SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 94402-1708
(Address of principal (Zip Code)
executive offices)
(650) 343-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Total number of units outstanding as of March 31, 1999: 96,442
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Rancon Realty Fund V, a California Limited Partnership (the "Registrant"),
hereby (i) amends certain information in Note 3 of the Notes to the Consolidated
Financial Statements in Item 1 of Part I of the Registrant's Form 10-Q for its
quarter ended March 31, 1999 (the "March 10-Q"), (ii) amends the first paragraph
after the caption "General Matters" in Item 2 of Part I, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
March 10-Q, and (iii) restates Items 1 and 2 of Part I in their entirety.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except unit amounts)
March 31, December 31,
1999 1998
(Unaudited) (Audited)
--------------- ----------------
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Assets
Investments in real estate:
Rental property, net of accumulated depreciation of
$17,037 and $16,666 at March 31, 1999 and December
31, 1998, respectively $ 28,470 $ 28,572
Rental property held for sale, net -- 3,970
Land held for development 2,704 2,702
Land held for sale -- 597
------------- -------------
Total real estate investments 31,174 35,841
------------- -------------
Cash and cash equivalents 11,146 3,073
Pledged cash -- 353
Accounts receivable 1,214 1,239
Notes receivable 6,190 --
Deferred financing costs and other fees, net of
accumulated amortization of $2,090 and $2,259
at March 31, 1999 and December 31, 1998, respectively 923 998
Prepaid expenses and other assets 565 6,121
------------- -------------
Total assets $ 51,212 $ 47,625
============= =============
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- continued -
Page 2 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(in thousands, except unit amounts)
March 31, December 31,
1999 1998
(Unaudited) (Audited)
--------------- ----------------
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Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 13,461 $ 13,508
Accounts payable and other liabilities 331 230
Deferred income 3,750 --
------------- -------------
Total liabilities 17,542 13,738
------------- -------------
Commitments and contingent liabilities (see Note 4) -- --
Partners' equity (deficit):
General partners (973) (971)
Limited partners, 96,442 and 96,444 limited partnership
units outstanding at March 31, 1999 and December 31,
1998, respectively 34,643 34,858
------------- -------------
Total partners' equity 33,670 33,887
------------- -------------
Total liabilities and partners' equity $ 51,212 $ 47,625
============= =============
</TABLE>
See accompanying notes to financial statements.
Page 3 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts and units outstanding)
Three months ended
March 31,
---------------------------------
1999 1998
--------------- -------------
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Revenues:
Rental income $ 1,578 $ 1,657
Interest and other income 205 97
------------- ------------
Total revenues 1,783 1,754
------------- ------------
Expenses:
Operating 796 749
Interest expense 318 322
Depreciation and amortization 424 484
Loss on sale of real estate 6 --
Expenses associated with undeveloped land 117 156
General and administrative 299 297
Proposed dissolution costs 39 22
------------- ------------
Total expenses 1,999 2,030
------------- ------------
Net loss $ (216) $ (276)
============= ============
Net loss per limited partnership unit $ (2.22) $ (2.82)
============= ============
Weighted average number of limited partnership units
outstanding during each period used to compute
net loss per limited partnership unit 96,443 96,710
============= ============
</TABLE>
See accompanying notes to financial statements.
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statement of Partners' Equity (Deficit)
For the three months ended March 31, 1999
(in thousands)
General Limited
Partners Partners Total
--------- --------- ----------
Balance at December 31, 1998 $ (971) $ 34,858 $ 33,887
Retirement of limited partnership units -- (1) (1)
Net loss (2) (214) (216)
--------- --------- ----------
Balance at March 31, 1999 $ (973) $ 34,643 $ 33,670
========= ========= ==========
See accompanying notes to financial statements.
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
Three months ended
March 31,
-------------------------------------
1999 1998
---------------- -------------
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Cash flows from operating activities:
Net loss $ (216) $ (276)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Loss on sale of real estate 6 --
Depreciation and amortization 424 484
Amortization of loan fees, included in
interest expense 14 13
Changes in certain assets and liabilities:
Accounts receivable 25 8
Notes receivable -- 10
Deferred financing costs and other fees 2 (23)
Prepaid expenses and other assets 5,556 (67)
Accounts payable and accrued expenses 101 (161)
------------- ------------
Net cash provided by (used for) operating activities 5,912 (12)
------------- ------------
Cash flows from investing activities:
Net proceeds from sales of real estate 2,121 --
Additions to real estate investments (265) (45)
Funds released from pledged cash 353 --
------------- ------------
Net cash provided by (used for) investing activities 2,209 (45)
------------- ------------
Cash flows from financing activities:
Notes payable principal payments (47) (38)
Retirement of limited partnership units (1) (56)
-------------- ------------
Net cash used for financing activities (48) (94)
-------------- ------------
Net increase (decrease) in cash and cash equivalents 8,073 (151)
Cash and cash equivalents at beginning of period 3,073 4,361
------------- ------------
Cash and cash equivalents at end of period $ 11,146 $ 4,210
============= ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 305 $ 280
============= =============
</TABLE>
See accompanying notes to financial statements.
Page 6 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Rancon Financial Corporation ("RFC") and Daniel Lee Stephenson
(the "Sponsors" or "General Partner") and Glenborough Corporation, the
Partnership's asset and property manager ("Glenborough"), the accompanying
unaudited financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial position of Rancon
Realty Fund V, A California Limited Partnership (the "Partnership") as of March
31, 1999 and December 31, 1998, and the related statements of operations and
cash flows for the three months ended March 31, 1999 and 1998.
Proposed Asset Sale and Dissolution - The General Partner currently plans to
seek the Limited Partners' consent to sell all of the Partnership's remaining
properties and liquidate the Partnership and has filed preliminary consent
solicitation materials with the United States Securities and Exchange Commission
(the "Commission") with the goal of mailing consent solicitation materials to
the Limited Partners in the quarter ending June 30, 1999. Assuming a proposal to
sell all of the Partnership's remaining properties and liquidate the Partnership
is submitted to and approved by the Limited Partners, the General Partner
currently intends to sell all of the Partnership's remaining properties in 1999,
distribute the proceeds and liquidate the Partnership after all of the
properties are sold and the cash proceeds thereof received, which the General
Partner does not expect to occur prior to at least early 2000 (and potentially
not until 2001) as some of the properties may be sold with the purchase price
payable on an installment basis.
The Partnership has not, as of the date of the filing of this Quarterly Report
on Form 10-Q with the Commission, entered into any agreement for the sale of its
remaining properties. If the Limited Partners consent to the Partnership selling
all of its remaining properties and then liquidating, the General Partner
currently intends to offer the Partnership's remaining properties for sale by
soliciting bids from various potential purchasers.
If a proposal for the sale of the Partnership's properties and liquidation of
the Partnership is submitted to the Limited Partners, but not approved, the
Partnership currently intends to continue to operate the properties and attempt
to sell such properties in single or multiple sales and develop properties it
believes are developable and would improve its return on investment.
Allocation of Net Income and Net Loss - Allocation of net income and net losses
are made pursuant to the terms of the Partnership Agreement. Generally, net
losses from operations are allocated 90% to the limited partners and 10% to the
general partners. Net losses other than net losses from operations are allocated
99% to the limited partners and 1% to the general partners. Such net losses will
be allocated among limited partners as necessary to equalize their capital
accounts in proportion to their Units, and thereafter will be allocated in
proportion to their Units. If a partner's capital account is reduced to zero,
additional net losses will be allocated entirely to those partners with positive
capital account balances until such balances are reduced to zero. In no event
shall the general partners be allocated less than 1% of the net losses for any
period.
Page 7 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
Net income from operations is allocated 90% to the limited partners and 10% to
the general partners. Net income other than net income from operations shall be
allocated as follows: (i) first, to the partners who have a deficit balance in
their capital account, provided that, in no event shall the general partners be
allocated more than 5% of the net income other than net income from operations
until the earlier of sale or disposition of substantially all of the assets or
the distribution of cash (other than cash from operations) equal to the
Unitholder's original invested capital; (ii) second, to the limited partners in
proportion to and to the extent of the amounts required to increase their
capital accounts to an amount equal to the sum of the adjusted invested capital
of their units plus an additional cumulative non-compounded 6% return per annum
(plus additional amounts depending on the date Units were purchased); (iii)
third, to the partners in the minimum amount required to first equalize their
capital accounts in proportion to the number of units owned, and then, to bring
the sum of the balances of the capital accounts of the limited partners and the
general partners into the ratio of 4 to 1; and (iv) the balance, if any, 80% to
the limited partners and 20% to the general partners. In no event shall the
general partners be allocated less than 1% of the net income other than net
income from operations for any period.
Management Matters - Effective January 1, 1995, Glenborough entered into an
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. Effective January 1, 1998, the agreement was amended to eliminate
Glenborough's responsibility for providing investor relations services and
Preferred Partnership Services, Inc., a California Corporation unaffiliated with
the Partnership, contracted to assume these services. In August 1998, the
management agreement was further amended to provide Glenborough with a guarantee
of a specified amount of asset management and property management fees through
December 31, 1999, regardless of whether the Partnership sells any or all of its
properties prior to such date. In exchange, Glenborough waived any and all
claims related to liquidated damages under the agreement to which it may have
otherwise been entitled. According to the contract, the Partnership will pay
Glenborough for its services as follows: (i) a specified asset administration
fee which is fixed for five years subject to reduction in the year following the
sale of assets ($759,000 in 1999); (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 duties for the General Partner of the Rancon Partnerships. 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.
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.
Page 8 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
The consent of the partners to a proposal to sell all of the Partnership's
remaining properties and liquidate the Partnership will not impact the
accounting treatment applied by the Partnership in its financial statements
prepared in accordance with generally accepted accounting principles as the
liquidation proceeds and the timing thereof are not currently estimable. The
Partnership will classify as "held for use" or "held for development", all of
its operating and undeveloped properties until such time as an acceptable buyer
is identified and an offer which is reasonably assured of consummation is
obtained. At that time, the Partnership will reclassify the appropriate portions
of its assets to "held for sale" and depreciation of those assets will be
discontinued.
When the sale price and timing of the last property disposal is reasonably
determinable, the Partnership will adopt liquidation basis accounting in that
quarter. At that time, all assets and liabilities will be adjusted to their
settlement amounts and an amount to be distributed to the partners upon
liquidation will be estimated.
Consolidation - In May 1996, the Partnership formed Rancon Realty Fund V
Tri-City Limited Partnership, a Delaware limited partnership ("RRF V Tri-City").
As required by the lender (Bear, Stearns Funding, Inc.) of a $9,600,000 loan
obtained by the Partnership in 1996, the Partnership contributed three of its
operating properties to RRF V Tri-City to provide a bankruptcy remote borrower
for the lender. The loan, secured by the properties in RRF V Tri-City, has a
principal balance of $9,299,000 at March 31, 1999, and matures on August 1, 2006
with a 9.39% fixed interest rate and a 25 year amortization of principal. 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.
Reclassifications - Certain prior year balances have been reclassified to
conform with the current year presentation.
Note 2. REFERENCE TO 1998 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the December 31, 1998 audited
consolidated financial statements.
Note 3. SALES OF REAL ESTATE
On January 20, 1999, the Partnership sold approximately 24 acres of land
(referred to as the Perris-Ethanac land) located in Perris, Riverside County,
California, to an unaffiliated entity for $502,200. The Partnership realized a
$6,000 loss on the sale which is reflected in the March 31, 1999 consolidated
statement of operations. The sale generated net proceeds of $446,000, which were
added to the Partnership's cash reserves.
Page 9 of 18
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RANCON REALTY FUND V,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1999
(Unaudited)
On January 29, 1999, the Partnership sold five distribution-center buildings
(referred to as Rancon Centre Ontario) located in Ontario, California, to an
unaffiliated entity for $7,650,000. As part of the terms of the sale, the
Partnership loaned $5,715,000 to the buyer (the "RCO Note"). The RCO Note is
secured by a deed of trust encumbering the Rancon Centre Ontario property, bears
interest at 8% per annum and matures on March 1, 2000, with an option to extend
the maturity date to June 1, 2000. The note also provides that the borrower may
prepay up to, but no more than, $3,000,000 of the principal balance prior to
January 1, 2000 and the entire balance after January 1, 2000. The sale generated
net proceeds of $1,562,000, which were added to cash reserves. Since the sale of
Rancon Centre Ontario included a $5,715,000 loan from the Partnership to the
buyer, the Partnership will defer recognition of the $3,307,000 gain on the sale
until collection of the note is assured.
Also on January 29, 1999, the Partnership sold approximately 60 acres of land
(referred to as the Perris-Nuevo land) located in Perris, Riverside County,
California, to an unaffiliated entity for $675,000. As part of the terms of the
sale, the Partnership loaned $475,000 to the buyer (the "Nuevo Note"). The Nuevo
Note is secured by a deed of trust encumbering the Perris Nuevo land, bears
interest at 6% per annum and matures on November 15, 1999. The sale generated
net proceeds of $113,000, which were added to the Partnership's cash reserves.
Since the sale of the Perris Nuevo land included a $475,000 loan from the
Partnership to the buyer, the Partnership will defer recognition of the $443,000
gain on the sale until collection of the note is assured.
Note 4. COMMITMENTS AND CONTINGENT LIABILITIES
The Partnership is contingently liable for subordinated real estate commissions
payable to the Sponsors in the aggregate amount of $102,000 at March 31, 1999
for sales that transpired in previous years. 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. Since the circumstances under which these commissions would be payable
are limited, the liability has not been recognized in the accompanying financial
statements; however, the amount will be recorded when and if it becomes payable.
Page 10 of 18
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Partnership had cash of $11,146,000. The remainder of the
Partnership's assets consists primarily of its net investments in real estate,
totaling approximately $31,174,000 which includes $28,470,000 in rental
properties and $2,704,000 of land held for development.
The Partnership's business strategy has been to focus on the eventual
disposition of its assets at the optimal time and sales price. As discussed in
Note 1 of Item 1, the General Partner currently plans to seek the Limited
Partners' consent to sell all of the Partnership's remaining properties and
liquidate the Partnership, and has filed preliminary consent solicitation
materials with the United States Securities and Exchange Commission (the
"Commission") with the goal of mailing consent solicitation materials to the
Limited Partners in the quarter ending June 30, 1999. Assuming a proposal to
sell all of the Partnership's remaining properties and liquidate the Partnership
is submitted to and approved by the Limited Partners, the General Partner
currently intends to sell all of the Partnership's remaining properties in 1999,
distribute the proceeds and liquidate the Partnership after all of the
properties are sold and the cash proceeds thereof received, which the General
Partner does not expect to occur prior to at least early 2000 (and potentially
not until 2001) as some of the properties may be sold with the purchase price
payable on an installment basis.
The Partnership has not, as of the date of the filing of this Quarterly Report
on Form 10-Q with the Commission, entered into any agreement for the sale of its
remaining properties. If the Limited Partners consent to the Partnership selling
all of its remaining properties and then liquidating, the General Partner
currently intends to offer the Partnership's remaining properties for sale by
soliciting bids from various potential purchasers.
If a proposal for the sale of the Partnership's properties and liquidation of
the Partnership is submitted to the Limited Partners, but not approved, the
Partnership currently intends to continue to operate the properties and attempt
to sell such properties in single or multiple sales and develop properties it
believes are developable and would improve its return on investment.
The discussion above contains forward-looking statements regarding the
Partnership's plans, goals and expectations, including statements regarding the
Partnership's estimate of the timing of the sale of the Partnership's remaining
properties, the distribution of proceeds and the liquidation of the Partnership.
Forward-looking statements are necessarily speculative, there being certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in the forward-looking statements. The General
Partners' current plans are subject to change, including in the event of changes
in general business and economic conditions as well as changes in the local real
estate markets where the Partnership's properties are located. There can be no
assurance that regulatory approval will be obtained, if and when consent
solicitation materials will be mailed to Limited Partners, that a proposal for
the sale of all of the Partnership's remaining properties and liquidation of the
Partnership will be approved, or if and when the properties will be sold, the
proceeds distributed and the Partnership liquidated. The timing of any sale of
the Partnership's remaining properties, the distribution of proceeds, and the
liquidation of the Partnership are subject to various and significant
uncertainties, many of which are beyond the
Page 11 of 18
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Partnership's control and which could delay any sale of the Partnership's
remaining properties, liquidation of the Partnership, and distribution of
proceeds significantly beyond the time periods estimated above. Among such
uncertainties are the date when any consent solicitation materials are mailed to
the Limited Partners, the date when consent of the Limited Partners is obtained
(assuming it is obtained), the demand for the Partnership's properties by
potential purchasers, the availability of capital for potential purchasers, the
actual dates when properties are sold, and the duration of any installment sales
of any of the properties.
Operationally, the Partnership's primary source of funds consist of cash
provided by its rental activities. Other sources of funds may include permanent
financing, property sales, interest income from certificates of deposit, and
other deposits of funds invested temporarily. Cash generated from property sales
are generally added to the Partnership's cash reserves pending use in the
development of properties, or are distributed to the partners.
All of the Partnership's assets are located in Tri-City Corporate Centre, in San
Bernardino, California. Tri-City is in the heart of the Inland Empire, a
submarket of Southern California and is the most densely populated area of San
Bernardino and Riverside counties. The Partnership's Tri City "Class A" office
buildings such as One Parkside and Lakeside Tower experienced strong leasing
activity over the past two quarters. Tri City's retail space continued to
experience strong leasing activity during the first quarter ended March 31, 1999
even though the retail sector in general has been adversely affected by the
presence of outlet retailers. The market for industrial space appears to be
improving due to the demand for space for both warehouse and distribution
facilities. Management currently believes that the overall real estate market in
the Inland Empire remains strong through 1999, with conditions beyond such time
being less predictable.
Tri-City
The Partnership currently owns the following eight properties in Tri-City
Corporate Center:
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 112,747
One Parkside Four story office building 70,069
Bally's Health Club Health club facility 25,000
Outback Steakhouse Restaurant 6,500
The Partnership also owns approximately 14 acres of unimproved land in the
Tri-City area.
General Matters
The $3,970,000 or 100% decrease in rental property held for sale is due to the
January 29, 1999 sale of five distribution center buildings referred to as
Rancon Centre Ontario ("RCO Buildings"). The Partnership received net sale
proceeds totaling $3,307,000 and took back a $5,715,000 note receivable secured
by the RCO Buildings. The note bears interest of 8% per annum and matures on
March 1, 2000 with option to extend the maturity date to June 1, 2000. The note
also provides that the borrower may prepay up to, but no more than, $3,000,000
of the principal balance prior to January 1, 2000 and the entire balance after
January 1, 2000.
Page 12 of 18
<PAGE>
The $597,000 or 100% decrease in land held for sale at March 31, 1999 compared
to December 31, 1998 is due to the January 1999 sales of the Perris-Ethanac land
and the Perris-Nuevo land. The Partnership received net sales proceeds totaling
$559,000 and took back a $475,000 note receivable secured by the Perris-Nuevo
land. The note bears interest at 6% per annum and is due on November 15, 1999.
The $353,000 or 100 % decrease in pledged cash at March 31, 1999 compared to
December 31, 1998 is due to the release of the collateral for subdivision
improvement bonds related to the Perris-Nuevo land. The cash collateral was
released to the Partnership upon the sale of the Perris-Nuevo land in January
1999.
The $5,556,000 or 91% decrease in prepaid expenses and other assets from
December 31, 1998 to March 31, 1999 is primarily due to the receipt of the net
sale proceeds related to the 38.5 acres of unimproved land at Rancon Centre
Ontario ("Ontario land"). The Ontario land was sold on December 31, 1998 and the
sale proceeds were held in an escrow account (included in other assets) at
year-end.
The $3,750,000 deferred income at March 31, 1999 resulted from the deferral of
recognition of the gain on sales of the Perris-Nuevo land and the RCO Buildings.
Management believes that the Partnership's cash balance at March 31, 1999
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, on a short-term basis and for the reasonably foreseeable
future. 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.
Aside from the foregoing and the current plan to potentially sell all of the
Partnership's remaining properties and liquidate the Partnership, the
Partnership knows of no demands, commitments, events or uncertainties, which
might effect its liquidity or capital resources in any material respect. In
addition, the Partnership is not subject to any covenants pursuant to its
secured debt that would constrain its ability to obtain additional capital.
RESULTS OF OPERATIONS
Revenues
Rental income decreased $79,000 or 5% for the three months ended March 31, 1999
compared to the three months ended March 31, 1998, due primarily to the loss of
rental income from the sale of the RCO Buildings. This decrease is offset by the
increased occupancy at One Parkside and Lakeside Tower.
Page 13 of 18
<PAGE>
Occupancy rates at the Partnership's Tri-City properties as of March 31, 1999
and 1998 were as follows:
March 31,
--------------------------------
1999 1998
--------------- ------------
One Carnegie Plaza 50% 57%
Two Carnegie Plaza 79% 82%
Carnegie Business Center II 74% 74%
Lakeside Tower 93% 85%
Santa Fe 100% 100%
One Parkside 84% 66%
Bally's Health Club 100% 100%
Outback Steakhouse 100% 100%
As of March 31, 1999, tenants at the Tri-City occupying substantial portions of
leased rental space included: (i) Atchison, Topeka and Santa Fe Railway Company;
(ii) Sterling Software; (iii) Chicago Title; and (iv) Holiday Spa Health Club.
These four tenants, in the aggregate, occupied approximately 118,681 square feet
of the 478,000 total leasable square feet at Tri-City and accounted for
approximately 31% of the total rental income for the Partnership during the
first quarter of 1999.
The seven percentage point decrease in occupancy from March 31, 1998 to March
31, 1999 at One Carnegie Plaza is the result of three tenants, occupying 7,570
square feet of space in the aggregate, vacating their space upon their
respective lease terminations.
The eight percentage point increase in occupancy from March 31, 1998 to March
31, 1999 at Lakeside Tower is attributed to the leasing of 14,917 square feet of
space to four new tenants.
The eighteen percentage point increase in occupancy from March 31, 1998 to March
31, 1999 at One Parkside is attributed to the leasing of 11,119 square feet of
space to two new tenants.
Interest and other income increased $108,000 or 111% for the three months ended
March 31, 1999 compared to the three months ended March 31, 1998 as a result of
the increase in interest income on the higher average invested cash balance
resulting from the recent sales of real estate.
Expenses
Operating expenses increased $47,000 or 6% for the three months ended March 31,
1999, compared to the three months ended March 31, 1998. The increase in
operating expenses is largely due to the increase in occupancy at One Parkside
and Lakeside Tower. Also contributing to the increase is: (i) the recognition of
prior year bad debt in the first quarter of 1999 as a result of failed
collection efforts from a tenant who vacated its space upon lease expiration;
(ii) the payment of tax appeal fees in February 1999; and (iii) general repairs
at Lakeside Tower. These sources of increases are offset by the decrease in
property operating expenses attributable to the sale of RCO Buildings.
Depreciation and amortization decreased $60,000 or 12% for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998 primarily
due to the elimination of depreciation and amortization associated with the RCO
Buildings. The March 31, 1999 loss on sale of real estate resulted from the sale
of the Perris-Ethanac land.
Page 14 of 18
<PAGE>
Expenses associated with undeveloped land decreased $39,000 or 25% for the three
months ended March 31, 1999 compared to the three months ended March 31, 1998
primarily due to the reduction of property taxes as a result of the recent land
sales.
General and administrative expenses remained consistent for the three months
ended March 31, 1999 compared to the three months ended March 31,1998.
The proposed dissolution costs of $39,000 and $22,000 during the three months
ended March 31, 1999 and 1998, respectively, represent charges for work
performed and expenses incurred while exploring the possibilities of having the
Partnership sell of all of its properties and then to liquidate, and preparation
of preliminary proxy materials in the quarter ended March 31, 1999. See Item 1
of Part I for further details.
Year 2000 Compliance
State of Readiness. Glenborough Corporation ("Glenborough"), the Partnership's
asset and property manager, utilizes a number of computer software programs and
operating systems. These programs and systems primarily comprise information
technology systems ("IT Systems") (i.e., software programs and computer
operating systems) that serve the management operations. Although the
Partnership does not utilize any significant IT Systems of its own, it does
utilize embedded systems such as devices used to control, monitor or assist the
operation of equipment and machinery systems (e.g., HVAC, fire safety and
security) at its properties ("Property Systems"). To the extent that 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 these IT Systems and Property Systems will be necessary.
IT Systems. Employing a team made up of internal personnel and third-party
consultants, Glenborough has completed an identification of IT Systems,
including hardware components that are not yet Year 2000 compliant. To the best
of Glenborough's knowledge based on available information and a reasonable level
of inquiry and investigation, such upgrading as appears to be called for under
the circumstances has been completed in accordance with prevailing industry
practice. Glenborough has commenced a testing program which will be completed
during 1999. In addition, the Partnership is currently communicating with third
parties with whom it does significant business, such as financial institutions,
tenants and vendors, to determine their readiness for Year 2000 compliance.
Property Systems. An identification of Property Systems, including hardware
components, that are not yet Year 2000 compliant, has also been completed.
Upgrading of such systems as appears to be called for under the circumstances
based on available information and a reasonable level of inquiry and
investigation, and in accordance with prevailing industry practice has
commenced. Upon completion of such upgrading, a testing program will be
initiated and completed during 1999. To the best of Glenborough's knowledge, the
Partnership has no Property Systems, the failure of which would have a material
effect on its operations.
Costs of Addressing Year 2000 issues. Given the information known at this time
about systems that are non-compliant, coupled with ongoing, normal course-of
business efforts to upgrade or replace critical systems, as necessary, the
Page 15 of 18
<PAGE>
Partnership does not expect Year 2000 compliance costs to have a material
adverse impact on its liquidity or ongoing results of operations. The costs of
assessment and remediation of the Property Systems will be paid by the
Partnership as an operating expense.
Risks of Year 2000 issues. In light of the assessment and upgrading efforts to
date, and assuming completion of the planned, normal course-of-business upgrades
and subsequent testing, the Partnership believes that any residual Year 2000
risk will be limited to non-critical business applications and support hardware,
and to short-term interruptions affecting Property Systems which, if they occur
at all, will not be material to overall operations. Glenborough and the
Partnership believe that all IT Systems and Property Systems will be Year 2000
compliant and that compliance will not materially adversely affect its future
liquidity or results of operations or its ability to service debt. However,
absolute assurance that this is the case cannot be given.
Contingency Plans. The Partnership is currently developing a contingency plan
for all operations which will address the most reasonably likely worst case
scenario regarding Year 2000 compliance. Such a plan, however, will recognize
material limitations on the ability to respond to major regional or industrial
failures such as power outages or communications breakdowns. Management expects
such a contingency plan to be completed during 1999.
Page 16 of 18
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
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:
On January 14, 1999, the Partnership filed a report on Form
8-K reporting under Item 2 thereof the sale of the 38.5 acres
of unimproved land in Rancon Centre Ontario and including
under Item 7 thereof certain pro forma financial statements
with respect thereto. On March 30, 1999, the Partnership filed
Amendment No. 1 on Form 8-K/A to such Form 8-K. The Form
8-K/A: (i) amends Item 7 of the Form 8-K to incorporate notes
to the pro forma financial statements and amend certain pro
forma adjustments; and (ii) restates Items 2 and 7 of the Form
8-K in their entirety.
On February 12, 1999, the Partnership filed a report on Form
8-K reporting under Item 2 thereof the sales of the Rancon
Centre Ontario Buildings, the Perris-Nuevo land and the
Perris-Ethanac land and including under Item 7 thereof certain
pro forma financial statements with respect thereto (including
the sale of the 38.5 acres of unimproved land in Rancon Centre
Ontario).
Page 17 of 18
<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
By Rancon Financial Corporation
a California corporation,
its General Partner
Date: June 1, 1999 By: /s/ DANIEL L. STEPHENSON
--------------------------
Daniel L. Stephenson, President
Date: June 1, 1999 By: /s/ DANIEL L. STEPHENSON
--------------------------
Daniel L. Stephenson, General Partner
Page 18 of 18
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000769131
<NAME> RANCON REALTY FUND V
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,146
<SECURITIES> 0
<RECEIVABLES> 1,214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,360
<PP&E> 31,174
<DEPRECIATION> 17,037
<TOTAL-ASSETS> 51,212
<CURRENT-LIABILITIES> 331
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 33,670
<TOTAL-LIABILITY-AND-EQUITY> 51,212
<SALES> 0
<TOTAL-REVENUES> 1,783
<CGS> 0
<TOTAL-COSTS> 919
<OTHER-EXPENSES> 762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318
<INCOME-PRETAX> (216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216)
<EPS-BASIC> (2.22)
<EPS-DILUTED> (2.22)
</TABLE>
