UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ______________
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 No.)
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)
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, 1997: 14,555
Page 1 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Assets Real estate investments:
Rental property, net of accumulated
depreciation of $1,467 and $1,423
at March 31, 1997 and December 31,
1996, respectively $ 4,927 $ 4,954
Rental property held for sale at estimated
fair value 1,111 1,104
-------------- --------------
Net real estate investments 6,038 6,058
Cash and cash equivalents 509 426
Deferred costs, net of accumulated amortization
of $198 and $196 at March 31, 1997 and
December 31, 1996, respectively 18 19
Other assets 52 28
-------------- --------------
Total assets $ 6,617 $ 6,531
============== ==============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Accounts payable and other liabilities $ 111 $ 86
-------------- --------------
Partners' equity (deficit):
General Partner (170) (178)
Limited Partners, 14,555 limited partnership
units outstanding at March 31, 1997
and December 31, 1996 6,676 6,623
-------------- --------------
Total partners' equity 6,506 6,445
-------------- --------------
Total liabilities and partners' equity $ 6,617 $ 6,531
============== ==============
</TABLE>
See accompanying notes to financial statements.
Page 2 of 11
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Income
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1997 1996
------------- -------------
<S> <C> <C>
Revenue:
Rental income $ 303 $ 305
Interest and other income 3 2
------------- -------------
Total revenue 306 307
------------- -------------
Expenses:
Operating 118 131
Depreciation and amortization 46 58
General and administrative 67 73
------------- -------------
Total expenses 231 262
------------- -------------
Net income $ 75 $ 45
============= =============
Net income per limited partnership unit $ 4.60 $ 2.75
============= =============
Distributions per limited partnership unit:
From net income $ 0.96 $ 3.09
Representing return of capital --- 1.10
------------- -------------
Total distributions per limited partnership unit $ 0.96 $ 4.19
============= =============
Weighted average number of limited partnership units
outstanding during the period used to compute net income
and distributions per limited partnership unit 14,555 14,555
============= =============
</TABLE>
See accompanying notes to financial statements.
Page 3 of 11
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
For the three months ended March 31, 1997 and 1996
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at December 31, 1996 $ (178) $ 6,623 $ 6,445
Net income 8 67 75
Distributions --- (14) (14)
------------- ------------ -------------
Balance at March 31, 1997 $ (170) $ 6,676 $ 6,506
============= ============ =============
Balance at December 31, 1995 $ (164) $ 8,105 $ 7,941
Net income 5 40 45
Distributions --- (61) (61)
------------- ------------ -------------
Balance at March 31, 1996 $ (159) $ 8,084 $ 7,925
============= ============ =============
</TABLE>
See accompanying notes to financial statements.
Page 4 of 11
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows (in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 75 $ 45
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 46 58
Changes in certain assets and liabilities:
Deferred costs (1) ---
Other assets (24) (36)
Accounts payable and other liabilities 25 (29)
------------ -----------
Net cash provided by operating activities 121 38
------------ -----------
Cash flows from investing activities:
Additions to real estate (24) (133)
------------ -----------
Net cash used for investing activities (24) (133)
------------ -----------
Cash flows from financing activities:
Distributions to partners (14) (61)
------------ -----------
Net cash used for financing activities (14) (61)
------------ -----------
Net increase (decrease) in cash and cash equivalents 83 (156)
Cash and cash equivalents at beginning of period 426 274
------------ -----------
Cash and cash equivalents at end of period $ 509 $ 118
============ ===========
</TABLE>
See accompanying notes to financial statements.
Page 5 of 11
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Rancon Financial Corporation (RFC) 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, 1997 and December 31, 1996, and the related statements of income, changes in
partners' equity and cash flows for the three months ended March 31, 1997 and
1996.
Allocation of the profits and losses from operations 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
partner. Net losses from operations are allocated 90% to the limited partners
and 10% to the general partner 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.
Distributions of cash from operations are generally allocated as follows: (i)
first to the Limited Partners until they receive a noncumulative 6% return per
annum on their unreturned capital contributions and (ii) the remainder, if any
in a given year, shall be divided in the ratio of 90% to the Limited Partners
and 10% to the General Partner.
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 until 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 Rancon Partnerships. This
agreement was effective January 1, 1995. Glenborough is not an affiliate of RFC.
Page 6 of 11
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1997
(Unaudited)
Reclassifications - Certain amounts in the 1996 financial statements have been
reclassified to conform to the current year presentation.
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the December 31, 1996 audited
financial statements.
Page 7 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
INTRODUCTION
The following discussion addresses the Partnership's financial condition at
March 31, 1997 and its results of operations for the three months ended March
31, 1997 and 1996. This information should be read in conjunction with the
Partnership's audited December 31, 1996 Consolidated Financial Statements, notes
thereto and other information contained elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
As of April 21, 1989, Rancon Income Fund I (the Partnership) was funded from the
sale of 14,559 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,
1997. As of March 31, 1997 the Partnership had cash of $509,000. The remainder
of the Partnership's assets consist primarily of its investments in properties,
which totaled approximately $6,038,000 at March 31, 1997.
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, has also been a significant
source of funds for the Partnership. 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 distributions to the limited partners. Another
source of funds is the interest earned on cash balances.
All of the Partnership's assets are located in Southern California and have been
directly affected by the economic weakness of the region. Management believes,
however, that the market has flattened and is no longer falling in terms of
sales prices. While prices have not increased significantly, the Southern
California real estate markets appears to be improving. Management continues to
evaluate the real estate market in which the Partnership's assets are located in
an effort to determine the optimal time to dispose of them and realize their
maximum value.
The Partnership currently owns three properties: Wakefield Industrial Center (a
44,200 square foot light industrial building in Temecula, California), Bristol
Medical Center (a 52,311 square foot office building in Santa Ana, California)
and Aztec Village Shopping Center (a 23,789 square foot retail center in San
Diego, California).
Management believes that the Partnership's available cash together with the cash
generated by the operations of the Partnership's properties will be sufficient
to finance the Partnership's continued operations. As the Partnership's
properties are owned free of mortgage indebtedness, the long term operations of
the properties and the Partnership are expected to be comparable to the current
operations. The Partnership is currently soliciting offers for the sale of Aztec
Village Shopping Center. This rental property is classified as property held for
sale on the Partnership's March 31, 1997 and December 31, 1996 balance sheets.
The increase in accounts payable and accrued expenses at March 31, 1997 is due
to the accrual of property taxes which are payable in April 1997.
Page 8 of 11
<PAGE>
RESULTS OF OPERATIONS
Rental income remained consistent for the three months ended March 31, 1997 as
compared to 1996. Occupancy rates as of March 31, 1997 were 85%, 42%, 100% for
the Bristol Medical Center, Aztec Village Shopping Center and Wakefield Building
properties, respectively, compared to 88%, 38% and 100%, respectively, as of
March 31, 1996.
Operating expenses decreased $13,000 or 10% in 1997 compared to the same period
in 1996 primarily due to a decrease in property taxes as a result of a reduction
in the assessed value of the Partnership's Aztec Village property .
Depreciation and amortization expense for the three months ended March 31, 1997
decreased $12,000, or 21%, as compared to 1996. Of the decrease, $6,000 is a
result of certain lease commissions becoming fully amortized during 1996 and the
remaining $6,000 relates to a decrease in depreciation of the Aztec Village
Shopping Center as such property is classified as held for sale and accordingly,
depreciation of the asset has ceased.
The decrease in general and administrative expenses of $6,000 or 8% for the
three months ended March 31, 1997 compared to the three months ended March 31,
1996 is due to a payment of $6,000 for professional services in 1996 rendered in
connection with the valuation of the limited partner interests; such payment was
not incurred in 1997.
Page 9 of 11
<PAGE>
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:
#27 - Financial Data Schedule.
(b) Reports on Form 8-K:
None.
Page 10 of 11
<PAGE>
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.
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
By: RANCON INCOME PARTNERS I, L.P.
General Partner
Date: May 15, 1997 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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791996
<NAME> Rancon Income Find I
<MULTIPLIER> 1,000
<CURRENCY> U.S. dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-01-1997
<CASH> 509
<SECURITIES> 0
<RECEIVABLES> 43
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 562
<PP&E> 7,505
<DEPRECIATION> (1,467)
<TOTAL-ASSETS> 6,617
<CURRENT-LIABILITIES> 111
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,506
<TOTAL-LIABILITY-AND-EQUITY> 6,617
<SALES> 0
<TOTAL-REVENUES> 306
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
