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, 2000
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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
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (713) 706-6271
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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
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Consolidated Balance Sheets - September 30, 2000 and December 4
31, 1999
Consolidated Statements of Operations - For the Nine Months
Ended September 30, 2000 and for the Three Months Ended
September 30, 2000 5
Consolidated Statement of Changes in Partners' Equity - For the
Year Ended December 31, 1999 and for the Nine Months Ended
September 30, 2000 6
Consolidated Statements of Cash Flows - For the Nine Months
Ended September 30, 2000 and 1999 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 Sierra Pacific
Institutional Properties V's (the Partnership) Consolidated Financial Statements
and Notes thereto appearing elsewhere in this Form 10-Q.
The Partnership currently owns a 56.08% interest in the Sorrento II Partnership,
which operates the Sorrento II property (the Property) in San Diego, California.
(b) RESULTS OF OPERATIONS
Rental income for the nine months and three months ended September 30, 2000 rose
by approximately $181,000, or 22%, and by approximately $37,000, or 13%,
respectively, when compared to the corresponding periods in 1999. These
increases were principally the result of higher common area maintenance fees
billed between the periods. Supplemental billings were made in 2000 to recover
higher than anticipated prior year common area maintenance fees. The Property
was 100% occupied at September 30, 2000 and 1999.
2
<PAGE>
Total operating expenses for the nine months ended September 30, 2000 increased
by approximately $13,000, or 4%, in comparison to the same period in the prior
year, primarily due to an increase in management fees and accounting and
auditing costs. Further, property taxes rose during the period. This increase
was partially offset by a decrease in other operating expenses. Total operating
expenses for the three months ended September 30, 2000 rose by approximately
$20,000, or 21%, principally as a result of an increase in management fees,
administrative costs and property taxes accrued during the quarter.
Ground lease expense for the nine months ended September 30, 2000 was
approximately $29,000 compared to approximately $294,000 for the nine months
ended September 30, 1999. As stated below, the Partnership's ground lease
terminated upon the purchase of the Sorrento II land holdings in February 2000.
(c) LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in an illiquid position as of September 30, 2000 with cash
and billed receivables of approximately $12,000 and accrued and other
liabilities of approximately $40,000. A source of cash is available through
advances from the minority owner of the property, Sierra Mira Mesa Partner
(SMMP). SMMP has adequate resources to make any necessary advances during the
foreseeable future.
In February 2000, the Partnership purchased the Sorrento II land holdings from
CGS Real Estate Company, Inc., an affiliate of the general partner, for
$3,500,000 and the ground lease subsequently terminated. The Partnerhip paid
cash of $2,174,255 and was credited its current prepaid balance of $1,325,745.
SMMP contributed the majority of the cash for the land purchase. During the nine
months ended September 30, 2000, SMMP made contributions totaling $1,917,000 to
the Partnership and received distributions totaling $597,900 from the
Partnership.
The Partnership's primary capital requirements will be for construction of new
tenant space. It is anticipated that these requirements and any operating
capital requirements will be funded from the operations of the property and
SMMP.
Inflation:
The Partnership does not expect inflation to be a material factor in its
operations in 2000.
3
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
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<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
-------------------- --------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ......................................................... $ 11,537 $ 134,781
Receivables:
Unbilled rent ................................................................... 394,716 451,414
Billed rent ..................................................................... 89 76,707
Prepaid ground lease .............................................................. 0 1,344,540
Income-producing property - net of
accumulated depreciation of $2,477,505
and $2,195,937, respectively .................................................... 5,578,380 5,552,440
Other assets - net of accumulated amortization
of $370,665 and $306,675, respectively .......................................... 261,238 314,313
-------------------- --------------------
Total Assets ...................................................................... $ 6,245,960 $ 7,874,195
==================== ====================
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ..................................................... $ 39,543 $ 90,908
Ground lease payable .............................................................. 0 194,539
-------------------- --------------------
Total Liabilities ................................................................. 39,543 285,447
-------------------- --------------------
Ground lessor's equity in income-
producing property .............................................................. 0 3,000,000
-------------------- --------------------
Minority interest in consolidated
joint venture .................................................................. 4,098,103 2,647,872
-------------------- --------------------
Partners' equity (deficit):
General Partner ................................................................. (52,680) 0
Limited Partners:
140,000 units authorized,
30,777 issued and
outstanding ................................................................... 2,160,994 1,940,876
-------------------- --------------------
Total Partners' equity ............................................................ 2,108,314 1,940,876
-------------------- --------------------
Total Liabilities and Partners' equity ............................................ $ 6,245,960 $ 7,874,195
==================== ====================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income ........................................ $ 1,013,425 $ 831,944 $ 314,295 $ 277,167
Interest income ...................................... 11,205 0 0 0
--------------- --------------- --------------- ---------------
Total revenues ..................... 1,024,630 831,944 314,295 277,167
--------------- --------------- --------------- ---------------
EXPENSES:
Operating expenses ................................... 351,062 338,169 114,821 94,602
Ground lease ......................................... 29,441 293,606 0 106,704
Depreciation and amortization ........................ 345,558 327,961 115,186 111,353
--------------- --------------- --------------- ---------------
Total costs and expenses ........... 726,061 959,736 230,007 312,659
--------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE MINORITY INTEREST'S
SHARE OF CONSOLIDATED JOINT VENTURE
(INCOME) LOSS ........................................ 298,569 (127,792) 84,288 (35,492)
--------------- --------------- --------------- ---------------
MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE
(INCOME) LOSS ........................................ (131,131) 44,855 (37,019) 12,458
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) ...................................... $ 167,438 $ (82,937) $ 47,269 $ (23,034)
=============== =============== =============== ===============
Net income (loss) per limited partnership unit ......... $ 5.39 $ (2.69) $ 1.52 $ (0.75)
=============== =============== =============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
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<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, 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 ............................................................... (1.84) (56,649) (56,649)
----------- ----------- ----------- -----------
Partners' equity - January 1, 2000 (audited) ........................... 63.06 1,940,876 0 1,940,876
Transfer among general partner and limited partners .................... 1.77 54,354 (54,354) 0
Net income ............................................................. 5.39 165,764 1,674 167,438
----------- ----------- ----------- -----------
Partners' equity (deficit) - September 30, 2000 (unaudited) ............ $ 70.22 $ 2,160,994 $ (52,680) $ 2,108,314
=========== =========== =========== ===========
</TABLE>
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, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
(Unaudited) (Unaudited)
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................................... $ 167,438 $ (82,937)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization ........................................................ 345,558 327,961
Minority interest's share of consolidated
joint venture income (loss) ........................................................ 131,131 (44,855)
Decrease in rent receivable .......................................................... 133,316 23,777
Decrease (increase) in prepaids and other assets ..................................... 7,879 (190,219)
Decrease in accrued and other liabilities ............................................ (51,924) (154,470)
--------------- ---------------
Net cash provided by (used in) operating activities .................................. 733,398 (120,743)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property additions ...................................................... (2,175,742) (324,219)
--------------- ---------------
Net cash used in investing activities ................................................ (2,175,742) (324,219)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from minority investor ................................................. 1,917,000 0
Distributions to minority investor ................................................... (597,900) 0
Loan from affiliate .................................................................. 0 567,420
--------------- ---------------
Net cash provided by financing activities ............................................ 1,319,100 567,420
--------------- ---------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ................................................................. (123,244) 122,458
CASH AND CASH EQUIVALENTS -
Beginning of period .................................................................. 134,781 3,203
--------------- ---------------
CASH AND CASH EQUIVALENTS -
End of period ........................................................................ $ 11,537 $ 125,661
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for real estate taxes ..................................... $ 44,488 $ 40,384
=============== ===============
</TABLE>
SEE ACCOMPANYING NOTES
7
<PAGE>
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
------------------------------------------------------------------------
1. ORGANIZATION
In October 1993, Sierra Pacific Institutional Properties V (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 partner's
percentage interest at January 1 of each year. Accordingly, on January 1, 2000,
the Partnership's interest in Sorrento II Partners was decreased from 64.90% to
56.08% to reflect 1999 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, 2000. 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 necessary for a fair presentation of its
financial position at September 30, 2000 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, 1999.
3. RELATED-PARTY TRANSACTIONS
In February 2000, the Partnership purchased the Sorrento II land holdings from
CGS Real Estate Company, Inc., an affiliate of the general partner, for
$3,500,000 and its ground lease subsequently terminated. The Partnership paid
cash of $2,174,255 and was credited its current prepaid balance of $1,325,745.
8
<PAGE>
Sierra Pacific Institutional Properties V
Notes to Financial Statements (Unaudited)
Page Two
Included in the financial statements for the nine months ended September 30,
2000 and 1999 are other affiliate transactions as follows:
September 30
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2000 1999
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Management fees $ 65,295 $51,343
Administrative fees 60,696 66,172
Ground lease payments 15,879 475,253
4. PARTNERS' EQUITY
Equity and net income (loss) per limited partnership unit is determined by
dividing the limited partner's share of the Partnership's equity and net income
(loss) by the number of limited partnership units outstanding, 30,777.
During the quarter ended March 31, 2000, an amount was transferred between the
partners' equity accounts such that 99% of cumulative operating income, gains,
losses, deductions and credits of the Partnership was allocated among the
limited partners and 1% was allocated to the general partner. Management does
not believe that the effect of this transfer is significant.
5. PENDING TRANSACTION
CGS Real Estate Company, Inc. (CGS), an affiliate of the general partner, is
continuing the development of a plan which will combine the property owned by
the Partnership with the properties of other real estate partnerships managed by
CGS and its affiliates. These limited partnerships own office properties,
industrial properties, shopping centers, and residential apartment properties.
It is expected that the acquirer would qualify as a real estate investment
trust. Limited partners would receive shares of common stock from the acquirer,
which would be listed on a national securities exchange. The transaction is
subject to the approval of the limited partners of the Partnership and portions
of the other partnerships. CGS's management filed a Registration Statement on
Form S-4 August 14, 2000 relating to the solicitation of consents with the
Securities and Exchange Commission.
6. RECENT ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, which summarizes certain of the SEC staff's views on applying
generally accepted accounting principles to revenue recognition in financial
statements. The Partnership will adopt the accounting provisions of SAB 101 in
the fourth quarter of 2000. Management believes that the implementation of SAB
101 will not have a significant effect on the Partnership's financial condition
or results of operations.
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
A Form 8-K was filed in April 2000 reporting a change in the Partnership's
Certifying Accountant.
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 14, 2000 /s/ THOMAS N. THURBER
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Thomas N. Thurber
President and Director
Date: NOVEMBER 14, 2000 /s/ G. ANTHONY EPPOLITO
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G. Anthony Eppolito
Chief Accountant
10
