FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended September 30, 1998
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Commission file
number 0-15702
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SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
State of California 33-0122424
- ------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
- ------------------------------------- -----------------------------------
(Address of principal executive
offices) (Zip Code)
Registrant's telephone
number, including area code: (713) 706-6271
-----------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No __.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are submitted in the next pages:
PAGE
NUMBER
----------
Consolidated Balance Sheets - September 30, 1998 and December
31, 1997 4
Consolidated Statements of Operations - For the Nine Months
Ended September 30, 1998 and 1997 and for the Three Months
Ended September 30, 1998 and 1997 5
Consolidated Statement of Changes in Partners' Equity - from
October 8, 1985 (Inception of the Partnership) to December
31, 1997 and for the Nine Months Ended September 30, 1998 6
Consolidated Statements of Cash Flows - For the Nine Months
Ended September 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(a) OVERVIEW
The following discussion should be read in conjunction with the Partnership's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Form 10-Q.
The Partnership currently owns a 66.45% interest in the Sorrento II Partnership,
which operates the Sorrento II property in San Diego, California.
2
<PAGE>
(b) RESULTS OF OPERATIONS
Rental income for the nine months ended September 30, 1998 decreased by
$182,000, or 25%, when compared to the corresponding period in the prior year.
One tenant, whose lease accounted for 22,150 square feet of the Property,
expired December 31, 1997. This vacant space was re-leased in the second quarter
and rent commenced in late August. Rental income for the three months ended
September 30, 1998 decreased by $39,000, or 16%, primarily due to the unoccupied
space during part of the third quarter.
Operating expenses for the nine months ended September 30, 1998 decreased by
$8,000, or 3%, principally due to a decrease in legal fees. This decrease was
partially offset by an increase in maintenance and repair costs incurred during
the period. Operating expenses for the three months ended September 30, 1998
remained virtually unchanged. Higher administrative costs for the quarter were
primarily offset by a decrease in legal fees.
Depreciation and amortization expenses for the nine months ended September 30,
1998 remained relatively unchanged. Depreciation and amortization expenses for
the quarter ended September 30, 1998 increased by $5,000, or 4%, due to
increased depreciation and amortization on tenant improvements and leasing costs
associated with the new tenant.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position at September 30, 1998 with cash of
$8,000 and current liabilities of $273,000. The Partnership's primary capital
requirements will be for the construction of new tenant space and leasing costs.
On October 1, 1993, the Partnership created a general partnership (Sorrento II
Partners) with Sierra Mira Mesa Partners ("SMMP"), an affiliate, to facilitate
cash contributions by SMMP for the continued development and operation of the
Sorrento II property. SMMP has adequate resources to make any necessary advances
during the foreseeable future.
3
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
- --------------------------------------------------------------------------------
September 30, December 31,
1998 1997
---------- -----------
ASSETS
Cash and cash equivalents ........................ $ 7,875 $ 23,479
Receivables:
Unbilled rent .................................. 460,632 476,278
Due from affiliate ............................... 18,995 18,995
Prepaid ground lease ............................. 719,000 845,000
Income-producing property - net of
accumulated depreciation of $2,654,545
and $2,554,493, respectively ................... 5,586,889 5,629,596
Other assets ..................................... 370,218 219,646
---------- ----------
Total Assets ..................................... $7,163,609 $7,212,994
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities .................... $ 272,842 $ 48,386
Due from affiliate ............................... 66,500 0
Ground lease payable ............................. 182,412 172,058
---------- ----------
Total Liabilities ................................ 521,754 220,444
---------- ----------
Ground lessor's equity in income-
producing property ............................. 3,000,000 3,000,000
---------- ----------
Minority interest in consolidated
joint venture ................................. 1,593,639 1,711,297
---------- ----------
Partners' equity:
General Partner ................................ 0 0
Limited Partners:
140,000 units authorized,
30,777 issued and
outstanding .................................. 2,048,216 2,281,253
---------- ----------
Total Partners' equity ........................... 2,048,216 2,281,253
---------- ----------
Total Liabilities and Partners' equity ........... $7,163,609 $7,212,994
========== ==========
UNAUDITED
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended June 30, 1998 and 1997
and for the Three Months Ended September 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ............................ $ 554,735 $ 736,809 $ 203,351 $ 242,242
--------- --------- --------- ---------
Total revenues ......... 554,735 736,809 203,351 242,242
--------- --------- --------- ---------
EXPENSES:
Operating expenses ..................... 292,399 300,806 90,919 91,313
Ground lease ........................... 280,353 287,573 93,451 95,858
Depreciation and amortization .......... 332,678 335,590 116,737 111,863
--------- --------- --------- ---------
Total costs and expenses 905,430 923,969 301,107 299,034
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ....... (350,695) (187,160) (97,756) (56,792)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS .......... 117,658 46,621 32,797 14,146
--------- --------- --------- ---------
NET LOSS ................................... $(233,037) $(140,539) $ (64,959) $ (42,646)
========= ========= ========= =========
Net loss per limited partnership unit ...... $ (7.57) $ (4.57) $ (2.11) $ (1.39)
========= ========= ========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
From October 8, 1985 (Inception of Partnership) to December 31, 1997
and for the Nine Months Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited Partners Total
------------------------ General Partners'
Per Unit Total Partner Equity
--------- ----------- ----------- -----------
<S> <C> <C> <C>
Proceeds from sale of
partnership units ................. $250.00 $ 7,694,250 $ 7,694,250
Underwriting commissions
and other organization expenses ... (37.21) (1,145,333) (1,145,333)
Cumulative net income (loss)
(to December 31, 1997) ............ (135.98) (4,184,903) $ 9,193 (4,175,710)
Cumulative distributions
(to December 31, 1997) ............ (2.69) (82,761) (9,193) (91,954)
--------- ----------- ----------- -----------
Partners' equity - January 1, 1998 .. 74.12 2,281,253 0 2,281,253
Net loss ............................ (7.57) (233,037) (233,037)
--------- ----------- ----------- -----------
Partners' equity - September 30, 1998 $ 66.55 $ 2,048,216 $ 0 $ 2,048,216
========= =========== =========== ===========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
6
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $(233,037) $(140,539)
Adjustments to reconcile net loss
to cash provided by operating activities:
Depreciation and amortization ...................... 332,678 335,590
Minority interest's share of consolidated
joint venture loss ............................... (117,658) (46,621)
Decrease in rent receivable ........................ 15,646 6,431
(Increase) decrease in other assets ................ (64,348) 27,977
Increase (decrease) in accrued and other liabilities 234,810 (22,348)
--------- ---------
Net cash provided by operating activities .......... 168,091 160,490
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (250,195) (26,970)
--------- ---------
Net cash used in investing activities .............. (250,195) (26,970)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from affiliate ................................ 66,500 0
Loan to affiliate .................................. 0 (138,600)
--------- ---------
Net cash provided by (used in) financing activities 66,500 (138,600)
--------- ---------
NET DECREASE IN CASH
AND CASH EQUIVALENTS ............................... (15,604) (5,080)
CASH AND CASH EQUIVALENTS -
Beginning of period ................................ 23,479 8,578
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period ...................................... $ 7,875 $ 3,498
========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
NOTES TO FINANCIAL STATEMENTS
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------
1. ORGANIZATION
In October 1993, the Partnership created a general partnership (Sorrento II
Partners) with Sierra Mira Mesa Partners ("SMMP") to facilitate cash
contributions by SMMP for the continued development and operation of the
Sorrento II property. The Partnership Agreement of Sorrento II Partners (the
"Agreement") was amended effective January 1, 1995 to consider both
contributions and distributions when calculating each partners' percentage
interest at January 1 of each year as called for by the Agreement. Accordingly,
on January 1, 1998, the Partnership's interest in Sorrento II Partners was
decreased from 75.09% to 66.45% to reflect 1997 contributions and distributions.
2. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements include
the accounts of the Partnership and Sorrento II Partners, a majority owned joint
venture at September 30, 1998. All significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of the Partnership's management, these unaudited financial
statements reflect all adjustments which are necessary for a fair presentation
of its financial position at September 30, 1998 and results of operations and
cash flows for the periods presented. All adjustments included in these
statements are of a normal and recurring nature. These financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Annual Report of the Partnership for the year ended December
31, 1997.
3. RELATED PARTY TRANSACTIONS
In 1994, all of the common stock of TCP, Inc. was purchased by Finance Factors,
Inc. from Carlsberg Management Company ("CMC"). TCP, Inc. owns all of the common
stock of S-P Properties, Inc., the General Partner of the Partnership. CMC
continued to manage the affairs of the Partnership through March 31, 1995.
In 1997, the Sorrento II land was purchased from Lincoln National Life Insurance
Company by CGS Real Estate Company, Inc. ("CGS"), an affiliate of the General
Partner. All rights, title and interest in the ground lease were transferred and
assigned to CGS.
UNAUDITED
8
<PAGE>
Included in the financial statements for the nine months ended September 30,
1998 and 1997 are affiliate transactions as follows:
September 30
-----------------------
1998 1997
-----------------------
Management fees $ 34,223 $ 44,545
Administrative fees 54,377 52,590
Leasing fees 55,878 0
Construction fees 0 1,998
Ground lease payments 144,000 0
4. PARTNERS' EQUITY
Equity and net loss per limited partnership unit is determined by dividing the
Limited Partners' share of the Partnership's equity and net loss by the number
of limited partnership units outstanding, 30,077.
UNAUDITED
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
a Limited Partnership
S-P PROPERTIES, INC.
General Partner
Date: NOVEMBER 10, 1998 /s/ THOMAS N. THURBER
--------------------------
Thomas N. Thurber
President and Director
Date: NOVEMBER 10, 1998 /s/ G. ANTHONY EPPOLITO
--------------------------
G. Anthony Eppolito
Chief Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC INSTITUTIONAL PROPERTIES V SEPTEMBER 30, 1998 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,875
<SECURITIES> 0
<RECEIVABLES> 460,632
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,870
<PP&E> 8,241,434
<DEPRECIATION> 2,654,545
<TOTAL-ASSETS> 7,163,609
<CURRENT-LIABILITIES> 272,842
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,048,216
<TOTAL-LIABILITY-AND-EQUITY> 7,163,609
<SALES> 554,735
<TOTAL-REVENUES> 554,735
<CGS> 0
<TOTAL-COSTS> 292,399
<OTHER-EXPENSES> 332,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (233,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> (233,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233,037)
<EPS-PRIMARY> (7.57)
<EPS-DILUTED> (7.57)
</TABLE>
