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, 1999
-------------------------------------
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 (Zip Code)
Registrants'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, 1999 and December 31, 5
Consolidated Statements of Operations - For the Six Month
Ended June 30, 1999 and For the Three Months Ended
June 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 Six Months Ended June 30, 1999 7
Consolidated Statements of Cash Flows - For the Six Months
Ended June 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 six months and three months ended June 30, 1999 increased by
$203,000 and $113,000, respectively, when compared to the corresponding periods
in the prior year. This increase was primarily due to an increase in occupancy
from 67% at June 30, 1998 to 100% at June 30, 1999. The Partnership leased
29,150 square feet of the Property to one tenant in 1998. This space was vacant
during the first six months of 1998.
2
<PAGE>
Operating expenses for the six months ended June 30, 1999 increased by $42,000,
or 21%, in comparison to the same period in 1998. This increase was primarily
due to higher management fees and other operating expenses resulting from the
increased occupancy of the Property. Further, administrative costs rose during
the period. Operating expenses for the quarter ended June 30, 1999 increased by
$23,000, or 24%, principally as a result of higher administrative costs and
other operating expenses. This increase was partially offset due to a decrease
in maintenance and repair costs.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position at June 30, 1999 with cash of $39,000
and current liabilities of $91,000. The Partnership's primarily capital
requirements will be for the construction of new tenant space. A 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.
(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.
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.
3
<PAGE>
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
JUNE 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
June 30, December 31,
1999 1998
---------- ------------
ASSETS
Cash and cash equivalents .......................... $ 39,249 $ 3,203
Receivables:
Unbilled rent .................................... 472,646 486,238
Due from affiliate ................................. 18,995 18,995
Prepaid ground lease ............................... 611,000 683,000
Income-producing property - net of
accumulated depreciation of $2,054,111
and $2,760,889, respectively ..................... 5,677,768 5,570,726
Other assets ....................................... 347,920 385,079
---------- ------------
Total Assets ....................................... $7,167,578 $ 7,147,241
========== ============
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ...................... $ 91,079 $ 252,764
Due to affiliate ................................... 267,420 0
Ground lease payable ............................... 192,765 185,863
---------- ------------
Total Liabilities .................................. 551,264 438,627
---------- ------------
Ground lessor's equity in income-
producing property ............................... 3,000,000 3,000,000
---------- ------------
Minority interest in consolidated
joint venture ................................... 1,678,692 1,711,089
---------- ------------
Partners' equity:
General Partner .................................. 0 0
Limited Partners:
140,000 units authorized,
30,777 issued and
outstanding .................................... 1,937,622 1,997,525
---------- ------------
Total Partners' equity ............................. 1,937,622 1,997,525
---------- ------------
Total Liabilities and Partners' equity ............. $7,167,578 $ 7,147,241
========== ============
UNAUDITED
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- -----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ..................... $ 554,777 $ 351,384 $ 294,711 $ 181,576
--------- --------- --------- ---------
Total revenues ................ 554,777 351,384 294,711 181,576
--------- --------- --------- ---------
EXPENSES:
Operating expenses .............. 243,567 201,480 119,989 96,620
Ground lease .................... 186,902 186,902 93,451 93,451
Depreciation and amortization ... 216,608 215,941 110,180 108,077
--------- --------- --------- ---------
Total costs and expenses ...... 647,077 604,323 323,620 298,148
--------- --------- --------- ---------
LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS (92,300) (252,939) (28,909) (116,572)
--------- --------- --------- ---------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS ... 32,397 84,861 10,147 39,110
--------- --------- --------- ---------
NET LOSS ............................ $ (59,903) $(168,078) $ (18,762) $ (77,462)
========= ========= ========= =========
Net loss per limited partnership unit $ (1.95) $ (5.46) $ (0.61) $ (2.52)
========= ========= ========= =========
</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 SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
LIMITED PARTNERS 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, 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 ......................... (1.95) (59,903) (59,903)
------- ----------- ------- -----------
Partners' equity - June 30, 1999 . $ 62.95 $ 1,937,622 $ 0 $ 1,937,622
======= =========== ======= ===========
</TABLE>
UNAUDITED
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $(59,903) $(168,078)
Adjustments to reconcile net loss
to cash provided by (used in) operating activities:
Depreciation and amortization ...................... 216,608 215,941
Minority interest's share of consolidated
joint venture loss ............................... (32,397) (84,861)
Decrease in rent receivable ........................ 13,592 11,687
Decrease (increase) in other assets ................ 69,562 (102,586)
(Decrease) increase in accrued and other liabilities (154,783) 90,438
--------- ---------
Net cash provided by (used in) operating activities 52,679 (37,459)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions .................... (284,053) (15,439)
--------- ---------
Net cash used in investing activities .............. (284,053) (15,439)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from affiliate ................................ 267,420 33,500
--------- ---------
Net cash provided by financing activities .......... 267,420 33,500
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ............................... 36,046 (19,398)
CASH AND CASH EQUIVALENTS -
Beginning of period ................................ 3,203 23,479
--------- ---------
CASH AND CASH EQUIVALENTS -
End of period ...................................... $ 39,249 $ 4,081
========= =========
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 June 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 June 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.
Included in the financial statements for the six months ended June 30, 1999 and
1998 are affiliate transactions as follows:
UNAUDITED
9
<PAGE>
Sierra Pacific Institutional Properties V
Notes to Financial Statemetns
Page Two
JUNE 30
-------------------
1999 1998
-------- --------
Management fees $ 34,102 $ 23,113
Administrative fees 49,897 32,479
Leasing fees 0 55,878
Ground lease payments 108,000 72,000
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: AUGUST 4, 1999 /S/ THOMAS N. THURBER
-------------- -----------------------
Thomas N. Thurber
President and Director
Date: AUGUST 4, 1999 /S/ G. ANTHONY EPPOLITO
-------------- -----------------------
G. Anthony Eppolito
Chief Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SIERRA PACIFIC INSTITUTIONAL PROPERTIES V JUNE 30, 1999 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 39,249
<SECURITIES> 0
<RECEIVABLES> 472,646
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,244
<PP&E> 7,731,879
<DEPRECIATION> 2,054,111
<TOTAL-ASSETS> 7,167,578
<CURRENT-LIABILITIES> 358,499
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 1,937,622
<TOTAL-LIABILITY-AND-EQUITY> 7,167,578
<SALES> 554,777
<TOTAL-REVENUES> 554,777
<CGS> 0
<TOTAL-COSTS> 430,469
<OTHER-EXPENSES> 216,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (59,903)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,903)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,903)
<EPS-BASIC> (1.95)
<EPS-DILUTED> (1.95)
</TABLE>
