
Rancon Centre Ontario -- 1,735 -- 6,733 34
Less: Provision for impairment
of investment in real estate (B) -- -- -- (2,809) --
------- ------- ------- -------- -------
13,684 7,385 -- 42,418 594
------- ------- ------- -------- -------
Land Held for Development:
San Bernardino County, CA:
14 acres - Tri-City -- 5,676 -- 4,628 1,265
Less: Provision for impairment
of investment in real estate (B) -- (2,431) -- (6,447) --
41.02 acres - Ontario -- 3,621 -- 1,499 169
------- ------- ------- -------- -------
-- 6,866 -- (320) 1,434
------- ------- ------- -------- -------
Land Held for Sale:
Riverside County, CA:
23.8 acres - Perris - Ethanac Rd. -- 2,780 -- 180 22
Less: Provision for impairment
of investment in real estate (B) -- (2,027) -- (180) --
78.1 acres - Perris - Nuevo Rd. -- 5,955 -- 1,008 45
Less: Provision for impairment
of investment in real estate (B) -- (5,770) -- (1,093) --
------- ------- ------- -------- -------
-- 938 -- (85) 67
------- ------- ------- -------- -------
TOTAL $13,684 $15,189 $ -- $ 42,013 $ 2,095
======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
Gross Amount Carried
at December 31, 1997
--------------------------
Buildings Date Life
and (A) Accumulated Construction Date Depreciated
Description Land Improvements Total Depreciation Began Acquired Over
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Properties:
Commercial Office Complexes
San Bernardino County, CA:
One Carnegie Plaza $ 1,583 $ 9,538 $11,121 $ 3,818 8/86 6/03/85 3-40 yrs.
Less: Provision for impairment
of investment in real estate (B) (256) (1,401) (1,657) --
Two Carnegie Plaza 873 5,592 6,465 2,396 1/88 6/03/85 3-40 yrs.
Carnegie Business
Center II 544 3,533 4,077 1,863 10/86 6/03/85 3-40 yrs.
Less: Provision for impairment
of investment in real estate (B) (41) (258) (299) --
Lakeside Tower 834 11,401 12,235 4,506 3/88 6/03/85 3-40 yrs.
Santa Fe 501 2,530 3,031 1,094 2/89 6/03/85 5-40 yrs.
One Parkside 529 6,376 6,905 1,369 2/92 6/03/85 5-40 yrs.
Less: Provision for impairment
of investment in real estate (B) (65) (635) (700) --
Health Club 786 1,932 2,718 179 1/95 6/03/85 5-40 yrs.
Outback Steakhouse 161 647 808 16 1/96 6/03/85 15-40 yrs.
Industrial Office Complexes
San Bernardino County, CA:
Rancon Centre Ontario 1,735 6,767 8,502 1,670 1/88 5/22/87 3-40 yrs.
Less: Provision for impairment
of investment in real estate (B) (598) (2,211) (2,809) --
------- ------- ------- -------
6,586 43,811 50,397 16,911
------- ------- ------- -------
Land Held for Development:
San Bernardino County, CA:
14 acres - Tri-City 11,569 -- 11,569 -- N/A 6/03/85 N/A
Less: Provision for impairment
of investment in real estate (B) (8,878) -- (8,878) --
41.02 acres - Ontario 5,289 -- 5,289 -- N/A 5/22/87 N/A
------- ------- ------- -------
7,980 -- 7,980 --
------- ------- ------- -------
Land Held for Sale:
Riverside County, CA:
23.8 acres - Perris - Ethanac Rd. 2,982 -- 2,982 -- N/A 3/30/89 N/A
Less: Provision for impairment
of investment in real estate (B) (2,207) -- (2,207) --
78.1 acres - Perris - Nuevo Rd. 7,008 -- 7,008 -- N/A 12/28/89 N/A
Less: Provision for impairment
of investment in real estate (B) (6,863) -- (6,863) --
------- ------- ------- -------
920 -- 920 --
------- ------- ------- -------
TOTAL $15,486 $43,811 $59,297 $16,911
======= ======= ======= =======
(A) The aggregate cost for federal income tax purposes is $83,571.
(B) See Note 4 to Financial Statements
(C) Two Carnegie Plaza, Lakeside Tower and One Parkside are collateral for the debt in the aggregate amount of $9,446.
</TABLE>
Page 37 of 38
<PAGE>
RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
Reconciliation of gross amount at which real estate was carried:
For the one For the
For the years ended month ended year ended
December 31, December 31, November 30,
1997 1996 1995 1995
--------- -------- -------- ----------
Investments in real estate:
Balance at beginning of period $ 60,518 $ 60,209 $ 59,248 $ 70,855
Additions during period:
Improvements 467 309 961 2,975
Capitalized carrying costs -- -- -- 178
Provision for impairment of
investments in real estate (1,688) -- -- (14,760)
--------- -------- -------- --------
Balance at end of period $ 59,297 $ 60,518 $ 60,209 $ 59,248
========= ======== ======== ========
Accumulated Depreciation:
Balance at beginning of period $ 15,180 $ 13,405 $ 13,244 $ 11,464
Additions charged to expenses 1,731 1,775 161 1,780
--------- -------- -------- --------
Balance at end of period $ 16,911 $ 15,180 $ 13,405 $ 13,244
========= ======== ======== ========
Page 38 of 38
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000769131
<NAME> RANCON REALTY FUND V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,714
<SECURITIES> 0
<RECEIVABLES> 1,349
<ALLOWANCES> 0
<INVENTORY> 920
<CURRENT-ASSETS> 4,855
<PP&E> 58,377
<DEPRECIATION> 16,911
<TOTAL-ASSETS> 50,191
<CURRENT-LIABILITIES> 767
<BONDS> 13,684
0
0
<COMMON> 0
<OTHER-SE> 35,740
<TOTAL-LIABILITY-AND-EQUITY> 50,191
<SALES> 0
<TOTAL-REVENUES> 7,273
<CGS> 0
<TOTAL-COSTS> 3,190
<OTHER-EXPENSES> 4,390
<LOSS-PROVISION> 1,688
<INTEREST-EXPENSE> 1,298
<INCOME-PRETAX> (3,293)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,293)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,293)
<EPS-PRIMARY> (32.68)
<EPS-DILUTED> (32.68)
</TABLE>
