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 June 30, 1998
----------------------------------------------------
Commission file
number 0-15702
----------------------------------------------------
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 500
Houston, Texas 77057
- ------------------------------------- -----------------------------------
(Address of principal executive (Zip Code)
offices)
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 - June 30, 1998 and December 31,
1997 4
Consolidated Statements of Operations - For the Six Months
Ended June 30, 1998 and 1997 and for the Three Months Ended
June 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 Six Months Ended June 30, 1998 6
Consolidated Statements of Cash Flows - For the Six Months
Ended June 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 six months ended June 30, 1998 decreased by $143,000, or
28%, 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 will
commence August 1, 1998. Rental income for the three months ended June 30, 1998
decreased by $37,000, or 17%, primarily due to the vacant space. This decrease
was partially offset due to higher common area maintenance billings during the
quarter.
Operating expenses for the six months ended June 30, 1998 decreased by $8,000,
or 4%, 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 June 30, 1998 decreased by
$33,000, or 25%, primarily due to the decrease in legal fees. In addition,
auditing costs, which were accrued in the first quarter, were accrued in the
second quarter in the prior year. The decrease in operating expenses for the
quarter was partially offset by an increase in maintenance and repair costs
incurred.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position at June 30, 1998 with cash of $4,000
and current liabilities of $132,000. The Partnership's primary capital
requirements will be for the construction of new tenant space.
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
June 30, 1998 and December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................ $ 4,081 $ 23,479
Receivables:
Unbilled rent .................................. 464,591 476,278
Due from affiliate ............................... 18,995 18,995
Prepaid ground lease ............................. 755,000 845,000
Income-producing property - net of
accumulated depreciation of $2,457,962
and $2,554,493, respectively ................... 5,452,186 5,629,596
Other assets ..................................... 389,140 219,646
---------- ----------
Total Assets ..................................... $7,083,993 $7,212,994
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities .................... $ 131,921 $ 48,386
Due from affiliate ............................... 33,500 0
Ground lease payable ............................. 178,961 172,058
---------- ----------
Total Liabilities ................................ 344,382 220,444
---------- ----------
Ground lessor's equity in income-
producing property ............................. 3,000,000 3,000,000
---------- ----------
Minority interest in consolidated
joint venture ................................. 1,626,436 1,711,297
---------- ----------
Partners' equity:
General Partner ................................ 0 0
Limited Partners:
140,000 units authorized,
30,777 issued and
outstanding .................................. 2,113,175 2,281,253
---------- ----------
Total Partners' equity ........................... 2,113,175 2,281,253
---------- ----------
Total Liabilities and Partners' equity ........... $7,083,993 $7,212,994
========== ==========
</TABLE>
Unaudited
See Accompanying Notes
4
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998 and 1997
and for the Three Months Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ --------------------------------
1998 1997 1998 1997
-------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ............................................ $ 351,384 $ 494,567 $ 181,576 $ 218,631
--------- --------- --------- ---------
Total revenues ......................... 351,384 494,567 181,576 218,631
--------- --------- --------- ---------
EXPENSES:
Operating expenses ..................................... 201,480 209,493 96,620 129,222
Ground lease ........................................... 186,902 191,715 93,451 95,857
Depreciation and amortization .......................... 215,941 223,727 108,077 111,864
--------- --------- --------- ---------
Total costs and expenses ............... 604,323 624,935 298,148 336,943
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ....................... (252,939) (130,368) (116,572) (118,312)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS .......................... 84,861 32,475 39,110 29,472
--------- --------- --------- ---------
NET LOSS ................................................... $(168,078) $ (97,893) $ (77,462) $ (88,840)
========= ========= ========= =========
Net loss per limited partnership unit ...................... $ (5.46) $ (3.18) $ (2.52) $ (2.89)
========= ========= ========= =========
</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 Six Months Ended June 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 ........................................... (5.46) (168,078) (168,078)
------- ----------- ----------- -----------
Partners' equity - June 30, 1998 ................... $ 68.66 $ 2,113,175 $ 0 $ 2,113,175
======= =========== =========== ===========
</TABLE>
Unaudited
See Accompanying Notes
6
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
- --------------------------------------------------------------------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $(168,078) $ (97,893)
Adjustments to reconcile net loss
to cash (used in) provided by operating activities:
Depreciation and amortization ...................... 215,941 223,727
Minority interest's share of consolidated
joint venture loss ............................... (84,861) (32,475)
Decrease (increase) in rent receivable ............. 11,687 (825)
(Increase) decrease in other assets ................ (102,586) 23,961
Increase (decrease) in accrued and other liabilities 90,438 (28,950)
--------- ---------
Net cash (used in) provided by operating activities (37,459) 87,545
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (15,439) (26,970)
--------- ---------
Net cash used in investing activities .............. (15,439) (26,970)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from affiliate ................................ 33,500 0
Loan to affiliate .................................. 0 (50,600)
--------- ---------
Net cash provided by (used in) financing activities 33,500 (50,600)
--------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............................... (19,398) 9,975
CASH AND CASH EQUIVALENTS -
Beginning of period ................................ 23,479 8,578
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period ...................................... $ 4,081 $ 18,553
========= =========
Unaudited
See Accompanying Notes
7
<PAGE>
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 June 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 June 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>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
NOTES TO FINANCIAL STATEMENTS
Included in the financial statements for the six months ended June 30, 1998 and
1997 are affiliate transactions as follows:
June 30
-----------------------
1998 1997
-----------------------
Management fees $ 23,113 $ 29,575
Administrative fees 32,479 36,412
Leasing fees 55,878 0
Construction fees 0 1,998
Ground lease payments 72,000 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: AUGUST 10, 1998 /s/ THOMAS N. THURBER
------------------------------
Thomas N. Thurber
President and Director
Date: AUGUST 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 JUNE 30, 1998 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,081
<SECURITIES> 0
<RECEIVABLES> 464,591
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,076
<PP&E> 7,910,148
<DEPRECIATION> 2,457,962
<TOTAL-ASSETS> 7,083,993
<CURRENT-LIABILITIES> 131,921
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,113,175
<TOTAL-LIABILITY-AND-EQUITY> 7,083,993
<SALES> 351,384
<TOTAL-REVENUES> 351,384
<CGS> 0
<TOTAL-COSTS> 201,480
<OTHER-EXPENSES> 215,941
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (168,078)
<INCOME-TAX> 0
<INCOME-CONTINUING> (168,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,078)
<EPS-PRIMARY> (5.46)
<EPS-DILUTED> (5.46)
</TABLE>
