FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16645
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 33-0157561
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification)
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
(Address of principal executive offices) (Zip Code)
(415) 343-9300
(Registrant's telephone number, including area code)
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
Total number of units outstanding as of March 31, 1996: 14,555
Page 1 of 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
Assets 1996 1995
------ -------- --------
Cash and cash equivalents $ 118 $ 274
Accounts receivable, net 50 16
Rental property, net of
accumulated depreciation
of $1,634 and $1,583 at
March 31, 1996 and
December 31, 1995,
respectively 7,824 7,742
Other assets, net of
accumulated amortization
of $179 and $172 at
March 31, 1996 and
December 31, 1995,
respectively 48 53
------- -------
Total Assets $ 8,040 $ 8,085
======= =======
Liabilities and Partners' Equity (Deficit)
------------------------------------------
Accounts payable and
accrued liabilities $ 52 $ 75
Other liabilities 63 69
------- -------
Total Liabilities 115 144
------- -------
Partners' equity (deficit):
General partner (164) (164)
Limited partners' (14,555
limited partnership units
in 1996 and 1995) 8,089 8,105
------- -------
Total Partners' Equity 7,925 7,941
------- -------
Total Liabilities and Partners'
Equity $ 8,040 $ 8,085
======= =======
See accompanying notes to financial statements.
Page 2 of 11
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended
March 31, February 28,
1996 1995
------ ------
Revenues:
Rental income $ 305 $ 374
Interest and other income 2 1
------ ------
Total revenues 307 375
------ ------
Costs and expenses:
Operating 131 149
Depreciation and amortization 58 64
General and administrative 73 30
------ ------
Total costs and expenses 262 243
------ ------
Net income $ 45 $ 132
====== ======
Net income per Limited Partnership Unit $ 3.09 $ 9.07
====== ======
Distributions per limited Partnership unit:
From net income $ 3.09 $ 9.07
Representing return of capital 1.10 3.43
------ ------
Total distribution per Limited
Partnership unit: $ 4.19 $ 12.50
====== ======
Weighted average number of limited
partnership Units outstanding during
each period used to net compute loss
and distributions per limited
partnership unit 14,555 14,555
====== ======
See accompanying notes to financial statements.
Page 3 of 11
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity
(in thousands)
(Unaudited)
General Limited
Partners Partners Total
-------- -------- ------
Balance at November 30, 1994 $ (167) $ 8,382 $ 8,215
Net income 1 131 132
Distributions --- (182) (182)
------ ------ ------
Balance at February 28, 1995 $ (166) $ 8,331 $ 8,165
====== ====== ======
Balance at December 31, 1995 $ (164) 8,105 7,941
Net income --- 45 45
Distributions --- (61) (61)
------ ------ ------
Balance at March 31, 1996 $ (164) $ 8,089 $ 7,925
====== ====== ======
See accompanying notes to financial statements.
Page 4 of 11
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows (in thousands)
(Unaudited)
Three Months Ended
March 31, February 28,
1996 1995
------ ------
Cash Flows Provided By
Operating Activities:
Net income $ 45 $ 132
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 58 64
Changes in certain assets and
liabilities:
Accounts receivable (34) (23)
Other assets (2) ---
Payable to Sponsor --- (51)
Accounts payable and accrued
liabilities (17) (17)
Other liabilities (12) (10)
------ ------
Net cash provided by operating
activities 38 95
------ ------
Cash Flows Used For Investing Activities:
Acquisitions of and additions to
real estate (133) (5)
------ ------
Cash Flows Used for Financing Activities:
Cash distributions to limited partners (61) (182)
------ ------
Net cash used for financing activities (61) (182)
------ ------
Net (Decrease) Increase in Cash (156) (92)
Cash at Beginning of Period 274 372
------ ------
Cash at End of Period $ 118 $ 280
====== ======
See accompanying notes to financial statements.
Page 5 of 11
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 1996
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------
In the opinion of Rancon Financial Corporation and Daniel Lee
Stephenson (the Sponsors) and Glenborough Inland Realty
Corporation, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals)
necessary to present fairly the financial position of Rancon
Income Fund I, A California Limited Partnership (the Partnership)
as of March 31, 1996 and December 31, 1995, and the related
statements of operations, changes in partners' equity, and cash
flows for the three months ended March 31, 1996 and 1995.
Effective with the year ended December 31, 1996, the
Partnership's year end has been changed from November 30 to
December 31.
Allocation of the profits, losses and cash distributions from
operations and from sale or financing of any Partnership property
are made pursuant to the terms of the Partnership Agreement.
Generally, net income and distributions from operations are
allocated 90% to the limited partners and 10% to the general
partners. Net losses from operations are allocated 90% to the
limited partners and 10% to the general partners until such time
as a partner's account is reduced to zero. Additional losses
will be allocated entirely to those partners with positive
account balances until such balances are reduced to zero. In no
event will the general partner be allocated less than 1% of net
losses for any period.
In December, 1994, RFC entered into an agreement with Glenborough
Inland Realty Corporation (Glenborough) whereby RFC sold to
Glenborough the contract to perform the rights and
responsibilities under RFC's agreement with the Partnership and
other related Partnerships (collectively, the Rancon
Partnerships) to perform or contract on the Partnership's behalf
for financial, accounting, data processing, marketing, legal,
investor relations, asset and development management and
consulting services for the Partnership for a period of ten years
or to the liquidation of the Partnership, whichever comes first.
According to the contract, the Partnership will pay Glenborough
for its services as follows: (i) a specified asset administration
fee of $208,000 per year, which is fixed for five years subject
to reduction in the year following the sale of assets; (ii) sales
fees of 2% for improved properties and 4% for land; (iii) a
refinancing fee of 1% and (iv) a management fee of 5% of gross
rental receipts. As part of this agreement, Glenborough will
perform certain responsibilities for the General Partner of the
Rancon Partnerships and RFC agreed to cooperate with Glenborough,
should Glenborough attempt to obtain a majority vote of the
limited partners to substitute itself as the Sponsor for the
Page 6 of 11
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 1996
(Unaudited)
Rancon Partnerships. This agreement was effective January 1,
1995. Glenborough is not an affiliate of RFC.
As a result of this agreement, RFC terminated several of its
employees between December 31, 1994 and February 28, 1995. Also
as a result of this agreement, certain of the officers of RFC
resigned from their positions effective February 28, 1995, March
31, 1995 and July 1, 1995.
Reclassifications - Certain amounts in the 1995 financial
statements have been reclassified to conform to the current year
presentation.
Note 2. REFERENCE TO 1995 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Financial Statements included in
the 1995 audited financial statements.
Page 7 of 11
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of April 21, 1989 Rancon Income Fund I (the Partnership) was
funded from the sale of limited partnership units (Units) in the
amount of $14,559,000. Four Units were retired in 1990 and
14,555 Units remain outstanding at March 31, 1996. As of March
31, 1996 the Partnership had cash of $118,000. The remainder of
the Partnership's assets consist primarily of its investments in
properties, which totaled approximately $7,824,000 at March 31,
1996.
The Partnership's primary source of funds consisted of the
proceeds of its public offering of Units. As the Partnership was
organized for the purpose of acquiring income producing
properties, the cash generated from such properties, net of costs
incurred in operating the properties, is also a significant
source of funds for the Partnership. Another source of funds is
the interest income earned on cash balances. Such cash flows
from operating activities have been sufficient to provide funds
to reinvest in the properties by way of improvements, as well as
to fund quarterly distributions to the limited partners.
All of the Partnership's assets are located in the Southern
California region. The Southern California regional economy in
general, and the real estate industry in particular, are
considered to be in a recessionary cycle. Current and potential
negative effects from these current market conditions include the
delinquency of lease payments owed to the Partnership and a
decrease in competitive market lease rates and real estate
prices.
Management believes that the Partnership's available cash
together with the cash generated by the operations of the
Partnership's properties, as proven in recent years, will be
sufficient to finance the Partnership's continued operations.
In order to maintain adequate cash reserves, the Partnership may
forego or reduce future distributions.
RESULTS OF OPERATIONS
---------------------
Rental income for the three months ended March 31, 1996 as
compared to 1995 decreased 18% primarily due to decreased rental
rates at Aztec Village Shopping Center and Bristol Medical
Center. Aztec Village lost two major tenants at the end of 1995
due to financial instability. Management is actively pursuing
tenants although they have none at this time. Occupancy rates as
of March 31, 1996 were 88%, 38% and 100% for the Bristol Medical
Center, Aztec Village Shopping Center and Aham Tor Industrial
Center properties, respectively, compared to 91%, 69% and 100%,
respectively, for the same periods in 1995.
The increase in general and administrative expenses of $43,000 or
143% at March 31, 1996 compared to February 28, 1995 is primarily
related to the fact that the partnership administration services
Page 8 of 11
paid to Glenborough in 1995 were slightly lower in the first
quarter of 1995 and were adjusted to reflect the amendment to the
agreement subsequent to the quarter ended February 28, 1995 along
with a one-time payment for professional services in 1996
rendered in connection with the valuation of the limited partner
interest in the Partnership.
Page 9 of 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
Page 10 of 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: RANCON INCOME FUND I,
a California Limited Partnership
(Registrant)
By: RANCON INCOME PARTNERS I, L.P.
General Partner
Date: By: /s/ Daniel L. Stephenson
Daniel L. Stephenson,
Director, President, Chief Executive
Officer and
Chief Financial Officer of
Rancon Financial Corporation,
General Partner of
Rancon Income Partners I, L.P.
Page 11 of 11
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