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, 1999
----------------------------------------------------
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 450
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
----
Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 5
Consolidated Statements of Operations - For the Nine Months Ended
September 30, 1999 and For the Three Months Ended September 30, 1999
and 1998 6
Consolidated Statement of Changes in Partners' Equity - from October 8,
1985 (Inception of the Partnership) to December 31, 1998 and For the Nine
Months Ended September 30, 1999 7
Consolidated Statements of Cash Flows - For the Nine Months Ended
September 30, 1999 and 1998 8
Notes to Consolidated Financial Statements 9
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 64.90% interest in the Sorrento II Partnership,
which operates the Sorrento II property in San Diego, California.
(b) RESULTS OF OPERATIONS
Revenues for the nine months and three months ended September 30, 1999 increased
by $277,000 and $74,000, respectively, when compared to the corresponding
periods in the prior year. This increase was principally due to an increase in
occupancy. The Partnership leased 29,150 square feet of the Property to one
tenant in 1998. This space was vacant during the first seven months of 1998. The
Property was 100% occupied at September 30, 1999.
2
<PAGE>
Operating expenses for the nine months ended September 30, 1999 increased by
$46,000, or 16%, in comparison to the same period in 1998. This increase was
principally due to higher management fees and other operating expenses resulting
from the increased occupancy of the property. Operating expenses for the three
months ended September 30, 1999 increased by $4,000, or 4%, primarily due to the
increase in management fees and as a result of higher maintenance and repair
costs. This increase was partially offset due to a decrease in administrative
costs incurred during the quarter.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primarily capital requirements will be for the construction of
new tenant space. It is anticipated that these requirements will be funded from
the operations of the property. A secondary source of cash is available through
advances from the minority owner of the property, Sierra Mira Mesa Partners
("SMMP"). SMMP has adequate resources to make any necessary advances during the
foreseeable future.
In August and October 1999, the Partnership prepaid its ground lease $300,000
and $525,000, respectively. These funds were advanced to the Partnership by
SMMP. Effective with the October 1999 rent, amounts becoming payable under the
terms of the lease will be applied against the prepaid balance until such time
the balance is extinguished plus interest at the annual rate of ten percent per
annum. The prepaid balance at September 30, 1999 was $875,000.
The Partnership is in a liquid position at September 30, 1999 with cash of
$126,000 and current liabilities of $88,000.
(d) YEAR 2000 COMPLIANCE
The Year 2000 Compliance issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. As a result,
many companies' software and computer systems may need to be upgraded or
replaced in order to comply with Year 2000 requirements.
The Partnership employs a property management company to manage, operate and
lease the property. The management company believes it will be ready for the
Year 2000 date change by the end of 1999. The impact of Year 2000 non-compliance
by other third parties cannot accurately be gauged.
The total cost to the Partnership of activities associated with Year 2000
Compliance is not anticipated to be material to its financial position or
results of operations in any given year. In January 1999, the Partnership began
utilizing a new software program to maintain books and records. The new software
program is Year 2000 compliant.
3
<PAGE>
The total amount of potential risk that would be reasonably likely to result
from Year 2000 failures cannot presently be estimated. In the event the
Partnership does not properly identify Year 2000 issues in a timely manner,
there can be no assurance that Year 2000 issues will not materially affect the
Partnership's results.
The Partnership's contingency plan should systems fail due to the Year 2000 date
change is to temporarily convert to a manual system. The Partnership believes it
could temporarily operate on a manual system without adversely impacting
operations.
The preceding Year 2000 discussion contains various forward-looking statements
which represent the Partnership's beliefs or expectations regarding future
events. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from
projected results.
4
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
-------------------- --------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ........................ $ 125,661 $ 3,203
Receivables:
Unbilled rent .................................. 462,461 486,238
Due from affiliate ............................... 18,995 18,995
Prepaid ground lease ............................. 875,000 683,000
Income-producing property - net of
accumulated depreciation of $2,144,852
and $2,760,889, respectively ................... 5,627,192 5,570,726
Other assets ..................................... 323,090 385,079
-------------------- --------------------
Total Assets ..................................... $ 7,432,399 $ 7,147,241
==================== ====================
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities .................... $ 87,941 $ 252,764
Due to affiliate ................................. 567,420 0
Ground lease payable ............................. 196,216 185,863
-------------------- --------------------
Total Liabilities ................................ 851,577 438,627
-------------------- --------------------
Ground lessor's equity in income-
producing property ............................. 3,000,000 3,000,000
-------------------- --------------------
Minority interest in consolidated
joint venture ................................. 1,666,234 1,711,089
-------------------- --------------------
Partners' equity:
General Partner ................................ 0 0
Limited Partners:
140,000 units authorized,
30,777 issued and
outstanding .................................. 1,914,588 1,997,525
-------------------- --------------------
Total Partners' equity ........................... 1,914,588 1,997,525
-------------------- --------------------
Total Liabilities and Partners' equity ........... $ 7,432,399 $ 7,147,241
==================== ====================
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ............................ $ 831,944 $ 554,735 $ 277,167 $ 203,351
--------- --------- --------- ---------
Total revenues ......... 831,944 554,735 277,167 203,351
--------- --------- --------- ---------
EXPENSES:
Operating expenses ..................... 338,169 292,399 94,602 90,919
Ground lease ........................... 293,606 280,353 106,704 93,451
Depreciation and amortization .......... 327,961 332,678 111,353 116,737
--------- --------- --------- ---------
Total costs and expenses 959,736 905,430 312,659 301,107
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS ....... (127,792) (350,695) (35,492) (97,756)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS .......... 44,855 117,658 12,458 32,797
--------- --------- --------- ---------
NET LOSS ................................... $ (82,937) $(233,037) $ (23,034) $ (64,959)
========= ========= ========= =========
Net loss per limited partnership unit ...... $ (2.69) $ (7.57) $ (0.75) $ (2.11)
========= ========= ========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
6
<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, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED PARTNERS TOTAL
-------------------------- GENERAL PARTNERS'
PER UNIT TOTAL PARTNER EQUITY
----------- ----------- ----------- -----------
<S> <C> <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, 1998) ............ (145.20) (4,468,631) $ 9,193 (4,459,438)
Cumulative distributions
(to December 31, 1998) ............ (2.69) (82,761) (9,193) (91,954)
----------- ----------- ----------- -----------
Partners' equity - January 1, 1999 .. 64.90 1,997,525 0 1,997,525
Net loss ............................ (2.69) (82,937) (82,937)
----------- ----------- ----------- -----------
Partners' equity - September 30, 1999 $ 62.21 $ 1,914,588 $ 0 $ 1,914,588
=========== =========== =========== ===========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $ (82,937) $(233,037)
Adjustments to reconcile net loss
to cash (used in) provided by operating activities:
Depreciation and amortization ...................... 327,961 332,678
Minority interest's share of consolidated
joint venture loss ............................... (44,855) (117,658)
Decrease in rent receivable ........................ 23,777 15,646
Increase in other assets ........................... (190,219) (64,348)
(Decrease) increase in accrued and other liabilities (154,470) 234,810
--------- ---------
Net cash (used in) provided by operating activities (120,743) 168,091
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (324,219) (250,195)
--------- ---------
Net cash used in investing activities .............. (324,219) (250,195)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from affiliate ................................ 567,420 66,500
--------- ---------
Net cash provided by financing activities .......... 567,420 66,500
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ............................... 122,458 (15,604)
CASH AND CASH EQUIVALENTS -
Beginning of period ................................ 3,203 23,479
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period ...................................... $ 125,661 $ 7,875
========= =========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
8
<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, 1999, the Partnership's interest in Sorrento II Partners was
decreased from 66.45% to 64.90% to reflect 1998 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, 1999. 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, 1999 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, 1998.
3. RELATED PARTY TRANSACTIONS
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.
In 1997, the Partnership prepaid $900,000 of the ground lease to CGS. In August
and October 1999, the Partnership made additional prepayments of $300,000 and
$525,000, respectively. Effective with the October 1999 rent, amounts becoming
payable under the terms of the lease will be applied against the prepaid balance
until such time the balance is extinguished plus interest at the annual rate of
ten percent per annum. The prepaid balance at September 30, 1999 was $875,000.
UNAUDITED
9
<PAGE>
Sierra Pacific Institutional Properties V
Notes to Consolidated Financial Statements
Page Two
Included in the financial statements for the nine months ended September 30,
1999 and 1998 are affiliate transactions as follows:
SEPTEMBER 30
--------------------
1999 1998
-------- --------
Management fees $ 51,343 $ 34,223
Administrative fees 66,172 54,377
Leasing fees 0 55,878
Ground lease payments 475,253 144,000
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
10
<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: OCTOBER 22, 1999 /s/ THOMAS N. THURBER
---------------- ----------------------------------
Thomas N. Thurber
President and Director
Date: OCTOBER 22, 1999 /S/ G. ANTHONY EPPOLITO
---------------- ----------------------------------
G. Anthony Eppolito
Cheif Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC INSTITUTIONAL PROPERTIES V SEPTEMBER 30, 1999 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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 125,661
<SECURITIES> 0
<RECEIVABLES> 462,461
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 144,656
<PP&E> 7,772,044
<DEPRECIATION> 2,144,852
<TOTAL-ASSETS> 7,432,399
<CURRENT-LIABILITIES> 655,361
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 1,914,588
<TOTAL-LIABILITY-AND-EQUITY> 7,432,399
<SALES> 831,944
<TOTAL-REVENUES> 831,944
<CGS> 0
<TOTAL-COSTS> 631,775
<OTHER-EXPENSES> 327,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (82,937)
<INCOME-TAX> 0
<INCOME-CONTINUING> (82,937)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,937)
<EPS-BASIC> (2.69)
<EPS-DILUTED> (2.69)
</TABLE>
